This was reported by the IPkat, Eric Goldman (with very interesting comments), BNA Internet News, and many others: Jews for Jesus launched a lawsuit in New York federal court, saying Blogger (Google) allowed one of its users to operate a blog with an address using the group's name: jewsforjesus.blogspot.com. Plaintiff's brief is here.
In a previous case over a third level domain, a US court ruled there was no trademark infringement: "It is unlikely that the presence of another's trademark in the post-domain path of a URL would ever violate trademark law", Interactive Products Corporation v. a2z Mobile Office Solutions, April 10, 2003). As usual, France distinguishes itself: A court said the use of jeunes.paris.fr infringes the trademark "Jeunes à Paris" (for other French cases, see here).
Blogger terms of service regulate the content of the blog, but does not specifically address its URL: Is it part of the content the users "upload, post or otherwise transmit"? (I would say yes - but I am not an American lawyer).