Removal, Rather Than Procedural Gamesmanship, Is How to Secure Federal Forum

Removal, Rather Than Procedural Gamesmanship, Is How to Secure Federal Forum

 The Fourth Circuit clarified last week that after a case is filed in state court, a defendant desiring a federal forum should seek removal rather than file a separate declaratory judgment action in its federal district court of choice. In VRCompliance v. HomeAway, Inc. [an enhanced version of this opinion is available to subscribers], the court noted that the federal removal statute is the primary avenue for obtaining federal court review of already pending state law claims, and allowing a party to file a case in a federal forum when the same claims are pending in state court would result in a "regime of forum shopping."

HomeAway, Inc. operates websites that facilitate vacation home rentals. These rentals, unlike the booking of hotel rooms, tend to deprive localities of tax revenue. Eye Street Solutions has developed computer software that can identify vacation homeowners who have not paid locality taxes. Eye Street licensed the software to VRCompliance, LLC, and VRCompliance uses the software to investigate tax compliance on behalf of localities such as the Colorado Association of Ski Towns ("CAST").

Believing that Eye Street's software was impermissibly accessing its websites and "scraping" data, HomeAway sent a letter to Eye Street and CAST demanding that CAST's members stop using the software. HomeAway asserted that the software's access of HomeAway's websites violated the terms of conditions of use of the sites and constituted unlawful interference with contractual relations as well as a deceptive and unfair trade practice in violation of state law. HomeAway sent a second letter to CAST and copied CAST's members, and it sent a letter to Eye Street and VRCompliance reiterating its allegations and threatening legal action unless the companies ceased scraping data from HomeAway's websites and turned over any data already obtained.

HomeAway sued Eye Street, VRCompliance and CAST in the District Court of Travis County, Texas asserting Texas state-law claims. The Defendants asserted various state-law counterclaims, and Eye Street filed its own action against HomeAway in the U.S. District Court for the Eastern District of Virginia seeking declaratory judgments that it was not violating state common law and statutory law as asserted in HomeAway's Texas complaint and that it was not violating the federal Computer Fraud and Abuse Act nor federal copyright law. Eye Street also asserted nondeclaratory Virginia state-law claims. HomeAway moved to dismiss the federal action for improper venue or, alternatively, to transfer venue to the U.S. District Court for the Western District of Texas. The district court stayed the action pending the resolution of Home Away's Texas lawsuit, and Eye Street challenged the decision to stay.

Read the rest of the article at the Virginia Business Litigation Lawyer blog.

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