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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 lexis.com
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
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
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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