PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

VRCOMPLIANCE LLC; EYE STREET 

SOLUTIONS LLC,

Plaintiffs-Appellants,

v.  No. 12-1143 HOMEAWAY, INC.;

HOMEAWAY.COM, INC.;

VRBO.COM, INC.;

VACATIONRENTALS.COM, INC.,

Defendants-Appellees. 

Appeal from the United States District Court

for the Eastern District of Virginia, at Alexandria.

Liam O’Grady, District Judge.

(1:11-cv-01088-LO-TCB)

Argued: March 20, 2013

Decided: May 24, 2013

Before WILKINSON, SHEDD, and DUNCAN,

Circuit Judges.

Affirmed by published opinion. Judge Wilkinson wrote the

opinion, in which Judge Shedd and Judge Duncan joined.
COUNSEL

ARGUED: M. Keith Blankenship, EYE STREET SOLUTIONS, LLC, Leesburg, Virginia, for Appellants. Adam J.

Kessel, FISH & RICHARDSON, PC, Boston, Massachusetts,

for Appellees. ON BRIEF: James A. Allen, GENERAL

COUNSEL, PC, McLean, Virginia, for Appellants. Ahmed J.

Davis, FISH & RICHARDSON, PC, Washington, D.C.; William Tommy Jacks, FISH & RICHARDSON, PC, Austin,

Texas, for Appellees.

OPINION

WILKINSON, Circuit Judge:

The district court stayed appellants’ action pending the resolution of an earlier parallel state lawsuit filed by appellees.

Appellants’ action was based on a "mixed" complaint, one

raising both declaratory and nondeclaratory claims. The parties spend a great deal of energy arguing over whether the

decision to stay a mixed action is governed by the standard

articulated in Colorado River Water Conservation District v.

United States, 424 U.S. 800, 813 (1976), which permits stays

only in "exceptional circumstances," or the standard articulated in Brillhart v. Excess Insurance Co. of America, 316

U.S. 491, 495 (1942), and Wilton v. Seven Falls Co., 515 U.S.

277, 286, 289 (1995), which affords district courts broader

discretion to stay declaratory actions in deference to parallel

state proceedings. We think, however, that regardless of the

standard applied, the district court did not abuse its discretion.

See Chase Brexton Health Servs., Inc. v. Maryland, 411 F.3d

457, 464 (4th Cir. 2005). One consideration in this case looms

above the others—namely, that appellants had every opportunity to procure a federal forum by removing appellees’ firstfiled state suit rather than by bringing a separate federal action

in an entirely separate federal district. 

2 VRCOMPLIANCE v. HOMEAWAY, INC.
I.

A.

Rather than book hotel rooms, many travelers now rent private residences for accommodation during their vacations.

Appellee HomeAway, Inc. owns and operates a number of

websites that facilitate such rentals. The websites, including

HomeAway.com and VRBO.com, post rental advertisements

by homeowners, whom prospective renters can then contact

directly to make reservations.

Many localities have found that these vacation rentals

deprive them of significant tax revenue. Whereas hotels

almost always pay the taxes that localities assess on room

rentals, private homeowners frequently fail to do so, whether

out of ignorance of the law or purposeful evasion. To combat

such delinquency, some localities have turned to companies

like appellant Eye Street Solutions LLC ("Eye Street"), which

has developed computer software designed to identify homeowners who neglect to pay taxes when they rent out their

homes. Eye Street claims the software as a trade secret, and

the parties dispute exactly how it works, but in general, it uses

various data to identify the owners of properties advertised on

websites like HomeAway’s and then determines whether the

owners have paid the requisite local rental taxes. Eye Street

has licensed its software to appellant VRCompliance LLC,

which, in turn, uses the software to conduct tax-compliance

investigations on behalf of localities, including those belonging to the Colorado Association of Ski Towns ("CAST").

Believing that Eye Street’s software was impermissibly

accessing its websites, HomeAway sent a letter, on December

10, 2010, to CAST and Eye Street, in which it demanded that

CAST’s members cease using the software. Specifically,

HomeAway asserted that CAST’s members were using Eye

Street’s software to "scrape" HomeAway’s websites—that is,

to access and copy from the websites’ computer servers inforVRCOMPLIANCE v. HOMEAWAY, INC. 3
mation that identified the homeowners who posted rental

advertisements. Such access, HomeAway contended, violated

the websites’ terms and conditions of use and thus constituted

unlawful interference with contractual relations as well as a

deceptive and unfair trade practice, in violation of Colorado

law. Additionally, because HomeAway claimed the lists of

homeowners who posted advertisements on its websites to be

copyrighted and trade secrets, it contended that the localities’

actions also violated federal copyright law and the Colorado

Uniform Trade Secrets Act, Colo. Rev. Stat. §§ 7-74-101 to

-110. 

On September 28, 2011, HomeAway sent a second letter to

CAST, copying the organization’s members, as well as a separate letter to Eye Street and VRCompliance. Reiterating the

allegations from the first letter, the second round of letters

threatened Eye Street, VRCompliance, and CAST and its

members with legal action unless, by October 5, 2011, they

stopped "scraping" data from HomeAway’s websites and

turned over any data they had already obtained.

B.

On October 3, 2011, HomeAway filed suit against Eye

Street, VRCompliance, and CAST in the District Court of

Travis County, Texas. Its complaint asserted the following

Texas state-law claims: breach of contract; misappropriation

of trade secrets; violations of the Texas Theft Liability Act,

Tex. Civ. Prac. & Remd. Code Ann. §§ 134.001-.005; conversion; and constructive trust. The defendants, in turn, later

asserted various state-law counterclaims, including tortious

interference with existing and prospective contractual relations; defamation; business disparagement; and violations of

the Texas Deceptive Trade Practices Act, Tex. Bus. & Com.

Code Ann. §§ 17.47, .58, .60, .61.

Eye Street did not attempt to remove HomeAway’s Texas

suit to federal district court. Instead, on October 6, 2011, it

4 VRCOMPLIANCE v. HOMEAWAY, INC.
filed its own action against HomeAway and its subsidiaries in

the U.S. District Court for the Eastern District of Virginia.*

Eye Street’s complaint sought declaratory judgments that (1)

it was not committing the various state common-law and statutory violations asserted in HomeAway’s Texas complaint;

(2) it was not violating the federal Computer Fraud and Abuse

Act (CFAA), 18 U.S.C. § 1030; and (3) it was not infringing

any of HomeAway’s copyrights and thus was not violating

federal copyright law. It also raised nondeclaratory Virginia

state-law claims for defamation; tortious interference with

existing and prospective contractual relations; and violations

of the Virginia Consumer Protection Act, Va. Code Ann.

§ 59.1-196 to -207—claims for which it sought compensatory

and punitive damages. 

After HomeAway moved to dismiss Eye Street’s 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

HomeAway’s Texas lawsuit. Eye Street challenges the propriety of the stay in this appeal. 

II.

The district court based its ruling on our decision in United

Capitol Insurance Co. v. Kapiloff, 155 F.3d 488, 493-94 (4th

Cir. 1998), which identified factors for district courts to consider in deciding whether to stay declaratory actions in deference to parallel state proceedings under Brillhart/Wilton. In

reviewing its ruling for abuse of discretion, we bear in mind

that, as with any multi-factor test governing the exercise of

federal jurisdiction, a district court should not treat the factors

as a "mechanical checklist," but rather should apply them

*VRCompliance, but not CAST, joined Eye Street as a plaintiff in the

federal action and thus is also an appellant here. For ease of reference,

however, we hereinafter refer to VRCompliance and Eye Street collectively as "Eye Street." 

VRCOMPLIANCE v. HOMEAWAY, INC. 5
flexibly in light of the particular circumstances of each case.

Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460

U.S. 1, 16 (1983).

First, the district court found that "Texas has a strong interest in deciding the issues of this case in its courts." J.A. 238.

All of Eye Street’s claims relate to a single general question:

whether appellants violated the terms and conditions of use

for HomeAway’s websites. As the court noted, because the

terms and conditions contain Texas choice-of-venue and

choice-of-law provisions, Texas has a strong interest in having its courts take a first stab at resolving this question. 

Second, the district court concluded that "the Texas State

Court will likely ‘resolve the issues more efficiently’ than this

court." J.A. 240 (quoting Kapiloff, 155 F.3d at 494). In general, where two parallel suits are pending in state and federal

court, "the first suit should have priority, absent the showing

of balance of convenience in favor of the second action." Ellicott Mach. Corp. v. Modern Welding Co., 502 F.2d 178, 180

n.2 (4th Cir. 1974) (internal quotation marks omitted). As the

district court noted, although the period between the two

actions was short, Eye Street filed its federal action after

HomeAway filed its Texas action. While Eye Street claims to

have been unaware of the Texas action at the time, it still had

known that such an action was imminent, given the threat in

HomeAway’s final cease-and-desist letter. Nor have the parties indicated that the Texas action has been stayed, suggesting that that action has progressed further, and promises to

conclude more promptly, than the federal one. 

The district court noted, moreover, that "an inquiry into

‘the scope of the pending state court proceeding’ convinces

the Court the suit ‘can better be settled in the proceeding

pending before the state court.’" J.A. 240-41 (quoting Brillhart, 316 U.S. at 495). The Texas suit includes not only all the

parties in the federal suit, but also CAST, thus promising a

more comprehensive resolution. See Kapiloff, 155 F.3d at 494

6 VRCOMPLIANCE v. HOMEAWAY, INC.
(finding that the state court action "included more parties than

did the federal action, suggesting that the same action would

be more efficient in resolving all interested parties’ rights").

Eye Street’s federal action also "explicitly mirror[s]" most

of the claims in the Texas suit. J.A. 240. In particular, Eye

Street’s state-law declaratory claim is explicitly styled as a

general defense to HomeAway’s Texas claims, while its nondeclaratory claims merely recast its Texas counterclaims in

terms of Virginia law. Eye Street will thus have an opportunity in the Texas proceeding to litigate all the offensive claims

against HomeAway that it sought to litigate in the district

court. To be sure, the Texas action does not include Eye

Street’s two federal-law declaratory claims, nor could it possibly include the copyright claim, which is subject to exclusive

federal jurisdiction. See 28 U.S.C. § 1338(a). But the core of

Eye Street’s action is its state-law declaratory claim, and its

federal-law declaratory claims turn on the very same factual

questions—questions that, for all the reasons noted, the Texas

court can more efficiently resolve. 

Third, because "the Texas and Virginia Suits involve ‘overlapping issues of fact [and] law,’" the district court concluded

that "permitting this action to go forward would result in

unnecessary entanglement between the federal and state court

systems." J.A. 241 (alteration in original) (quoting Kapiloff,

155 F.3d at 494). The risk of such entanglement is especially

acute where the same issues being litigated in federal court

"are already being litigated by the same parties in the related

state court action[ ]," since any factual determinations first

made in one proceeding would likely have preclusive effect

in the other, thus "frustrat[ing] the orderly progress of [the

other] proceeding[ ] by leaving the . . . court with some parts

of [the] case foreclosed from further examination but still

other parts in need of full scale resolution." Nautilus Ins. Co.

v. Winchester Homes, Inc., 15 F.3d 371, 379, 377 (4th Cir.

1994) (internal quotation marks omitted). This procedural

maze, of course, perfectly describes the instant case. The simVRCOMPLIANCE v. HOMEAWAY, INC. 7
ilarities between the Texas and federal actions are, as the district court aptly put it, "unambiguous." J.A. 241.

Consequently, the district court would almost certainly have

to accord any prior factual findings by the Texas court preclusive effect, a prospect made all the more likely by the fact that

the Texas suit was filed first and has progressed further. 

III.

The district court’s foregoing discussion is all well and

good, and we in no sense discount it. However, one consideration looms above the rest and would justify the stay under

either Brillhart/Wilton or Colorado River. Thus, although

"[o]ur jurisprudence suggests that, in a ‘mixed’ complaint scenario, the Brillhart/Wilton standard does not apply, at least to

the nondeclaratory claims. . . . [w]e need not express a definitive view on this point" because even if we applied the heightened Colorado River standard, "the result would not change."

Great Am. Ins. Co. v. Gross, 468 F.3d 199, 211 (4th Cir.

2006). That is, appellants’ procedural gamesmanship renders

us unable to say that the district court abused its discretion

under either governing standard. 

Crucially, Eye Street insisted on proceeding with its federal

action, rather than seeking to remove HomeAway’s action to

the appropriate federal district court in Texas, even after

HomeAway indicated it would not oppose removal. "At

numerous points," the district court noted, HomeAway

"evinced its assent to removal of the Texas Suit. And at no

point did [Eye Street] argue removal of the Texas Suit would

have been improper." J.A. 243 n.11. Eye Street thus desired

not a federal forum per se, but one that would approach the

dispute on its terms and potentially preempt HomeAway’s

alternative framing of the issues in the Texas suit. This, of

course, is precisely the kind of "procedural fencing" that federal case law aims to forestall. Kapiloff, 155 F.3d at 494.

Congress designed the federal removal statute, 28 U.S.C.

§ 1446, as the primary avenue for obtaining federal court

8 VRCOMPLIANCE v. HOMEAWAY, INC.
review of claims already pending in a state court. Under the

statute, a defendant in an action pending in state court may

seek to remove the action only to the federal district court "for

the district and division within which such action is pending."

Id. § 1446(a). But if the defendant could gain a federal forum

in any federal district court with personal jurisdiction over the

state court plaintiffs simply by filing a federal action recasting

the claims against it as declaratory claims, then the removal

statute’s comprehensive jurisdictional scheme would be supplanted with a regime of forum shopping. District courts

enjoy discretion to consider a litigant’s deliberate decision to

forego removal as a reason to stay its federal declaratory

action.

Colorado River does not counsel the contrary. That decision embodies the notion that, barring "exceptional circumstances," litigants should have access to a federal forum

where Congress has afforded them one. 424 U.S. at 813. This

principle is especially salient where, as here, some of a litigant’s claims are based on federal law. But in Colorado River

all the federal claims were nondeclaratory. Here, all of Eye

Street’s federal claims are declaratory, where the breadth of

the district court’s discretion reflects the permissive language

in the Declaratory Judgment Act itself. See 28 U.S.C. § 2201

(providing that a district court "may declare the rights and

other legal relations of any interested party seeking such declaration" (emphasis added)). In any event, Eye Street has

always had access to a federal forum for all its claims, federal

and state, via removal of HomeAway’s Texas suit to federal

district court. Because Eye Street decided voluntarily to

forego the opportunity to litigate in one federal forum, the

concerns underlying Colorado River are now mitigated as it

seeks to litigate in another.

Moreover, as the district court emphasized, because it

issued a stay rather than dismissing Eye Street’s action outright, it has by no means "thwart[ed] . . . Eye Street’s access

to a federal forum for resolution of [its] federal claims or

VRCOMPLIANCE v. HOMEAWAY, INC. 9
additional claims that properly invoke the [district court’s]

jurisdiction." J.A. 243 n.11. The Supreme Court has counseled this exact course in cases like the instant one. See Wilton, 515 U.S. at 288 n.2 ("We note that where the basis for

declining to proceed is the pendency of a state proceeding, a

stay will often be the preferable course, because it assures that

the federal action can proceed without risk of a time bar if the

state case, for any reason, fails to resolve the matter in controversy."). 

Of course, the district court issued the stay based in part on

the belief that the Texas court is likely to answer the central

questions in the dispute, including those underlying Eye

Street’s federal declaratory claims. But insofar as this means

that Eye Street is unlikely to have a chance to litigate those

questions in federal court, it yet again has only itself to blame,

for it deliberately chose not to remove HomeAway’s Texas

action. A party should not be heard to complain that it lacks

a federal forum when such deprivation stems from its own

apparent procedural gamesmanship.

We thus conclude that the district court did not abuse its

discretion in staying Eye Street’s action. Given the strong

case for a stay under the Kapiloff factors and Eye Street’s

deliberate choice to forego removal, the court’s decision

would be an appropriate exercise of discretion under either

Brillhart/Wilton or Colorado River.

IV.

For the foregoing reasons, the judgment of the district court

is affirmed.

AFFIRMED

10 VRCOMPLIANCE v. HOMEAWAY, INC.