City of Charleston, S.C. v. Hotels.Com, Lp

• Decision Date: 29 April 2008
• Docket Number: C.A. No. 2:06-cv-1646-PMD.,C.A. No. 2:06-cv-2087-PMD.
• Citation: 586 F.Supp.2d 538
• Parties: CITY OF CHARLESTON, SOUTH CAROLINA, Plaintiff, v. HOTELS.COM, LP, et al., Defendants. Town of Mount Pleasant, South Carolina, Plaintiff, v. Hotels.Com, LP, et al., Defendants.
• Court: U.S. District Court — District of South Carolina

586 F.Supp.2d 538

CITY OF CHARLESTON, SOUTH CAROLINA, Plaintiff, v. HOTELS.COM, LP, et al., Defendants.

Town of Mount Pleasant, South Carolina, Plaintiff, v. Hotels.Com, LP, et al., Defendants.

C.A. No. 2:06-cv-1646-PMD.

C.A. No. 2:06-cv-2087-PMD.

United States District Court, D. South Carolina, Charleston Division.

April 29, 2008.

COPYRIGHT MATERIAL OMITTED

Edward A. Berman, Edward A. Berman Law Office, Chicago, IL, Robert Allen Young, Town of Mount Pleasant, Mt. Pleasant, SC, Walter Ronald Bonds, Attorneys for Medical Help, Charleston, SC, for Plaintiff.

Bradish Johnson Waring, Thomas S. Tisdale, Jr., Nexsen Pruet Jacobs Pollard and Robinson, Charleston, SC, Deborah S. Sloan, James P. Karen, Jones Day, Dallas, TX, Jeffrey A. Rossman, Laznar P. Raynal, Nicholas M. Berg, Elizabeth B. Herrington, Paul E. Chronis, McDermott Will and Emery, Chicago, IL, Marcus Gerardo Mungioli, Brian Scott Stagner, Jason Chad Nash, Kelly Hart and Hallman, Fort Worth, TX, Karen L. Valihura, Michael A. Barlow, Skadden Arps Slate Meagher and Flom, Wilmington, DE, for Defendants.

ORDER

PATRICK MICHAEL DUFFY, District Judge.

This matter is before the court on Defendants' Motion for Reconsideration pursuant to Fed.R.Civ.P. 59(e), or in the alternative, to certify an interlocutory appeal in this matter pursuant to 28 U.S.C. § 1292(b). For the reasons set forth herein, the Defendants' Motions are denied.

FACTUAL BACKGROUND

The facts, as alleged by Plaintiffs' Amended Complaints, are as follows:

Pursuant to their respective Municipal Accommodations Fee Ordinances, Charleston imposes a tax of 2% and Mt. Pleasant imposes a tax of 1% (the "tax") on the gross proceeds derived from the rental of any accommodations within their municipal boundaries. All persons renting hotel rooms within Charleston or Mt. Pleasant are required to pay the tax in addition to the gross price of the hotel room. The tax is paid by the consumer at the time of the "delivery of the accommodations to which the fee applies" and is collected on behalf of the relevant municipality by the provider of the service of the rental of accommodations. Charleston, S.C. Ordinance 1996-18, § 4; Mt. Pleasant, S.C. Ordinance 96014, § 4. Plaintiffs adopted these taxes in 1996 to help provide property tax relief to their residents.

Defendants are online sellers and/or online resellers of hotel rooms to the general public. Defendants have rented rooms in Charleston and in Mt. Pleasant to consumers and have collected accommodations taxes. Plaintiffs assert, however, that Defendants have not paid the full amount of tax due and owing to Plaintiffs on these transactions. Specifically, Defendants contract with hotels operating within Charleston and Mt. Pleasant for rooms at negotiated discounted room rates. Defendants then market these rooms on their websites, and sell the rooms at a higher marked-up price to consumers who occupy the rooms. Defendants charge and collect the accommodations taxes from online consumers at the time of the sale based on the marked-up room rates, but only remit the taxes based on the lower discount rates to the Plaintiffs. Defendants keep the difference between the amount of tax charged to the consumer and the amount remitted to the Plaintiffs.¹ Plaintiffs assert that this practice violates Plaintiffs' Municipal Accommodations Fee Ordinances and constitutes conversion, calls for an imposition of a constructive trust, and is an unfair or deceptive trade practice in violation of the South Carolina Unfair Trade Practices Act ("SCUTPA"). Plaintiffs also demand a legal accounting of all money Defendants are alleged to have charged consumers as "tax" and retained as profit.

PROCEDURAL BACKGROUND

On April 26, 2006, Charleston filed a Complaint against Defendants in the Charleston County Court of Common Pleas, Mt. Pleasant filed a nearly identical Complaint against Defendants on May 23, also in the Charleston County Court of Common Pleas. These Complaints originally asserted causes of action for (1) violations of the Municipal Accommodations Fee Ordinances, (2) conversion, and sought (3) imposition of constructive trust and (4) a full legal accounting. Defendants removed both cases to federal district court pursuant to 28 U.S.C. § 1332 on the basis of diversity jurisdiction.

On January 11, 2007, based upon the parties' agreement and consent, the court entered Amended Scheduling Orders in both cases. Under these Orders, the parties had until January 23 to amend their pleadings. Accordingly, on January 22, Plaintiffs filed Motions to Amend their Complaints, seeking to add a fifth cause of action to their Complaints based on Defendants' alleged violation of SCUTPA, S.C.Code Ann. § 39-5-10, et seq. (2006). This motion was granted by the court on April 23.

On April 25, 2007, Defendants filed an Unopposed Motion to Consolidate the two cases into a single action, which the court granted on April 26. On June 4, Defendants filed the Motion to Dismiss Plaintiff's First Amended Complaint and Memorandum in Support Thereof. Plaintiffs filed a Memorandum of Law in Opposition to Defendants' motion on July 19. On August 8, Defendants filed a Reply with Supporting Memorandum in Support of Their Motion to Dismiss.

Defendants moved for dismissal of the Complaint for failure to state a claim upon which relief may be granted. Fed.R.Civ.P. Rule 12(b)(6). On November 5, 2007, 520 F.Supp.2d 757, this court entered an order denying Defendants' Motion to Dismiss.

On November 30, Defendants filed the present Motion for Reconsideration or Certification of Interlocutory Appeal. Plaintiffs filed a Response in Opposition to this Motion on January 17, 2008. Defendants filed a Reply on January 28.

STANDARD OF REVIEW

I. Motion for Reconsideration

Reconsideration of a judgment is an extraordinary remedy which should be used sparingly. Pacific Ins. Co. v. American Nat. Fire Ins. Co., 148 F.3d 396, 403 (4th Cir.1998). A motion to reconsider may be granted for three reasons: "(1) to accommodate an intervening change in controlling law; (2) to account for new evidence not available at trial; or (3) to correct a clear error of law or prevent manifest injustice." Id. Motions to reconsider may not be used to initiate arguments or legal theories that the proponent had the ability to address prior to the judgment. Id.

II. Interlocutory Appeal

A district court may certify an issue for interlocutory appeal to the Court of Appeals under certain limited circumstances:

When a district judge, in making in a civil action an order not otherwise appealable under this section, shall be of the opinion that such order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation, he shall so state in writing in such order. The Court of Appeals which would have jurisdiction of an appeal of such action may thereupon, in its discretion, permit an appeal to be taken from such order, if application is made to it within ten days after the entry of the order: Provided, however, That application for an appeal hereunder shall not stay proceedings in the district court unless the district judge or the Court of Appeals or a judge thereof shall so order.

28 U.S.C. § 1292(b) (emphasis added). A question of law is generally considered to be controlling within the meaning of § 1292(b) if the action would have been terminated had the district court ruled the opposite way. Klinghoffer v. SNC Achille Lauro Ed Altri-Gestione Motonave Achille Lauro in Amministrazione Straordinaria, 921 F.2d 21, 24 (2d Cir.1990). However, certification of an interlocutory appeal should generally be limited to extraordinary cases where significant effort and expense would be spared by appellate review prior to the entry of final judgment. Abortion Rights Mobilization, Inc. v. Regan, 552 F.Supp. 364 (S.D.N.Y.1982). See also In re Flor, 79 F.3d 281, 284 (2d Cir.1996) ("[U]se of this certification procedure should be strictly limited because `only `exceptional circumstances [will] justify a departure from the basic policy of postponing appellate review until after the entry of a final judgment.''") (citations omitted).

ANALYSIS

I. Motion for Reconsideration

Defendants assert that this court committed two primary errors in its Order of November 5, which the court will address individually.

A. Whether This Court Misinterpreted the Relevant State Statutes

Defendants' first claim is that this court was required to construe all applicable tax statutes which contained any ambiguity in favor of the taxpayer. Defendants assert that the state act defining the scope of municipal ordinances and the state enabling act are both ambiguous as to whether they apply to Defendants or not. Therefore, Defendants argue that this court was in error when it held that Plaintiffs were allowed to levy accommodations taxes against Defendants.

In the context of a tax statute, Defendants are correct that ambiguities are to be resolved in favor of the taxpayer. See, e.g., Gould v. Gould, 245 U.S. 151, 153, 38 S.Ct. 53, 62 L.Ed. 211 (1917) ("In the interpretation of statutes levying taxes it is the established rule not to extend their provisions, by implication, beyond the clear import of the language used, or to enlarge their operations so as to embrace matters not specifically pointed out. In case of doubt they are construed most strongly against the government, and in favor of the citizen."). See also Hadden v. South Carolina Tax Comm'n, 183 S.C. 38, 46-47, 190 S.E. 249 (1937) ("[W]here a tax statute is ambiguous or is reasonably susceptible of an interpretation that would exclude the person or subject sought to be taxed, any substantial doubt must be resolved against the government in favor of the taxpayer.").

However, "[t]he cardinal rule of statutory interpretation is to ascertain and effectuate the intention of...