The Twp. of Lyndhurst v. Priceline.Com Inc.
| Decision Date | 14 September 2011 |
| Docket Number | No. 09–2053.,09–2053. |
| Citation | 657 F.3d 148 |
| Parties | The TOWNSHIP OF LYNDHURST, NEW JERSEY on behalf of itself and all similarly situated taxing authorities within the State of New Jersey, Appellantv.PRICELINE.COM INC.; Lowestfare.com; Travel Web LLC; Travelocity.com, Inc.; Travelocity.com, L.P.; Site59.com, LLC; Expedia, Inc.; Hotels.com, L.P.; Hotwire Inc.; TravelNow.com, Inc.; Orbitz Worldwide, Inc.; Travelport Americas, LLC; Trip Network, Inc., doing business as Cheap Tickets, Inc.; Orbitz, LLC. |
| Court | U.S. Court of Appeals — Third Circuit |
OPINION TEXT STARTS HERE
John M. Agnello, Esquire, James E. Cecchi, Esquire (Argued), Lindsey H. Taylor, Esquire, Carella, Byrne, Cecchi, Olstein, Brody & Agnello, Roseland, NJ, for Appellant.Melissa C. Fulton, Esquire, Michael R. Griffinger, Esquire, Gibbons, Newark, NJ, Randolph K. Herndon, Esquire, Karen L. Valihura, Esquire, Skadden, Arps, Slate, Meagher & Flom, Wilmington, DE, Brian S. Stagner, Esquire, Scott R. Wiehle, Esquire, Fort Worth, TX, Lazar P. Raynal, Esquire, Jeffrey A. Rossman, Esquire (Argued), Michael W. Weaver, Esquire, McDermott, Will & Emery, Chicago, IL, for Appellees.Before: AMBRO, CHAGARES, and GREENAWAY, JR., Circuit Judges.
The Court, on its own motion, recalls the mandate. The Court's opinion, filed August 2, 2011, is hereby vacated and panel rehearing is granted. An amended precedential opinion, containing clarifying and typographical changes, will be issued forthwith. Upon filing of the Court's opinion, the mandate will be issued.
The Township of Lyndhurst, New Jersey, brought this putative class action “in its capacity as a taxing authority” on behalf of itself and all other similarly situated New Jersey municipalities, townships, and counties.1 It alleges that defendants—all companies who operate hotel booking sites online—owe the putative class unpaid hotel occupancy taxes.2 The District Court granted defendants' motion to dismiss on prudential standing grounds, concluding that Lyndhurst did not have the right to sue for the alleged taxes owed under the relevant statutory scheme. Instead, that enforcement right was given to the State of New Jersey's Director of Taxation (the “Director”), aided by the State's Attorney General (the “Attorney General”).3 For the reasons that follow, we affirm.
Lyndhurst is a political subdivision of the State of New Jersey. “As a general principle, it is established beyond question that [such] municipalities, being created by the State, have no powers save those delegated to them by the Legislature and the State Constitution.” Dome Realty, Inc. v. City of Paterson, 83 N.J. 212, 416 A.2d 334, 341 (1980).4 This case involves two distinct powers under N.J. Stat. Ann. §§ 40:48F–1 to –5 (the “Enabling Act”): 1) the power to enact a local hotel occupancy tax; and 2) the subsequent power to enforce it.5 The text of the Enabling Act speaks to each of these powers, as well as to the substantive reach of any ordinance enacted under this statutory scheme.
The Enabling Act's grant of power to enact local hotel occupancy taxes varies based on the “class” of the political subdivision at issue. For general classification purposes, cities of the “first class” have populations of greater than 150,000, while cities of the “second class” have populations between 12,000 and 150,000. See N.J. Stat. Ann. § 40A:6–4(a), (b). 6 It is undisputed that Lyndhurst is a city of the “second class” and that its enactment power is governed by N.J. Stat. Ann. § 40:48F–1, which permits it to “ adopt an ordinance imposing a tax ... on charges of rent for every occupancy ... of a room or rooms in a hotel.” (Emphasis added). 7 Lyndhurst exercised this authority by adopting (that is, enacting) such a tax, as did each member of the putative plaintiff class.8 Even as the New Jersey legislature provided Lyndhurst with the power to enact such a tax ordinance, it (the legislature) also placed limits on the ordinance's substantive reach. In short, the Enabling Act only permitted Lyndhurst to impose a local hotel occupancy tax on transactions that were already subject to the Sales and Use Tax Act, which levied a statewide tax on “[t]he rent for every occupancy of a room or rooms in a hotel in [New Jersey].” N.J. Stat. Ann. § 54:32B–3(d). The tax was to be collected by “the person collecting rent from the hotel customer,” id. § 40:48F–3(a), which included “every operator of a hotel,” id. § 54:32B–2(w). Given this scheme, although the substantive reach of Lyndhurst's hotel occupancy tax remains a matter of dispute, its power to enact such a tax is not.
Once Lyndhurst passed its hotel occupancy tax, the Enabling Act also provided for a specific enforcement regime. By the terms of the statute, only the Director—a State of New Jersey official—is given the explicit right to enforce Lyndhurst's hotel occupancy tax: “The Director of the Division of Taxation shall collect and administer any tax imposed pursuant to the provisions of [§ 40:48F–1].” Id. § 40:48F–5 (emphasis added). Interestingly, the Enabling Act provides a distinct enforcement regime for cities of the “first class” and those of the “second class” with an international airport—as these municipalities may enforce directly their local hotel occupancy taxes. See id. § 40:48E–3 (). The same enforcement power is not given to other “second class” cities like Lyndhurst. As noted, this power resides with the Director.
“In carry[ing] out” his authority to enforce Lyndhurst's hotel occupancy tax, the Director is given “all the powers granted in” the Sales and Use Tax Act. Id. § 40:48F–5. This includes the power to “ determine ” the amount of tax owed by a taxpayer. Id. § 54:32B–19 (emphasis added). Indeed, the Act provides that, “[i]f a return required ... is not filed, or if a return when filed is incorrect or insufficient, the amount of tax due shall be determined by the [D]irector from such information as may be available.” Id. “[S]uch determinations shall finally and irrevocably fix the tax unless the person against whom it is assessed ... shall apply to the [D]irector for a hearing, or unless the [D]irector of his own motion shall redetermine the same.” Id. The Act also includes a specific mechanism for dealing with delinquent taxpayers: “Whenever any person required to collect tax shall fail to collect or pay over any tax[,] ... the Attorney General shall, upon the request of the [D]irector, bring or cause to be brought an action to enforce the payment of same on behalf of the State of New Jersey....” Id. at § 54:32B–22(a). In the end, the question remains whether this explicit grant of enforcement power to the Director (aided by the Attorney General) precludes Lyndhurst from bringing its own enforcement action against private parties in federal court.
This case involves the propriety of the taxes owed by defendants to certain New Jersey municipalities, pursuant to the Enabling Act, under the so-called “Merchant Model” employed by defendants, whereby they (1) acquire inventories of hotel rooms at negotiated rates; and then (2) rent those rooms to consumers at higher rates.9 Lyndhurst alleges that defendants calculate the amount owed under Lyndhurst's hotel occupancy tax based on the negotiated rate paid by a defendant for rooms (the so-called “wholesale” rate), not the higher rate that the consumers are subsequently charged (the so-called “retail” rate). Defendants then pay the tax to the hotel, which in turn remits it to the State taxing authority. Lyndhurst alleges that this scheme, which understates the amount of taxes it seeks to exact, is a form of tax evasion.
At the same time, there is no evidence in the record that the Director has ever sought to collect tax revenue under a hotel occupancy tax based on the retail rate charged to consumers by online travel booking sites. In fact, in a letter opinion the New Jersey Division of Taxation has concluded that online booking agents are not subject to the hotel occupancy tax. This was in response to a ruling request by one defendant.10
Lyndhurst brought this putative class action in June 2008. It asserted claims for the collection of unpaid taxes, conversion, and unjust enrichment, as well as for the imposition of a constructive trust and a declaratory judgment. In August 2008, defendants moved to dismiss the complaint under Fed.R.Civ.P. 12(b)(1) and (6). In their motion, defendants argued that: 1) Lyndhurst lacked standing to bring the action; 2) the Director (who was the proper party to bring suit, with the aid of the Attorney General) had already determined that defendants were not subject to the hotel occupancy tax; 3) even if Lyndhurst had standing, it had failed to exhaust its administrative remedies; and 4) Lyndhurst's claims failed as a matter of law.
In March 2009, the District Court granted defendants' motion to dismiss for lack of subject matter jurisdiction on the prudential standing ground discussed below. It concluded that Lyndhurst was attempting to assert a legal right that was reserved to the Director (aided by the Attorney General) and not to Lyndhurst—namely, the right to enforce Lyndhurst's hotel occupancy tax by determining the amount of tax due and then collecting the related revenue. The Court did not reach the remainder of defendants' arguments.
Lyndhurst filed a timely notice of appeal.
The District Court had jurisdiction under 28 U.S.C. § 1332, and we have jurisdiction under 28 U.S.C. § 1291. We exercise plenary review over a dismissal under Fed.R.Civ.P. 12(b)(1), and determine “whether the allegations on the face of the complaint, taken as...
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