Vill. of Bedford Park v. Expedia, Inc.
| Decision Date | 20 June 2016 |
| Docket Number | Case No. 13 C 5633 |
| Citation | 193 F.Supp.3d 911 |
| Parties | VILLAGE OF BEDFORD PARK, City of Warrenville, City of Oakbrook Terrace, Village of Oak Lawn, Village of Orland Hills, City of Rockford, Village of Willowbrook, Village of Arlington Heights, Village of Burr Ridge, City of Des Plaines, Village of Lombard, Village of Orland Park, Village of Tinley Park, and Village of Schaumburg, Plaintiffs, v. EXPEDIA, INC. (WA), Hotels.com, LP, Hotwire, Inc., Egencia, LLC, Trip Network, Inc., Orbitz, LLC, Internetwork Publishing Corp. (d/b/a Lodging.com ), Priceline.com Incorporated (n/k/a The Priceline Group Inc. ), Priceline.com LLC, Travelweb LLC, Travelocity.com LP, Site59.com, LLC, and Does 1 through 1000, Inclusive, Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
Michael Sean Krzak, Thomas K. Prindable, Clifford Law Offices, P.C., Dominick L. Lanzito, Paul A. O'Grady, Peterson Johnson and Murray Chicago LLC, Chicago, IL, Donald J. Storino, Richard J. Ramello, Storino, Ramello & Durkin, Rosemont, IL, John W. Crongeyer, Crongeyer Law Firm, P.C., Kristen L. Beightol, William Q. Bird, Bird Law Group, P.C., Atlanta, GA, Robert K. Finnell, Finnell Firm, Rome, GA, for Plaintiffs.
Mark P. Rotatori, Meghan Sweeney Bean, Nicole C. Henning, Jones Day, Elizabeth Brooke Herrington, Mark Jacob Altschul, Morgan, Lewis & Bockius LLP, Jeffrey A. Rossman, Freeborn & Peters LLP, Lisa Nicole Haidostian, McDermott Will & Emery LLP, Albert Lee Hogan, III, Marcella Louise Lape, Skadden, Arps, Slate, Meagher & Flom LLP, Luke Degrand, Tracey L. Wolfe, DeGrand & Wolfe, P.C., Chicago, IL, Brian Stagner, Brian S. Stagner, Derek Lee Montgomery, Scott Ryan Wiehle, Kelly Hart & Hallman LLP, Fort Worth, TX, Randolph K. Herndon, Skadden, Arps, Slate, Meagher & Flom LLP, Wilmington, DE, for Defendant.
Fourteen Illinois municipalities, on behalf of a putative class of similarly situated municipalities, sued a number of online travel companies alleging that they failed to remit taxes owed under plaintiffs' municipal hotel tax ordinances. Defendants removed the case to federal court under the Class Action Fairness Act, 28 U.S.C. §§ 1332(d) & 1453. In October 2014, plaintiffs moved to certify a class of 276 municipalities under Federal Rule of Civil Procedure 23(b)(1) and (b)(3), which the Court denied without prejudice to renewal. See Vill. of Bedford Park v. Expedia, Inc. , No. 13 C 5633, 2015 WL 94851 (N.D.Ill. Jan. 6, 2015). In September 2015, the Court denied plaintiffs' renewed motion for class certification, this time brought to certify a class of 154 municipalities under Rule 23(b)(3) alone. See Vill. of Bedford Park v. Expedia, Inc. , 309 F.R.D. 442 (N.D.Ill.2015). Since that time, one plaintiff—City of Oakbrook Terrace—voluntarily dismissed its claims against defendants. The remaining parties on both sides have now moved for summary judgment. For the reasons stated below, the Court grants summary judgment on liability in favor of the Village of Lombard with respect to its hotel occupancy tax but otherwise enters summary judgment in favor of defendants.
Except where otherwise noted, the following facts are undisputed. Plaintiffs are thirteen municipalities in Illinois. Between 1974 and 2003, each one enacted one or more ordinances imposing taxes on the rental of hotel rooms within its borders. Each of the ordinances is unique, but all share one common characteristic: when a transient guest pays to occupy a hotel or motel room within a particular municipality, the ordinances require a sum of money (some percentage of the amount paid by the guest) to be remitted to the municipality in which the rented room is located.
When a transient guest reserves a room directly through a hotel's reservation system, the process is simple. In that situation, the hotel bills the guest the room rental rate plus an additional amount that it will remit to its local municipal authority for the taxes due on the rental. Arlington Heights, for example, imposes a five percent tax "upon the use and privilege of renting, leasing or letting of rooms in a motel or hotel in the Village of Arlington Heights." Pls.' Ex. 57, dkt. no. 256-11, at 19. When a guest stays in a room priced at $100 in Arlington Heights, the hotel charges the guest $105 and indicates on the guest's bill that the total amount due consists of $100 in rental charges and $5 in taxes. The hotel then remits the five dollars it collected to the Village.
Transient guests in the twenty-first century, however, do not always make their room reservations directly with hotels. Defendants are online travel companies through which travelers may purchase hotel room reservations. These companies utilize various business models to procure inventory to advertise and sell to consumers. Under the "merchant model," the business model at issue in this case, defendants contract with hotels to purchase hotel rooms at a "wholesale" or "net" rate. When a traveler visits an online travel company's website, however, she does not ever see what that rate is. Instead, she is presented with two charges, one for the room rate (which the Court will refer to as the "retail" rate) and one for "taxes and fees." All of the online travel companies require users to agree to their terms and conditions, which state that the retail rate includes both the cost of the hotel room and consideration for the services the companies provide.
When a traveler pays an online travel company $100 to cover the retail rate of a hotel room in Arlington Heights and $5 in "taxes and fees," Arlington Heights does not receive five dollars. This is because the online travel company that collects $105 from a traveler might have purchased the room from the hotel at a net rate of $60. The online travel company delivers $63 to the hotel, and the hotel then remits $3 (five percent of $60) to the Village. The online travel company keeps the balance as its fee.
The central questions in this case concern whether plaintiffs' tax ordinances apply to online travel companies selling hotel rooms under the merchant model, and if so whether the tax must be calculated with reference to the retail rate set by the online travel companies or the net rate hotels charge them for the room. Put in terms of the example above, Arlington Heights seeks to recover the two-dollar difference between taxes remitted on the $60 net rate and taxes that would be remitted on the $100 retail rate.
Plaintiffs filed a putative class action suit in the Circuit Court of Cook County in July 2013. Shortly thereafter, defendants removed the case to federal court under the Class Action Fairness Act, 28 U.S.C. §§ 1332 & 1453. Plaintiffs asserted ten claims in their complaint, seven of which the Court dismissed in March 2014. See Vill . of Bedford Park v. Expedia, Inc. , No. 13 C 5633, 2014 WL 983129 (N.D.Ill. Mar. 13, 2014). Only counts one, two, and nine remained after dismissal. Count 1 seeks declaratory judgment on whether defendants have a duty to collect the taxes in question and remit them to plaintiffs. Count 2 alleges that defendants violated the municipal tax ordinances at issue. Count 9 claims damages based on the tax monies allegedly owed.
After engaging in class discovery, plaintiffs moved for class certification under Rules 23(b)(1)(A) and 23(b)(3) in October 2014. The Court denied plaintiffs' motion because differences in the tax ordinances from municipality to municipality made class adjudication under Rule 23(b)(1)(A) inappropriate and defeated plaintiffs' arguments that class adjudication was superior to individual adjudication and that common issues would predominate as required under Rule 23(b)(3). See Vill. of Bedford Park v. Expedia , 2015 WL 94851, at *4–6 (N.D.Ill. Jan. 6, 2015). In September 2015, the Court denied plaintiffs' renewed motion for class certification, this time brought to certify a class under Rule 23(b)(3) alone. See Vill. of Bedford Park , 309 F.R.D. at 455. The Court again found that plaintiffs' proposed subclasses did not satisfy the predominance and superiority requirements. Id. at 451–52.
Discovery closed near the end of 2015. Plaintiffs made two separate motions for summary judgment in February 2016, one on behalf of the City of Oakbrook Terrace and one on behalf of the other thirteen plaintiffs. Oakbrook Terrace then filed a stipulation for voluntary dismissal in early March 2016, and its claims were accordingly dismissed with prejudice. See dkt. nos. 275, 276, 283, & 284. Defendants cross-moved for summary judgment on all of the remaining thirteen plaintiffs' claims.
Summary judgment is proper when the moving party "shows that there is no genuine dispute as to any material fact and [that] the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). On a motion for summary judgment, the Court draws reasonable inferences in favor of the non-moving party. Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; Boss v. Castro , 816 F.3d 910, 916 (7th Cir.2016). "Summary judgment is not appropriate ‘if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.’ " Payne v. Pauley , 337 F.3d 767, 770 (7th Cir.2003) (quoting Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ).
On cross-motions for summary judgment, the Court assesses whether each movant has satisfied the requirements of Rule 56. See Cont'l Cas. Co. v. Nw. Nat'l Ins. Co. , 427 F.3d 1038, 1041 (7th Cir.2005). "As with any summary judgment motion, [the Court] review[s] cross-motions for summary judgment construing all facts, and drawing all reasonable inferences from those facts, in favor of the nonmoving party." Laskin v. Siegel , 728 F.3d 731, 734 (7th Cir.2013) (internal quotation marks omitted).
Plaintiffs seek summary judgment on counts 1 and 2 of their complaint. They contend that...
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