Wake County v. Hotels.Com L.P.
| Decision Date | 19 December 2012 |
| Docket Number | 08 CVS 741,06 CVS 16256,07 CVS 56,07 CVS 585 |
| Citation | 2012 NCBC 61 |
| Court | Superior Court of North Carolina |
| Parties | WAKE COUNTY, Plaintiff, v. HOTELS.COM, L.P., et al., Defendants. BUNCOMBE COUNTY, Plaintiff, v. HOTELS.COM, L.P., et al., Defendants. DARE COUNTY, Plaintiff, v. HOTELS.COM, L.P., et al., Defendants. MECKLENBURG COUNTY, Plaintiff, v. HOTELS.COM, L.P., et al., Defendants. |
STATE OF NORTH CAROLINA COUNTY OF BUNCOMBE
STATE OF NORTH CAROLINA COUNTY OF DARE
STATE OF NORTH CAROLINA COUNTY OF MECKLENBURG
Shanahan Law Group PLLC by Kieran Shanahan for Plaintiff Wake County.
Long, Parker, Warren & Jones, P.A. by Steve Warren for Plaintiff Buncombe County.
Ward & Smith, P.A. by Gary J. Rickner, Samuel H. Poole, and Hugh R. Overholt for Plaintiffs Dare County and Mecklenburg County.
Williams Mullen by Gilbert C. Laite, III, Charles B. Neely, Jr., Nancy S. Rendleman, and Robert W. Shaw for Defendants.
{1} THIS MATTER is before the Court on Plaintiffs and Defendants' Motions for Summary Judgment (respectively "Plaintiffs' Motion" and "Defendants' Motion"). After considering the parties' motions and briefs, counsels' arguments made during the Court's February 4, 2011, hearing on the parties' Motions, and the subsequently decided authority provided by Defendants, the Court GRANTS Defendants' Motion and DENIES Plaintiffs' Motion.
{2} Plaintiffs and former plaintiff Cumberland County filed their Complaints on various dates between November, 2006 and January, 2008.
{3} The cases were transferred to the North Carolina Business Court, assigned to this Court, and subsequently consolidated for the resolution of all pre-trial matters.
{4} The Court entered Orders on Defendants' Motions to Dismiss on November 19, 2007, and May 15, 2008, dismissing: former plaintiff Cumberland County's ("Cumberland") Complaint; Plaintiffs Wake County ("Wake"), Mecklenburg County ("Mecklenburg"), and Dare County's ("Dare") claims for unfair and deceptive trade practices; and Plaintiffs Wake and Dare's claims for conversion. Wake County v. Hotels.com, LP, 2007 NCBC 35 (N.C. Super. Ct. Nov. 19, 2007), http://www.ncbusinesscourt.net/opinions/112007%20Opinion%20for%20Webpage%2 0Hotels.pdf (addressing Defendants' motions to dismiss Wake, Buncombe County ("Buncombe"), Dare, and Cumberland's Complaints); Wake County v. Hotels.com, LP, No. 06 CVS 16256 ().
{5} Plaintiffs and Defendants filed their Motions for Summary Judgment on November 1, 2010, and a hearing was held on the parties' motions on February 4, 2011.
{6} Summary judgment is improper where findings of fact are necessary to resolve an issue of material fact. Collier v. Collier, 204 N.C.App. 160, 161, 693 S.E.2d 250, 251–52 (2010). However, for the aid of the parties and the courts, the trial court may provide a summary of material facts that it finds to be uncontroverted in deciding the motion. Id. at 161–62, 693 S.E.2d at 252. The following facts are undisputed in the record.
{7} Plaintiffs are North Carolina counties. (Wake Compl. ¶ 1; Mecklenburg Compl. ¶ 1; Dare Compl. ¶ 1; Buncombe Compl. ¶ 8.)
{8} Defendants operate online websites that allow travelers to research and book reservations with airlines, hotels, car rental companies, and cruise lines. (Wake Compl. ¶ 24; Dare Compl. ¶ 24; Buncombe Compl. ¶ 30; Mecklenburg Compl. ¶ 22; Defs.' Br. in Supp. of Mot. for Summ. J. 14.)
{9} By authorization of the North Carolina General Assembly, each Plaintiff has, through passage of either an ordinance or resolution, enacted an occupancy tax (hereafter the "Tax" or "Occupancy Tax") that requires the collection and remittance of a tax equal to a percentage of the gross receipts derived from the rental of hotel rooms and other similar accommodations within each County. (Wake Compl. ¶ 19; Mecklenburg Compl. ¶ 18; Dare Compl. ¶¶ 19–20; Buncombe Compl. ¶ 33.)
{10} Plaintiffs allege that Defendants negotiate and contract with hotels, motels, and inns operating within their jurisdictions for rooms at discounted rates, then mark up the prices and sell the rooms to consumers. (Wake Compl. ¶ 25; Mecklenburg Compl. ¶ 23; Dare Compl. ¶ 25; Buncombe Compl. ¶ 31.)
{11} Plaintiffs allege Defendants charge and collect the Occupancy Tax from consumers based on Defendants' higher sales rate ("Sales Rate") charged to consumers, but only remit to Plaintiffs a tax amount based on the discounted rates ("Discount Rate") paid by Defendants to the hotel owners, thereby pocketing the difference. (Wake Compl. ¶¶ 24–27; Mecklenburg Compl. ¶¶ 24–25, 56; Dare Compl. ¶¶ 24–27; Buncombe Compl. ¶ 36.) Buncombe County professes uncertainty as to whether Defendants engage in this practice (Buncombe Compl. ¶ 35), but alleges Defendants are "charging more money in 'fees and taxes' than required by the statutory occupancy tax rate, resulting in additional, hidden, and unlawfully retained profits." (Buncombe Compl. ¶ 36.)
{12} Plaintiffs argue that Defendants are obligated to pay the Occupancy Tax because: (1) the collection obligations under the Occupancy Tax are not limited to hotel operators, and therefore, Defendants are responsible for collecting the Tax, (2) Defendants, through their contracts with hotels, have placed themselves in the sole position of collecting the Occupancy Tax, and (3) Defendants can not collect a tax but fail to remit the total amount collected to the Plaintiffs.
{13} Plaintiffs also allege that Defendants have failed to file occupancy tax returns, as required by law. (Wake Compl. ¶ 29; Mecklenburg Compl. ¶ 27; Dare Compl. ¶ 29; Buncombe Compl. ¶ 35.)
{14} Plaintiffs assert claims for: (1) declaratory judgment; (2) violations of the Occupancy Tax; (3) conversion; (4) imposition of a constructive trust; (5) an accounting; and (6) agency liability.
{15} They seek: (1) an order compelling Defendants to pay the full amount of the tax going forward; (2) recovery of all unpaid taxes; (3) civil penalties pursuant to the Occupancy Tax and state law; (4) treble damages; and (5) recovery of Plaintiffs' costs and attorney fees.
{16} "The purpose of summary judgment is to determine whether any issues of material fact exist, and if not, eliminate the necessity of a full trial where only questions of law are involved." Strickland v. Lawrence, 176 N.C.App. 656, 661, 627 S.E.2d 301, 305, disc. rev. denied, 360 N.C. 544, 633 S.E.2d 472 (2006) (citing Foster v. Winston-Salem Joint Venture, 303 N.C. 636, 641–42, 281 S.E.2d 36, 40 (1981)). "The movant has the burden of establishing the absence of any triable issues of fact." Id. This burden can be met in one of two ways: "(1) 'by proving an essential element of the opposing party's claim does not exist, cannot be proven at trial, or would be barred by an affirmative defense'; or (2) 'by showing through discovery that the opposing party cannot produce evidence to support an essential element of her claim.'" Id. (quoting Dobson v. Harris, 352 N.C. 77, 83, 530 S.E.2d 829, 835 (2000)).
{17} "In ruling on a motion for summary judgment, 'the court may consider the pleadings, depositions, admissions, affidavits, answers to interrogatories, oral testimony[, ] and documentary materials.'" Id. (quoting Dendy v. Watkins, 288 N.C. 447, 452, 219 S.E.2d 214, 217 (1975)). "A question of statutory interpretation is ultimately a question of law for the courts, " and thus, appropriate for summary judgment. Browne v. Flowe, 349 N.C. 520, 523, 507 S.E.2d 894, 896 (1998) (citing Wood v. J.P. Stevens & Co., 297 N.C. 636, 642, 256 S.E.2d 692, 696 (1979)).
{18} A County's authority to tax room rental transactions within its borders is controlled by enactments of the North Carolina General Assembly and circumscribed further by the express language of each County's Occupancy Tax ordinance or resolution.
{19} Each of the Defendants has been authorized by statutory provisions to enact an Occupancy Tax, and each has done so.
{20} Each County's Occupancy Tax imposes a tax of some specified percentage on the gross receipts derived from the rental of any room, lodging, or similar accommodation within the County that is "subject to the State sales tax . . . under [s]ection 105-164.4(a)(3) of the North Carolina General Statutes." (Wake Compl. ¶ 19.)
{21} The parties' central disagreement in these cases relates to whether Defendants are obligated to collect the Occupancy Tax. Plaintiffs argue that Defendants are obligated to collect the Occupancy Tax because: (1) the counties' ordinances and resolutions require Defendants to collect the Tax, (2) Defendants have contractually obligated themselves as the only parties able to collect the Tax, and (3) Defendants have collected the Tax but failed to remit the full amount to the Plaintiffs. Accordingly, the Court must determine if Defendants are obligated to collect and remit the Occupancy Tax under any of these theories.
{22} "The cardinal principle of statutory construction is that the intent of the legislature is controlling." State ex rel. Utils. Comm'n v. Public Staff N.C. Utils. Comm'n, 309 N.C. 195, 210, 306 S.E.2d 435, 443 (1983) (citing In re Brownlee, 301 N.C. 532, 272 S.E.2d 861 (1981)). "In ascertaining the legislative intent, courts should consider the language of the statute, the spirit of the statute, and what it seeks to accomplish." Id. at 210, 306 S.E.2d at 444 (citing Stevenson v. City of Durham, 281 N.C. 300, 188 S.E.2d 281 (1972)).
{23} "To effectuate that intent, '[s]tatutes dealing with the same subject matter must be construed in pari materia and harmonized, if possible, to...
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