Expedia 2013 Annual Report Download - page 45

contrary to the plain language of the ordinances at issue as well as prior Hawaiian Supreme Court decisions,
previous positions taken by the Hawaii Director of Taxation, and an opinion by the Attorney General of the State
of Hawaii. We intend to vigorously pursue our rights on appeal. The Department of Taxation has dismissed
without prejudice its common law claims for the recovery of general excise taxes.
As a pre-condition to appealing the tax court rulings, the Expedia companies were required to pay an
amount equal to taxes, penalties and interest. This requirement is commonly referred to as “pay-to-play.”
Payment of these amounts, if any, is not an admission that we believe we are subject to the taxes in question. To
the extent our appeal is successful in reducing or eliminating the assessed amounts, the state of Hawaii would be
required to repay such amounts, plus interest. The total amount that the Expedia companies paid in 2013 to
appeal the tax court ruling was $171 million; compromised of $78 million in taxes, $41 million in penalties and
$52 million in interest. The ultimate resolution of these contingencies may be greater or less than the liabilities
recorded and our estimates of possible penalties and additional assessments.
In addition, on May 20, 2013, the Department of Taxation issued final assessments for general excise taxes
against the Expedia companies for non-commissioned hotel reservations totaling $20.5 million for the tax year
2012. On June 17, 2013, the online travel companies appealed these assessments to the Hawaii tax court. On
December 13, 2013, the tax court held proceedings in abeyance pending review and decision by the Hawaii
Supreme Court on the prior assessments.
On December 9, 2013, the Department of Taxation also issued final assessments for general excise taxes
against the online travel companies for non-commissioned travel agency services relating to rental cars totaling
$29.2 million for the years 2000 to 2012. These assessments include a duplicative assessment for Expedia and
Hotels.com totaling $9.3 million and thus are overstated. On January 7, 2013, the online travel companies
appealed the assessments to the Hawaii tax court.
Non-Tax Litigation and Other Legal Proceedings
Consumer Class Action Litigation
Consumer Case against Expedia Canada. On June 26, 2009, a class action suit against Expedia Canada
Corporation was filed in Ontario, Canada, alleging that disclosures related to “taxes and service fees” were
deceptive. See Magill v. Expedia Canada Corporation and Expedia.ca, CV-09-381919-00LP (Ontario Superior
Court of Justice). The complaint asserts claims under the Competition Act and Consumer Protection Act as well
as claims of unjust enrichment, restitution, constructive trust, accounting and disgorgement and breach of
contract. It seeks damages in the amount of CA$50 million for the class as well as interest, fees and alternate
damages measures. On September 24, 2010, the court added Expedia, Inc. as a defendant and dismissed many of
the plaintiff’s claims with leave to amend. The class period was also limited. The plaintiff filed an amended
statement of claim on January 7, 2011. A class certification hearing took place from January 15-17, 2013 and the
court granted in part and denied in part plaintiff’s motion for class certification. On May 8, 2013, the court
dismissed Expedia Canada Corporation from the lawsuit. On June 7, 2013, Expedia, Inc. filed a notice of motion
for summary judgment on the remaining claims in the case. The court has scheduled a hearing on that motion for
March 26, 2014.
Consumer Cases against Hotwire. On September 12, 2012, a putative class action suit was filed in federal
district court in Connecticut against a number of credit card companies and e-commerce companies, including
Hotwire. Miller, et al. v. 1-800-Flowers.com, Inc., et al., Case No. 3:12-CV-00396-VLB (U.S. District Court,
District of Connecticut). The complaint generally alleges that the defendants failed to adequately apprise
consumers that they were providing their credit card information to Trilegiant Corporation, which offered
membership in discount or other services programs through promotions appearing on the e-commerce
defendants’ websites. The complaint asserts claims against Hotwire for violation of RICO, the Electronic
Communications Privacy Act, state consumer protection statutes and for unjust enrichment. On December 7,
2012, Hotwire filed a motion to dismiss the complaint. The court held a hearing on that motion on September 25,
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