Expedia 2011 Annual Report Download - page 35

City of Baltimore Litigation. On December 10, 2008, the city of Baltimore filed an individual action in
federal court against a number of internet travel companies, including Expedia, Hotels.com, and Hotwire. Mayor
and City Council of Baltimore v. Pricline.com, Inc. et al., MJG-07-2807 (United States District Court for the
District of Maryland). The complaint alleges that the defendants have failed to pay to the city hotel
accommodations taxes as required by municipal ordinance. The complaint asserts claims for violation of the local
ordinance, as well as claims for conversion, unjust enrichment, assumpsit, declaratory judgment, imposition of a
constructive trust, and injunctive relief. The complaint seeks damages in an unspecified amount. On
December 30, 2010, the city filed a motion for summary judgment. On February 11, 2011, defendants filed an
opposition to the city’s motion for summary judgment and a cross-motion for summary judgment. On August 2,
2011, the court ruled on the cross-motions for summary judgment and held that online travel companies have no
tax obligation prior to 2007 when Baltimore amended its ordinance and that taxes are due under Baltimore’s
changed ordinance, subject to further ruling by the court. Certain defendants, including Expedia, Hotels.com and
Hotwire, entered a settlement agreement dated June 17, 2011.
City of Anaheim, California Litigation. On October 10, 2007, the city of Anaheim instituted an audit of a
number of internet travel companies, including Expedia, Hotels.com, and Hotwire, for hotel occupancy taxes. On
or before May 23, 2008, the city completed its audit and issued assessments against each of those online travel
companies. The online travel companies challenged those assessments through an administrative appeals process.
On January 28, 2009, the hearing examiner issued his decision, rejecting the online travel companies’ challenges
to those assessments. On February 6, 2009, the hearing examiner issued a decision setting forth the assessed
amounts due by each online travel company, including a total of approximately $17.7 million for the Expedia
companies. On February 11, 2009, the online travel companies filed a petition for writ of mandate in the
California superior court seeking to vacate the decision of the hearing examiner and asking for a declaratory
judgment that the online travel companies are not subject to Anaheim’s hotel occupancy tax. Expedia, Inc. v. City
of Anaheim, et. al., Hotels.com L.P. v. City of Anaheim, et. al.; Hotwire, Inc. v. City of Anaheim et. al., (Superior
Court of the State of California, County of Orange). On February 17, 2009, the online travel companies filed a
motion asking the court to rule that the city is not entitled to require the companies to pay the tax assessment
prior to commencing litigation to challenge the applicability of the ordinance, commonly referred to as
“pay-to-play.” On March 30, 2009, the court overruled the city’s demurrer to the companies’ “pay-to-play”
motion. The trial court’s ruling that the online travel companies had no obligation to pay the tax assessments
before commencing litigation was affirmed on appeal. The lawsuit is coordinated with the San Diego, San
Francisco, Santa Monica and Los Angeles matters. On February 1, 2010, the court ruled in defendants’ favor that
taxes are not due to the city of Anaheim. The city amended its complaint and the court again granted relief in
favor of the online travel companies dismissing the city’s claims. On December 16, 2010, judgment was entered
dismissing the case. The city has appealed.
City of San Francisco, California Litigation. On May 13, 2008, the city of San Francisco instituted an audit
of a number of internet travel companies, including Expedia, Hotels.com, and Hotwire, for hotel occupancy
taxes. On or before October 31, 2008, the city completed its audit and issued assessments against each of those
online travel companies. The online travel companies challenged those assessments through an administrative
appeals process and in hearings that took place during January 2009. The hearing examiner upheld the city’s
assessments. On May 11, 2009, the online travel companies filed a petition for writ of mandate in the California
superior court seeking to vacate the decision of the hearing examiner and asking for a declaratory judgment that
the online travel companies are not subject to San Francisco’s hotel occupancy tax. Expedia, Inc. v. City and
County of San Francisco, et. al.; Hotwire, Inc. v. City and County of San Francisco, et. al., (Superior Court of
the State of California, County of San Francisco). The case is coordinated with the Los Angeles, Anaheim, Santa
Monica and San Diego lawsuits. On June 19, 2009, the court granted the city’s demurrer on the “pay first” issue
relating to pay-to-play provisions. Expedia and Hotwire’s appeal of the “pay first” decision was denied and
Expedia and Hotwire paid the assessed amounts on July 13, 2009. A hearing on the Hotels.com assessment
appeal was held on August 12, 2009. Hotels.com paid the assessed amount on November 30, 2009. The total
assessed amount paid by the Expedia companies was approximately $48 million. The court has denied the city’s
demurrer to the defendants’ petitions.
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