Orbitz 2012 Annual Report Download - page 72

ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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The Travelport GDS Service Agreement also requires that ebookers use the Travelport GDSs exclusively in certain
countries for segments processed through GDSs in Europe. Our failure to process at least 95% of these segments through
the Travelport GDSs would result in a shortfall payment of $1.25 per segment for each segment processed through an
alternative GDS provider. We failed to meet this minimum segment requirement during each of the years ended December
31, 2011 and 2010 and, as a result, we were required to make shortfall payments of $0.4 million to Travelport related to
each of these years. There was not a shortfall for the year ended December 31, 2012. Because the required number of
segments to be processed through the Travelport GDSs is dependent on the actual segments processed by ebookers in
certain countries in a given year, we are unable to predict shortfall payments that may be required. As a result, the table
above excludes any shortfall payments that may be required related to our ebookers brands. If we meet the minimum
number of segments, we are not required to make shortfall payments to Travelport (see Note 15 - Related Party
Transactions).
In addition to the commitments shown above, we are required to make principal payments on the Term Loan (see
Note 6 - Term Loan and Revolving Credit Facility). We also expect to make approximately $123.9 million of payments in
connection with the tax sharing agreement with the Founding Airlines (see Note 7 - Tax Sharing Liability). Also excluded from
the above table are $4.1 million of liabilities for uncertain tax positions for which the period of settlement is not currently
determinable.
Company Litigation
We are involved in various claims, legal proceedings and governmental inquiries related to contract disputes, business
practices, intellectual property and other commercial, employment and tax matters.
We are party to various cases brought by consumers and municipalities and other state and local governmental entities in
the U.S. involving hotel occupancy or related taxes and our merchant hotel business model. Some of the cases are class actions
(some of which have been confirmed on a state-wide basis and some which are purported), and most of the cases were brought
simultaneously against other online travel companies, including Expedia, Travelocity and Priceline. The cases allege, among
other things, that we violated the jurisdictions' hotel occupancy tax ordinances. While not identical in their allegations, the
cases generally assert similar claims, including violations of local or state occupancy tax ordinances, sales and use tax,
violations of consumer protection ordinances, conversion, unjust enrichment, imposition of a constructive trust, demand for a
legal or equitable accounting, injunctive relief, declaratory judgment, and in some cases, civil conspiracy. The plaintiffs seek
relief in a variety of forms, including: declaratory judgment, full accounting of monies owed, imposition of a constructive trust,
compensatory and punitive damages, disgorgement, restitution, interest, penalties and costs, attorneys' fees, and where a class
action has been claimed, an order certifying the action as a class action. An adverse ruling in one or more of these cases could
require us to pay tax retroactively and prospectively and possibly pay penalties, interest and fines. The proliferation of
additional cases could result in substantial additional defense costs.
We have also been contacted by several municipalities or other taxing bodies concerning our possible obligations with
respect to state or local hotel occupancy or related taxes. The following taxing bodies have issued notices to the Company: the
Montana Department of Revenue; the Kentucky Department of Revenue; an entity representing 84 cities and 14 counties in
Alabama; 43 cities in California; the cities of Paradise Valley and Phoenix, Arizona; North Little Rock and Pine Bluff,
Arkansas; Aurora, Broomfield, Colorado Springs, Golden, Greenwood Village, Lakewood, Littleton, Loveland, and Steamboat
Springs, Colorado; Columbia and North Charleston, South Carolina; and the counties of Jefferson, Arkansas; Arlington, Texas;
Brunswick and Stanly, North Carolina; Duval, Florida; Davis, Summit, Salt Lake and Weber, Utah; and Aiken and Jasper,
South Carolina. These taxing authorities have not issued assessments, but have requested information to conduct an audit and/
or have requested that the Company register to pay local hotel occupancy taxes.
Assessments or declaratory rulings that are administratively final and subject to judicial review have been issued by the
cities of Los Angeles, San Francisco and San Diego, California; the city of Denver, Colorado; the counties of Miami-Dade and
Broward, Florida; the Indiana Department of Revenue; the Hawaii Department of Taxation; the Wisconsin Department of
Revenue, and the Wyoming Department of Revenue. In addition, the following taxing authorities have issued assessments
which are subject to further review by the taxing authorities: the Colorado Department of Revenue; the City of Aurora,
Colorado; the Maryland Comptroller; the Texas Comptroller; the West Virginia Department of Revenue; the South Carolina
Department of Revenue; Lake County, Indiana; the City of Portland, Oregon; and Osceola, Florida. In December 2012, the City
of Philadelphia, Pennsylvania withdrew its assessment. The Company disputes that any hotel occupancy or related tax is owed
under these ordinances and is challenging the assessments made against the Company. These assessments range from $0.02
million to approximately $58 million, and total approximately $80 million. Some of these assessments, including a $58 million