Orbitz 2014 Annual Report Download - page 70

ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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In February 2014, the Company entered into an agreement with Amadeus IT Group, S.A. to provide GDS services. This
contract requires the Company to meet certain minimum annual booking requirements beginning in 2016 through the end
of the contract at December 31, 2019.
In addition to the commitments shown above, we are required to make principal payments on the Term Loan (see
Note 7 - Term Loan and Revolving Credit Facility). We also expect to make approximately $96.2 million of payments in
connection with the tax sharing agreement with the Founding Airlines (see Note 8 - Tax Sharing Liability). Also excluded from
the above table are $3.3 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 believe that we have meritorious
defenses, and we are vigorously defending against these claims, proceedings and inquiries. As of December 31, 2014, and
December 31, 2013, we had accruals of $4.3 million and $5.5 million related to various legal proceedings, respectively.
Litigation is inherently unpredictable and, although we believe we have valid defenses in these matters, unfavorable resolutions
could occur. Below, we have provided relevant information on these matters.
We are party to various cases brought by municipalities and other state and local governmental entities in the U.S.
concerning hotel occupancy or related taxes and our merchant model for hotel and car rental reservations. Most of the cases
were brought simultaneously against other OTCs, including Expedia, Travelocity and Priceline. Certain of these cases are class
actions, some of which have been confirmed on a state-wide basis and some which are purported. The cases allege, among
other things, that we violated the jurisdictions’ hotel occupancy tax ordinances, as well as related sales and use taxes. While not
identical in their allegations, the cases generally assert similar claims, including violations of local or state occupancy tax
ordinances, failure to pay sales or use tax, and in some cases, 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 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
interest, penalties 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. We received tax assessments which range from $0.02 million to
approximately $58.8 million, and collectively exceed approximately $116.0 million. The following taxing bodies have issued
notices to the Company: 43 cities in California; the following cities in Colorado: Broomfield, Colorado Springs, Durango,
Frisco, Glendale, Glenwood Springs, Golden, Grand Junction, Greeley, Greenwood Village, Lafayette, Lakewood, Littleton,
Loveland, Silverthorne and Steamboat Springs; Arlington, Texas; Brunswick and Stanly, North Carolina; the following counties
in Utah: Davis, Summit, Salt Lake and Weber; the Arizona Department of Revenue; the New Mexico Department of Revenue;
the Ohio Department of Taxation; Paradise Valley, Arizona; St. Louis, Missouri; various Alabama Municipalities; the Louisiana
Department of Revenue; the Maine Department of Revenue; and the Vermont Department of Taxation. 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.
The following taxing authorities have issued assessments which are not final and are subject to further review by such
taxing authorities: the Colorado Department of Revenue; the City of Aurora, Colorado; the Maryland Comptroller; the Texas
Comptroller; the City of Portland, Oregon, and Multnomah County, Oregon; and Lake County, Indiana. These assessments
range from $0.02 million to approximately $5.8 million, and total approximately $9.67 million.
In addition, the Hawaii Department of Taxation has issued final assessments for merchant model hotel reservations in the
amount of $16.9 million for the taxable year 2012, and for merchant model hotel reservations and rental car transactions in the
amount of $14.6 million for the taxable year 2013. Additionally, on December 9, 2013, the Hawaii Department of Taxation
issued final assessments for rental car transactions in the amount of $3.4 million against each of three Orbitz entities for the
period of January 1, 2002, through December 31, 2012. Based on Hawaii’s past merchant model hotel assessments, Orbitz
believes that Hawaii’s rental car assessments represent an aggregate of $3.4 million total against the Orbitz entities for the time