Around the country, state and local governments have sued online travel companies, seeking allegedly unpaid occupancy taxes. In City of San Antonio, et al. v. Hotels.com, a group of 173 Texas cities and municipalities have scored a $55 million win.
This is the first such class action to proceed to final judgment, according to Steve Wolens of Dallas’ McKool Smith, who represents the plaintiffs. He and his firm also represent state and local governments around the country in similar occupancy-tax suits.
But lawyers for both sides say the seven-year battle is far from finished.
U.S. District Judge Orlando L. Garcia of the Western District of Texas in San Antonio issued the final judgment on April 4. The plaintiffs had sued 11 online travel companies, alleging they had failed to collect and remit hotel occupancy taxes on the difference between what the travel companies paid the hotels and what the travel companies charged customers.
According to the final judgment, the plaintiffs are also "entitled to declaratory relief, pursuant to 28 U.S.C. §2201." Specifically, the judgment notes that the defendants "have a duty, as tax collectors, to assess and collect taxes on the total retail amount for every hotel transaction; remit such taxes to each of the Cities who are class members; and submit all reports required by the ordinances" and "must adjust their business practices to ensure that all taxes due and owing on post-judgment transactions are paid in accordance with the Cities’ ordinances and the Court’s findings. . . ."
Both sides’ lawyers say their clients will file post-judgment motions, and they have yet to address who owes how much in attorney fees.
"We’ve been at this so long. It would be shocking if we were to add up the hours lawyers have worked on this case," says Wolens. "We’re so far away from that focus [on fees]."
Ricardo Cedillo, a partner in San Antonio’s Davis, Cedillo & Mendoza, who represents all the defendants in City of San Antonio, did not return a call seeking comment.
Jones Day partner Deborah Sloan of Dallas also represents three of the defendants — Hotwire.com, Hotels.com, and Expedia.com. Asked about the possibility of an appeal of the final judgment, she says, "Absolutely."
Wolens says his firm and others represent other local and state governments nationwide, including Hawaii, with similar occupancy tax related claims against the same online travel companies. City of San Antonio, however, stands out as the only class action case of this category to go to a jury for a verdict and then lead to a final judgment, Wolens says.