UPDATE ON ONLINE TRAVEL COMPANY LITIGATION

Transcription

1 UPDATE ON ONLINE TRAVEL COMPANY LITIGATION June 13, 2011 Jess Reagan Deputy Attorney General Office of the Indiana Attorney General Indiana Government Center South, Fifth Floor 302 West Washington Street Indianapolis, IN Telephone: (317) I. Background Online travel companies are involved in similar litigation all across the country. The online travel companies argue that sales tax and local innkeepers tax on hotel rooms should be remitted based on the amount a hotel receives for a room rather than the amount that a customer pays for a room. Essentially, the online travel companies want sales tax to apply to the wholesale room rate rather than the retail price. A. Who are OTCs? 1. Brief History of OTCs: (1) Expedia was launched by Microsoft in 1996 and later spun off as a publicly traded company. (2) Priceline was the brainchild of a venture capitalist and digital entrepreneur, launched in 1998 before it was sold off to a Hong Kong investment conglomerate. (3) Travelocity was started in 1996 by Sabre Holdings, otherwise known as the original (1978) electronic reservation system by American Airlines. (4) Orbitz was started by a partnership of five airlines (United Airlines Inc., Delta Airlines Inc., Continental Airlines Inc., Northwest Airlines Corp., and, later, American Airlines) in Orbitz branched out to include hotel rooms in *** The information in this presentation and the written materials contained herein are for INFORMATIONAL PURPOSES ONLY and do not constitute legal advice. ***

2 2. Affiliations and Connections many, if not all, of the smaller OTCs are subsidiaries of the larger companies. But even unrelated OTCs have joined together in a Joint Defense Agreement. B. OTC Tax Planning As early as 2001, OTCs decided to only remit tax based on their secret wholesale room rates, while declaring the difference between the tax on the wholesale rate and the tax on the retail rate to be OTC profit. 1. December from an Expedia executive explained: As a company, this will add between $2-3 million in our net profit (bottom line) next quarter. 2. After reviewing some 26,000 internal Expedia documents, Georgia s special master explained: Expedia gambled on not paying the taxes by deliberately bundling the line item charges into taxes and fees ; by engaging in an aggressive legal defense with other OTCs to specifically hold out from disclosing any of its insider tax data unless absolutely forced to; by engaging in a massive lobbying effort to try to get local legislators and tax commissioners to buy into their semantic fiction that OTCs are not entities that sell hotel rooms. II. Illustration of Tax on the Wholesale Room Rate Versus Tax on the Retail Room Rate Hotel website: $ Retail room charge to consumer Taxes (at 13%) $ Total cost to consumer Expedia website: $ Expedia s wholesale room cost (assuming 25% Expedia mark up) Expedia s 25% mark-up $ Expedia s room charge shown to consumer Expedia s Taxes and Service Fees shown to consumer $ Total cost to consumer *Expedia pays $14.46 in taxes on the room (13 percent of the $ wholesale cost), or $3.61 less than the $18.07 it would pay if it paid tax on the room s full retail cost. This $3.61 is retained by Expedia in addition to the $27.80 Expedia receives through its wholesale-toretail markup. 2

3 III. Description of Dollars at Issue A. Estimations of Tax Revenue Lost $276 to $396 million in hotel tax revenue is lost each year due to the OTCs practice of taxing the wholesale room rate instead of the retail room rate. 1. Florida tax officials have estimated the underpaid bed taxes in Florida at $146 million since North Carolina legislative research indicates $6 to $8 million each year in additional revenue from its 2011 legislation on this issue. 3. New York City estimates that NY s 2010 legislation on this issue will generate upwards of $20 million annually in additional tax revenue. 4. The California state policy update for 2010 estimated OTC tax losses to California cities of nearly $100 million annually. (1) Anaheim assessed more than $21 million against eleven OTCs. (2) San Francisco assessed more than $30 million against several OTCs. 3

4 B. Return on Tourism Taxes Many, if not all, jurisdictions reinvest tourism taxes like local innkeepers taxes in tourism. IV. Litigation Update 1. In Louisiana, every dollar invested in tourism advertising returns $17 in tax revenue 2. The Ohio Department of Development's Tourism Division's "Too Much Fun for Just One Day" paid marketing campaign resulted in a 13-to-one return on investment. That means a return of $13 in state and local taxes for every $1 invested in tourism marketing, officials say. 3. The City of Philadelphia received an additional $6 in state taxes and $5 in local municipal taxes for every single tax dollar spent on tourism advertising for a return of 11:1. 4. In Connecticut, every dollar spent to promote tourism brings $9.30 in tax revenue. 5. In Texas, the state tourism advertising budget is fully funded by hotel taxes, and every $1 spent to advertise out of state brings back $7 in revenues. 6. Virginia s government estimates that every $1 invested in tourism marketing, brings $5 back to the state in tax revenue alone. 7. Michigan estimates that it gets just less than $3 in taxes for each $1 of marketing. 8. In Seattle, the Chamber of Commerce has recognized that every dollar spent on tourism is an investment in the community, and the Downtown Seattle Association explained further that tourism dollars mean more local jobs here at home. A. In Summary Altogether, there have been more than 70 cases on this issue. Most of these are either currently on appeal, or they are still at the trial level. 1. Contrary to the claims of the Interactive Travel Services Association, which is effectively another name for the OTCs, state and local jurisdictions have won more substantial victories on the merits. (1) Both the Georgia Supreme Court and the South Carolina Supreme Court have examined the merits and decided in favor of state and local taxing jurisdiction, explaining that OTCs owe tax on the retail room rate. (2) Only federal district courts and two federal circuit courts have decided against the tax. More importantly, all of those decisions are expressly limited to the specific language of the local ordinance or statute. 4

5 2. Sixteen cases have been dismissed for procedural reasons, such as failure to exhaust administrative remedies, denial of class certification, and lack of standing. 3. At least five cases have been dismissed without prejudice. 4. At least ten cases have settled. B. Substantial Victories 1. The Georgia Supreme Court decided that OTCs are not operators or furnishers, but as 3rd party collectors, the OTCs must collect the whole amount of tax on the retail price. Moreover, the Georgia Supreme Court recognized that in Expedia s contracts with hotels, Expedia agreed to pay all applicable taxes. 2. The South Carolina Supreme Court decided that OTCs are "engaged in the business of furnishing accommodations to transients for consideration." Further, it found the tax constitutional and specified that the OTCs are required to remit. 3. A Texas jury found that OTCs controlled hotels and awarded a $20.6 million verdict against OTCs. 4. A federal district court in Washington State awarded $184 million in a nationwide class action against Expedia for breach of contract and violations of the Washington Consumer Protection Act ( CPA ) arising from Expedia s assessment of bundled Tax Recovery Charges and Service Fees. C. Dollars Awarded in Litigation 1. Washington State Court awarded $184 million against Expedia -- the largest consumer class action judgment in the State's history. 2. San Antonio, Texas won a $20 million verdict. 3. Travelscape, a subsidiary of Expedia, was ordered to pay $6.3 million in back sales tax revenue to South Carolina. 4. The Georgia Supreme Court s decision in favor of Atlanta could result in as much as $6 million annually. D. Limitations of Particular Ordinances 1. Florida Circuit Court decided that the OTCs were not taxable as the Orange County ordinance now reads th Circuit affirmed the federal district court in Kentucky s decision that OTCs were not like or similar accommodations businesses as required by Louisville s ordinance. 5

6 3. Federal district court in New Mexico decided that OTCs were not vendors as required by the City of Gallop s ordinance. à However, the 6 th Circuit decided that even though OTCs were not vendors under Ohio law, the OTCs were liable for collected, unremitted taxes th Circuit affirmed the federal district court in North Carolina s decision that OTCs were not retailers as described by North Carolina s prior statute. 5. Federal district court in Texas decided that the City of Orange s ordinance only applied to consideration paid to a motel or hotel. E. Statutory Language 1. Courts have reached different conclusions regarding the interpretation of the applicable statute or ordinance, including terms such as: hotel operator, vendor, like or similar accommodations businesses, and retailers. 2. OTCs argue that words in their SEC filings like buy, sell, or provide rooms were not intended to mean buy, sell, or provide for tax purposes. Rather, OTCs contend that these are merely industry terms that refer to something else. F. Pages from the OTC Playbook 1. Joint Defense Agreement Georgia s special master described the Joint Defense Agreement between the OTCs: required the parties to cloak any and all information or documents, including but not limited to discussion, conferences, phone calls, s, memos, correspondence, memoranda of law, debriefing memoranda, factual summaries, interviews, transcript digests, analyses, appraisals and other materials or communications related to or concerning the Issue as confidential, protected from disclosure to any third party by the common interest privilege, joint-defense privilege, the clients attorney-client privilege, the work product doctrine and all other applicable privileges and immunities. The special master found that the OTCs joint defense agreement demonstrates a conscious and deliberate effort to avoid the payment of its full measure of occupancy taxes, in violation of state and local law. 2. OTCs have been aggressively lobbying for a federal bill they have entitled the Internet Travel Tax Fairness Act. This bill would make OTCs immune to taxes on hotel rooms, in spite of any state statutes or local ordinances. The American Hotel & Lodging Association has joined with the National League of Cities and several other groups, including the Federation of Tax Administrators to strongly oppose the OTCs draft bill. 3. Removing Listings San Francisco, California; Columbus, Georgia; and Baltimore, Maryland have been removed from OTC listings. 6

7 4. At least $8,895,000 has been disclosed as paid in settlement of these OTC cases. (1) After the Florida Department of Revenue joined the OTC litigation, OTCs settled with Florida counties for $6.5 Million to Monroe County, Florida and $655,000 to Brevard County, Florida. (2) After Columbus, Georgia s victory on the merits in the Georgia Supreme Court, Orbitz settled with Columbus for $450,000. (3) At least three cases have settled in Maryland, whose law specifically holds persons other than hotel operators liable. OTCs settled with Worchester County and the city of Baltimore for undisclosed amounts, and Baltimore County received $390,000 in settlement. (4) After the South Carolina Department of Revenue joined the OTC litigation, OTCs settled with three South Carolina cities and towns. The City of North Myrtle Beach received $192,600; the Town of Mount Pleasant received $50,400; and Charleston received $657,000. 7

8 Online Travel Company Litigation Plaintiff Defendant Highest Court Alabama 1 City of Birmingham, Ala. Orbitz, Inc., et al *Jefferson County Circuit Court, CV TAX NO TAX Procedural w/o Prejudice Denied Removal of Listing Notes Date Updated 4/1/2010 2/14/2011 Arizona Arkansas 2 Pine Bluff Adver. & Promotion Comm'n, Ark. Hotels.com *Jefferson Circuit Court CV X Per 2/11/2011 Expedia 10-K, still in litigation 3/14/ City of Fayetteville, Ark. Hotels.com Cir. Ct. of Wash. County CV California 4 City of Anaheim, Cal. Expedia, Orbitz, Travelocity, Priceline, Hotels.com, 5 City of Oakland, Cal. Hotels.com, Orbitz, Priceline.com, Travelocity 7/25/2008 *Cal. Superior Ct. 12/16/2010 Consolidated case: Los Angeles, Anaheim, San Francisco, San Diego, Santa Monica, and Los Angeles. (No. GIC ; No ; No. BC326693). Initially stayed pending exhaustion of administrative procedures. Assessments affirmed by hearing board. OTC appealed. City's use of outside counsel approved. Case dismissed; City to appeal ruling. N.D. Cal. 572 F.3d 958 8/20/2009 Dismissed for failure to exhust admin. remedies 11/6/2007. Ex parte motion denied 1/28/2008. Dismissed w/o prejudice 8/20/2009. District of Columbia 6 District of Columbia Expedia, Inc. et al. *D.C. Superior Ct. In litigation. 4/13/2011 Florida 7 County of Monroe (class action w/ 32 other counties), Fla. Priceline.com S. D. Fla. 5/13/2009 $6,500,000 Parties settled in principle for $6.5 Million, precluding litigation through /13/2011 2/3/ City of Jacksonville, Fla. Hotels.com Fla. Duval County, 2006-CA Brevard County, Fla. Priceline.com M.D. Fla., 6:09-cv Gannon, (Tax Collector) Palm Beach County Hotels.com *Fla. Palm County, CA Orbitz Broward County, Fla. *Fla. Leon County, CA State of Florida Expedia, Orbitz *Fla. Leon County, CA County of Leon, Fla. Hotels.com *Fla. Leon County, 2009 CA /21/2007 X Dismissed, but Plaintiffs allowed to file amended complaint. As part of Monroe County settlement, this case was settled. 1/11/2011 $655,000 Dismissed and partially settled for up to $655,000 & atty fees WL (M.D. Fla. 2010) (applying Florida law) In litigation, trial scheduled for October 11, /15/2011 Docket shows: 2/9/2011 "ORDER ON PLAINTIFFS' MOTIN TO DISMISS DEFENDANT" 2/15/2011 In litigation. 2/15/2011 2/21/ /6/2006 OTC MTD denied; stipulated to dismissal w/o prejudice in fed. ct. In litigation in state court. 2/8/ Orange County, Fla. Expedia, Orbitz Fla. Cir. Ct., CA-2104-O 1/21/2011 6/13/2008 County was not required to exhaust administrative remedies. County's motion for summary judgment was denied; Cir. Ct. found that the additional sums of money earned by OTCs were conceivably within the reach of the tax, but not taxable as the ordinance now reads. 2/4/ Osceola County, Fla. Dep't of Revenue Expedia, et al. *Fla. Leon County, 2011-CA CA OTCs contest both outside counsel and assessment. 2/15/ State of Fla., Office of the Atty General, Dep't of Legal Affairs Expedia, Inc., Orbitz, LLC, and Orbitz, Inc. *Fla. Leon County, CA The Attorney General s Office has filed suit alleging Deceptive and Unfair Trade Practices Act (the "Act"). 2/15/2011 * Currently in litigation Page 1 of 5

9 Online Travel Company Litigation Plaintiff Defendant 17 Miami Dade County, Fla. Internetwork Publ'g Corp. d/b/a lodging.com Highest Court Fla. Miami-Dade County, CA 5 & CA 5 18 Hotwire, Inc. et al. Miami-Dade County, Fla. *Fla. Leon County, CA 4977 TAX NO TAX Procedural 1/18/2007 w/o Prejudice Denied Removal of Listing Notes Date Updated In litigation. 2/15/2011 Georgia 19 City of Atlanta, Ga. Hotels.com, Travelocity, Expedia, Orbitz, Priceline Ga. Supreme Ct. 7/22/ /11/2006 3/23/ Ga. 231 Georgia Supreme Court decided that OTCs are not operators or furnishers, but as 3rd party collectors, the OTCs must collect the whole amount of tax on the retail price. No back taxes. 20 City of Columbus, Ga. Expedia Ga. Supreme Ct. 6/15/2009 X 21 City of Columbus, Ga. Hotels.com Ga. Supreme Ct. 10/5/2009 X Loses limited to future activities; no back taxes. 2/15/ City of Columbus, Ga. Orbitz M.D. Ga. $450,000 Settled in 2009 after OTCs' attempt to transfer in City of Rome, Ga. Hotels.com, Orbitz, Travelocity *N.D. Ga. 5/10/2007 In litigation. Previously stayed pending exhaustion of administrative remedies; stay lifted on 7/10/2009 following City of Atlanta v. Hotels.com. Hawaii 24 Expedia State of Hawaii *Trial Ct., 1TX11-1- Trial scheduled for week of June 25, Illinois 25 City of Rosemont, Ill. Priceline.com *N.D. Ill., 1:09-CV Conversion and Unjust Enrichment Claims dismissed. Cross motions for summary judgment due 3/15/11. 2/11/ City of Chicago, Ill. Hotels.com *Cook County Ct., 2005 L City of Fairview Heights, Ill. Orbitz, Hotels.com, Expedia, S.D. Ill., 05-CV- Travelocity 840-DRH As of Expedia's 10-k 2/11/2011, still in litigation. 2/11/2011 3/30/2009 3/31/2008 7/12/2006 OTC's MTD denied. Protective order for mayor denied. Class cert. denied. Subpoena sought by city denied. City stipulated to dismissal with prejudice in /9/2011 Indiana 28 Travelocity Ind. Dep't of Revenue *Ind. Tax Ct., 49T TA-8 29 Priceline.com Ind. Dep't of Revenue *Ind. Tax Ct., 49T TA-9 30 Orbitz Ind. Dep't of Revenue *Ind. Tax Ct., 49T TA Travelscape Ind. Dep't of Revenue *Ind. Tax Ct., 49T TA Hotwire Ind. Dep't of Revenue *Ind. Tax Ct., 49T TA Hotels.com Ind. Dep't of Revenue *Ind. Tax Ct., 49T TA Marshall County, Ind. Hotels.com N.D. Ind., 3:2006- cv Lake County Convention & Hotels.com N.D. Ind., 2:06-cv- Visitors Bureau, Ind JVB-APR 6/20/2006 Dismissed with prejudice before an Answer was filed. 3/30/2010 County Failed to exhaust administrative remedies. Kentucky 36 City of Bowling Green, Ky. Hotels.com L.P., et al. Warren Cir. Ct., 09- CI Louisville/Jefferson County Metro Gov't, Ky. City appealing trial court's dismissal; set for oral argumen 03/15/2011. Hotels.com 6th Cir. 12/22/2009 OTCs are not subject to the local ordinance at issue because OTCs were not like or similar accommodations businesses. Maryland 38 Montgomery County, Md. Priceline, Inc., et al., *N.D. Md., 8:10-cv AW Complaint filed 12/21/ /9/2011 * Currently in litigation Page 2 of 5

10 Online Travel Company Litigation Plaintiff 39 County Comm'rs of Worcester County, Md. 40 Mayor & City Council of Baltimore, Md. Priceline.com et al. Defendant Priceline.com et al. (lowestfare.com, travelweb, travelport, cheaptickets, Trip Network, Orbitz, Orbitz, Expedia, Expedia, Hotels.com, hotwire, travelnow, travelocity, sabre holdings, site59.com) Highest Court *1:09-cv MJG *N.D. Md., 1:08-cv MJG TAX NO TAX Procedural w/o Prejudice Denied Removal of Listing X X OTC's motion to dismiss denied. Parties have reached settlement in principle X Priceline, LowestFare.com, and Travelweb LLC settled for taxes up to Motion for summary judgment hearing set for February 2011 amongst remaining litigants. Notes Date Updated 41 Baltimore County, Md. Priceline.com, Inc., et al., (Priceline, Lowestfare.com LLC, and Travelweb Massachusetts Michigan 42 County of Genesee, County of Calhoun, County of Ingham and County of Saginaw, Mich. Hotels.com L.P., et al. MJG10CV1104 $390,000 reached for $390,000, including past two years of taxes through *Mich. Ingham County Cir. Ct., CZ Court denied OTC's motion for summary disposition on August 21, On September 9, 2010, the counties filed a motion for summary judgment. Minnesota 43 Minnesota Hotels.com * Missouri 44 City of Branson, Mo. Hotels.com L.P., et al. *Mo. Greene County Cir. Ct., 31106CC City of Jefferson, Mo. Hotels.com, L.P, et al. Mo. Cole County Cir. Ct., 07 AC- CC St. Louis County, Mo. Prestige Trave, et.al. *Mo. Supreme Ct., SC91228 New Jersey 47 Township of Lyndhurst, N.J. Priceline.com *3rd Cir., 2:08-cv JLL-MF New Mexico 48 City of Gallup, N.M. Hotels.com, et al. D. N.M., 2:07-cv JEC-RLP New York 49 County of Nassau, N.Y. Hotels.com *2d Cir., cv X Hearing on dismissal for failure to prosecute. 12/29/2009 Dismissed with prejudice. County is appealing to Supreme Court Mo. Reply briefs due March 24, /3/2011 Townships lack standing to sue for unpaid taxes; suit dismissed. OTCs are not "vendors." No tax on OTC's total charges. Also, OTCs were not proven to be trustees of unpaid taxes. 8/18/2007 3/3/2011 E.D. N.Y. dismissed for failure to exhaust administrative remedies. 2nd Cir. remanded regarding class action. 3/3/2011 3/4/2011 3/4/ Expedia, Inc., et al. N.Y.C. Dep't of Fin., et al. *N.Y. App. Div., / N.Y.C. Occupancy Tax Summary judgment in favor of city; the 2009 N.Y.C. occupancy tax is constitutional. 51 Chiste Hotels.com L.P. *S.D. N.Y. Class action seeking declaratory and injunctive relief against OTCs for improperly charging taxes and failure to disclose taxes, mark-ups, and service fees. Several claims and plaintiffs were dismissed. Plaintiff Schroud's (No. 08 Civ ) fifth cause of action, for breach of fiduciary duty remains as of 11/15/2010. North Carolina 52 Pitt County, N.C. Hotels.com et.al. 4th Cir. 1/14/2009 legislative fix OTCs are not "retailers." 2/11/ /21/2010 3/14/ Orbitz, LLC et al Hoyle, N.C., N.C. Dept' of Revenue, Durham County *11CV OTC challenges new law under the Internet Tax Freedom act, contract rights, and the commerce clause. 2/8/ County of Wake, Cumberland, Buncombe, Dare, Durham, Mecklenburg County, N.C. Ohio 55 Hamilton County, Erie County, Hotels.com et al. N.C. Wake County, 06 CV /19/2007 Dismissed w/o prejudice for failure to exhaust administrative remedies. On 11/1/2010, cross-motions for summary judgment were filed Hotels.com *N.D. Ohio, Transferred to federal court. 2/9/2011 Cuyahoga County, Ohio 3:2011cv City of Columbus, Ohio Hotels.com *6th Cir., /18/2010 7/23/2007 N.D. Ohio granted summary judgment in favor of OTC. Motion to certify Qs for Ohio Sup. Ct. denied. Appealed to 6th Cir. 3/4/2011 * Currently in litigation Page 3 of 5 3/14/2011

11 Online Travel Company Litigation 57 City of Findlay, (City of Columbus) Plaintiff Defendant Hotels.com, Orbitz, Travelocity Expedia, Priceline Highest Court Pennslyvania 58 County of Lawrence, Pa. Hotels.com et al. *W.D. Pa., 2:09- cv01219-gll 59 City of Philadelphia, Pa. Hotels.com, Expedia, Orbitz, Travelocity, Cheap Tickets TAX NO TAX Procedural w/o Prejudice Denied Removal of Listing *6th Cir., X In 2006, N.D. Ohio said that OTCs are not "vendors," but can be liable for collected, unremitted "taxes." In 2010, summary judgment was granted in favor of OTC. Motion to certify Qs for Ohio Sup. Ct. denied. Appealed to 6th Cir. Pa. Philadelphia County 60 Cumberland County Hotels.com, L.P., et al. Pa. Cumberland County, 06 CV South Carolina 61 Horry County, S.C. Hotels.com, L.P., et al. *S.C. Horry County., 2007 CP City of Myrtle Beach, S.C. Hotels.com, L.P., et al. *S.C. Horry County., 2007 CP City of North Myrtle Beach, S.C. Hotels.com, L.P., et al. D. S.C., 06-cv Notes Date Updated 3/4/ /25/ /17/2009 ADR. W.D. Pa. dismissed. County is appealing. 3/7/2011 5/26/2006 Dismissed for failure to exhaust administrative remedies. 3/7/ /19/2007 Dismissed. Summary judgment hearing scheduled 3/8/ /14/2011 In litigation. 3/14/2011 $192,600 Settled in 2010 for $192,600 for next two years of taxes. Both sides want to wait until S.C. hearing in DOR case. 3/7/ Town of Mount Pleasant, S.C. Hotels.com, et al. D. S.C., 2:06-cv PMD 65 Town of Hilton Head Island, S.C. Hotels.com, et al., *No CP Charleston, S.C. Hotels.com D. S.C., 2:06-cv PMD $50,400 Merged with Charleston, SC v. Hotels.com 2:06-CV PMD. Settled in 2010 for $50,400 for next two years of taxes. Both sides want to wait until S.C. hearing in DOR case. Town brought suit 4/2/ /5/2007 $657,000 In 2007, SCUPTA claim allowed; MTD denied. Settled in 2010 for $657,000 for next two years of taxes. Both sides want to wait until S.C. hearing in DOR case. 3/7/2011 3/7/ Travelscape, LLC S.C. Dep't of Revenue S.C. Supreme Ct. 1/18/2011 OTC is "engaged in the business of furnishing accommodations to transients for consideration." Tax not unconstitutional. OTC required to remit. 2/4/2011 Tennessee 68 City of Goodlettsville, Brentwood, Priceline, et al Tenn. *M.D. Tenn., 3:2008-cv /31/2009 City does not have to exhaust administrative remedies. Class lawsuit allowed for cities against OTCs. 4/20/2010 Texas 69 City of San Antonio, Tex. Hotels.com, et al. W.D. Tex. 10/30/2009 3/20/2007 Class cert. granted. City's motion to exclude testimony on the issue of "control" was granted. OTC's emergency order to strike supplemental expert report was denied. Jury finds OTCs controlled hotels. $20.6 million verdict against OTCs. 3/14/ City of Orange, Tex. Hotels.com, Orbitz, Priceline, Travelocity, Expedia E.D. Tex., 1:2006- cv /21/2007 Unambiguous ordinance clearly imposed tax on consideration paid to a motel or hotel. Court found that the city did not alleged sufficient facts. 3/14/ City of Houston, Tex. Hotels.com, et al *Tex. App., CV Virginia Washington 72 In re Expedia Hotel Taxes & Fee W.D. Wash., Litig SEA 1/19/2010 Summary judgment granted in OTC's favor. Hearing on Appeal set for 1/28/2011. N/A N/A $184 million awarded in nationwide class action against Expedia for breach of contract and violations of the Washington Consumer Protection Act ( CPA ) arising from Expedia s assessment of bundled Tax Recovery Charges and Service Fees. 2/8/2011 3/14/2011 * Currently in litigation Page 4 of 5

12 Online Travel Company Litigation Plaintiff Defendant Highest Court 73 City of Bellingham, Wash. Hotels.com, L.P., et al. W.D. Wash., 05-cv TAX NO TAX Procedural w/o Prejudice Denied Removal of Listing 7/24/2008 Wash. Dep't of Revenue instructed city to dismiss on 7/24/2008. Notes Date Updated 2/8/2011 Wisconsin 74 City of Madison, Wis. Expedia, Inc. et al. Wis. Dane County Cir. Ct., 2007-cv /24/2008 Dismissed. * Currently in litigation Page 5 of 5

13 Issues in Online Travel Company Litigation Alabama City of Birmingham v. Orbitz, Inc., et al. (Jefferson County Cir. Ct.) Alaska* Arizona Arkansas Pine Bluff Adver. & Promotion Comm'n v. Hotels.com (Jefferson Cir. Ct.) City of Fayetteville v. Hotels.com (Wash. County Cir. Ct.) California* City of Anaheim v. Expedia, et al. (Cal. Superior Ct.) City of Oakland v. Hotels.com, et al. (N.D. Cal.) Colorado Connecticut** Delaware** District of Columbia District of Columbia v. Expedia, et al. (D.C. Superior Ct.) Florida County of Monroe v. Priceline.com (S.D. Fla.) City of Jacksonville v. Hotels.com (Fla. Duval County) Brevard County v. Priceline.com (M.D. Fla.) Exhaustion Class Certification Venue Nexus Statutory Language Consumer Protection Conversion, etc. Crime Fraud Pro OTC Pro Tax. Gannon v. Hotels.com (Fla. Palm County) Orbitz v. Broward County (Fla. Leon County) State of Florida v. Expedia, Orbitz (Fla. Leon County) County of Leon v. Hotels.com (Fla. Leon County) Orange County v. Expedia, Orbitz (Fla. Cir. Ct.) Osceola County v. Expedia, et al. (Fla. Leon County) Miami Dade County v. Internetwork Publ'g Corp. d/b/a lodging.com (Fla. Miami-Dade County) Hotwire, Inc. et al. v. Miami-Dade County (Fla. Leon County) Georgia City of Atlanta v. Hotels.com, et al. (Ga.) City of Columbus v. Expedia (Ga.) City of Columbus v. Hotels.com (Ga.) City of Columbus v. Orbitz (M.D. Ga.) City of Rome v. Hotels.com, et al. (N.D. Ga.) Hawaii** Expedia v. State of Hawaii (Trial Ct.) Illinois City of Rosemont v. Priceline.com (N.D. Ill.) City of Chicago v. Hotels.com (Cook County Ct.) City of Fairview Heights v. Orbitz, et al. (S.D. Ill) Indiana * No state tax on hotel room rentals ** No city or county tax on hotel room rentals Page 1 of 3

14 Issues in Online Travel Company Litigation Travelocity v. Ind. Dep't of Revenue (Ind. Tax Ct.) Priceline.com v. Ind. Dep't of Revenue (Ind. Tax Ct.) Orbitz v. Ind. Dep't of Revenue (Ind. Tax Ct.) Travelscape v. Ind. Dep't of Revenue (Ind. Tax Ct.) Hotwire v. Ind. Dep't of Revenue (Ind. Tax Ct.) Hotels.com v. Ind. Dep't of Revenue (Ind. Tax Ct.) Marshall County v. Hotels.com (N.D. Ind.) Lake County Convention & Visitors Bureau v. Hotels.com (N.D. Ind.) Kansas Kentucky City of Bowling Green v. Hotels.com, et al. (Warren Cir. Ct.) Louisville/Jefferson County Metro Gov't v. Hotels.com (6th Cir.) Louisiana Maine** Maryland Montgomery County v. Priceline.com, et al. (N.D. Md.) County Comm'rs of Worcester County v. Priceline.com Mayor & City Council of Baltimore v. Priceline.com et al. (N.D. Md.) Baltimore County v. Priceline.com, et al. Exhaustion Class Certification Venue Nexus Statutory Language Consumer Protection Conversion, etc. Crime Fraud Massachusetts Michigan County of Genesee, et al. v. Hotels.com, et al. (Mich. Ingham County Cir. Ct.) Minnesota Minnesota v. Hotels.com Missouri City of Branson v. Hotels.com, et al. (Mo. Greene County Cir. Ct.) City of Jefferson v. Hotels.com, et al (Mo. Cole County Cir. Ct.) St. Louis County v. Prestige Travel, et al. (St. Louis County Cir. Ct.) Montana Nevada* New Hampshire** New Jersey Township of Lyndhurst v. Priceline.com (3d Cir.) New Mexico City of Gallup v. Hotels.com, et al. (D. N.M.) New York County of Nassau v. Hotels.com (2d Cir.) Expedia, et al. v. N.Y.C. Dep't of Fin., et al. (N.Y. App. Div.) Chiste v. Hotels.com (S.D. N.Y.) Pro OTC Pro Tax. North Carolina Pitt County v. Hotels.com, et al. (4th Cir.) * No state tax on hotel room rentals ** No city or county tax on hotel room rentals Page 2 of 3

15 Issues in Online Travel Company Litigation Orbitz, et al. v. Hoyle, N.C., N.C. Dept' of Revenue, Durham County County of Wake, et al. v. Hotels.com, et al. (N.C. Wake County) Ohio Exhaustion Class Certification Venue Nexus Statutory Language Consumer Protection Conversion, etc. Crime Fraud Hamilton County, et al. v. Hotels.com (N.D. Ohio) City of Columbus v. Hotels.com (6th Cir.) City of Findlay v. Hotels.com, et al. (6th Pro OTC Pro Tax Cir.) Oklahoma Pennslyvania County of Lawrence v. Hotels.com, et al. (W.D. Pa.) City of Philadelphia v. Hotels.com, et al. (Pa. Philadelphia County) Cumberland County v. Hotels.com, et al. (Pa. Cumberland County) South Carolina Horry County v. Hotels.com, et al. (S.C. Horry County) City of Myrtle Beach v. Hotels.com, et al. (S.C. Horry County) City of North Myrtle Beach v. Hotels.com (D. S.C.) Town of Mount Pleasant v. Hotels.com, et al. (D. S.C.) Town of Hilton Head Island v. Hotels.com, et al. Charleston v. Hotels.com (D. S.C.) Travelscape v. S.C. Dep't of Revenue (S.C.) Tennessee City of Goodlettsville v. Priceline.com, et al. (M.D. Tenn.) Texas City of San Antonio v. Hotels.com, et al. (W.D. Tex.) City of Orange v. Hotels.com, et al. (E.D. Tex.) City of Houston v. Hotels.com, et al. (Tex. App.) Virginia Washington In re Expedia Hotel Taxes & Fee Litig. (W.D. Wash.) City of Bellingham v. Hotels.com, et al. (W.D. Wash.) West Virginia Wisconsin City of Madison v. Expedia, et al. (Wis. Dane County Cir. Ct.) Wyoming. * No state tax on hotel room rentals ** No city or county tax on hotel room rentals Page 3 of 3