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Town of Breckenridge v. Egencia, LLC

Court of Appeals of Colorado, Third Division

January 25, 2018

Town of Breckenridge, Colorado, Plaintiff-Appellant,
Egencia, LLC; Expedia, Inc.;, L.P.;, GP, LLC; Hotwire, Inc.; Internetwork Publishing Corporation, d/b/a;, Inc.; Orbitz, Inc.; Orbitz, LLC;, Incorporated;, LLC;, LP; Travelport, Inc., f/k/a Cendant Travel Distribution Services Group, Inc.; Travelscape, LLC; Travelweb, LLC; Trip Network, Inc., d/b/a, Defendants-Appellees.

         Summit County District Court No. 11CV420 Honorable Karen A. Romeo, Judge

          Lewis Roca Rothgerber Christie LLP, Michael D. Plachy, Thomas M. Rogers III, Joy Allen Woller, Denver, Colorado, for Plaintiff-Appellant

          Connelly Law LLC, Sean Connelly, Denver, Colorado; Davis Graham Stubbs LLP, Jason M. Lynch, Denver, Colorado, for Defendants-Appellees

          GRAHAM JUDGE

          ¶ 1 We are asked to determine whether online travel companies (OTCs) are required to collect and remit accommodation and sales taxes to the Town of Breckenridge, Colorado, on hotel rooms they book through their respective internet websites. We conclude that they need not collect and remit such taxes.

         ¶ 2 Breckenridge, the plaintiff, seeks to collect accommodation and sales taxes from sixteen OTCs, the defendants: Egencia, LLC; Expedia, Inc.;, L.P.;, GP, LLC; Hotwire, Inc.; Internetwork Publishing Corporation d/b/a;, Inc.; Orbitz, Inc.; Orbitz, LLC;, Incorporated;, LLC;, LP; Travelport Inc. f/k/a Cendant Travel Distribution Services Group, Inc.; Travelscape, LLC; Travelweb, LLC; Trip Network, Inc. d/b/a; and yet unidentified companies, Does 1 through 1000.

         ¶ 3 On appeal, Breckenridge makes five contentions. First, it contends that the district court erred in determining that the OTCs were not "renters" or "lessors" for purposes of Breckenridge's accommodation tax ordinance, relying on the Colorado Supreme Court's decision in City & County of Denver v. Expedia, Inc., 2017 CO 32 (plurality opinion). Second, it contends that the district court misapplied the summary judgment standard by resolving material issues of fact. Third, it contends that its sales tax claim should not have been dismissed for lack of subject matter jurisdiction. Fourth, it contends that its motion for class action certification should have been granted because common questions predominate and class action was the superior method of relief. Fifth, it contends that its common law claims were improperly dismissed. We consider and reject each contention.

         I. Background

         A. Overview of OTCs

         ¶ 4 The OTCs maintain websites through which travelers may book reservations for hotel accommodations and other travel-related services. The OTCs transact their online businesses in two ways. The first is known as the "agency model, " which describes transactions where the OTC is the actual agent of a hotel. The second is the "merchant model, " which was used here.

         ¶ 5 Under the merchant model, an OTC first contracts with a hotel. These contracts offer rooms to an OTC at a discounted rate - a fixed percentage of the price the hotel would charge travelers directly for the rooms. The OTC describes the hotel and its facilities on its website and allows customers logging onto its website to book reservations for that hotel.

         ¶ 6 When facilitating reservations, an OTC neither purchases nor reserves rooms in advance. Rather, the OTC coordinates information between travelers and hotels. Only hotels can issue reservations. When a purchaser requests a hotel room, the chosen OTC's computer system communicates with a hotel's central reservation system to find a specific room at a specified rate. If available, the purchaser must agree to the hotel's cancellation policy and terms of occupancy before the hotel will accept the reservation. If the hotel accepts the reservation, it will provide a confirmation number in the customer's name and supply this number to the OTC. The OTC forwards the confirmation number then collects and processes the customer's payment.

         ¶ 7 When a customer arrives at the hotel, the hotel registers the customer as a guest before assigning a room. Assignments are made only when a room is available and the customer meets the hotel's terms and conditions for occupancy. After the customer concludes his stay, the OTC transfers payment to the hotel. The hotel then remits the collected taxes to Breckenridge.

         ¶ 8 As relevant here, Breckenridge imposes an accommodation tax "of three and four-tenths percent (3.4%) on the price paid for the leasing or rental of any hotel room, motel room, or other accommodation located in the town." Breckenridge Town Code § 3-4-3 (B.T.C.). In addition to the accommodation tax, Breckenridge collects a 2.5% sales tax. B.T.C. § 3-1-5. Unlike the accommodation tax, the sales tax ordinance requires Breckenridge to seek administrative review before petitioning the district court for relief to collect allegedly unpaid sales taxes. B.T.C. §§ 3-1-35, 3-1-36.

         B. Procedural History

         ¶ 9 Breckenridge instituted this action to recover from the OTCs unpaid accommodation and sales taxes. In its initial complaint, Breckenridge alleged that the OTCs were responsible for collecting and remitting taxes associated with hotel reservations. Breckenridge asserted five causes of action: declaratory judgment, violations of municipal ordinances, conversion, civil conspiracy, and unjust enrichment.

          ¶ 10 The OTCs then filed a motion to dismiss, which was partially granted. The district court agreed that no cause of action existed in respect to the sales tax claim because Breckenridge had failed to exhaust its administrative remedies and none of the exceptions to exhaustion applied. Consequently, the court determined that it lacked subject matter jurisdiction to decide that claim. But, the district court refused to dismiss the accommodation tax claim, explaining that Breckenridge had sufficiently asserted a claim in regard to the accommodation tax.

         ¶ 11 Breckenridge then sought class certification for fifty-five home rule cities that also levy a lodger's or accommodation tax, seeking to impose taxes, interest, and penalties on the OTCs in favor of the putative class. The district court denied class certification on multiple grounds. First, the court concluded that certification under C.R.C.P. 23(b)(2) was inappropriate because Breckenridge was primarily seeking monetary damages. Second, the court determined that common questions did not predominate over questions affecting only individual members of the putative class, so class certification was not superior to other available remedies and, therefore, C.R.C.P. 23(b)(3) certification was unavailable.Third, the court held that certification was inappropriate because at least nine of the unnamed class members had failed to exhaust their own administrative remedies.

         ¶ 12 Thereafter, the parties filed cross-motions for summary judgment. Resolving those motions in favor of the OTCs, the district court analyzed the plain language of the accommodation tax ordinance, in addition to the OTCs' role in the reservation process. Specifically, the court determined that it was beyond dispute that OTCs do not maintain hotel room inventories, any customer service the OTCs provide is related only to the facilitation of reservations and not the actual rental or service of accommodations, and the hotels - not the OTCs - are primarily involved in a customer's reservation process. Based on those undisputed facts and the plain language of the ordinance, the court concluded that the OTCs were not renters or lessors and, therefore, not required to collect and remit the accommodation tax.

         II. The District Court Properly Determined that the OTCs are not Subject to Breckenridge's Accommodation Tax

         ¶ 13 Breckenridge contends that the district court erred in concluding that OTCs are neither "lessors" nor "renters" of hotel rooms. Additionally, Breckenridge asserts that the district court erred when it relied on Expedia, Inc. v. City & County of Denver, 2014 COA 87 (Expedia I), which was reversed by the Colorado Supreme Court in a plurality decision. City & Cty. of Denver v. Expedia, Inc., 2017 CO 32 (Expedia II). We disagree.

         ¶ 14 Who is responsible for collecting and remitting accommodation taxes under the B.T.C.? This question hinges on the meaning of "lessor, " "renter, " and "furnish, " as used in sections 3-4-1, 3-4-3, and 3-4-4 of that code.

         ¶ 15 Breckenridge contends that the OTCs are renters or lessors under the code because they sell the legal right to use hotel rooms in exchange for consideration. Because the accommodation tax does not require a person to have physical possession of the right sold, Breckenridge asserts that the OTCs are capable of leasing or renting even without physical possession of the hotel rooms.

         ¶ 16 The OTCs respond that they are not lessors or renters because they do not own, possess, or have any interest in hotel rooms; therefore, they have no power to convey use or occupancy - in other words, to lease hotel rooms - to others. See City of Philadelphia v. City of Philadelphia Tax Review Bd., 37 A.3d 15, 20 (Pa. Commw. Ct. 2012) (no rental occurs until a customer checks in at the hotel and receives the right to a room). Rather, they contend that OTCs are technology companies that act as intermediaries between purchasers and hotels.

         ¶ 17 The district court agreed with the OTCs that they are not lessors or renters subject to the accommodation tax and, instead, are intermediaries. Relying on dictionary definitions, the court found that a "lessor" or "renter" is a "person or business that conveys via a contract the right to use, possess, or occupy accommodations for consideration." Because OTCs act merely as intermediaries and, therefore, lack a possessory interest in the lodging, the district court found that they are not subject to Breckenridge's accommodation tax.

         A. Standard of Review

         ¶ 18 We review a district court's grant of summary judgment and issues of statutory interpretation de novo. Robinson v. Legro, 2014 CO 40, ¶ 10; Bd. of Cty. Comm'rs v. ExxonMobil Oil Corp., 192 P.3d 582, 585 (Colo.App. 2008), aff'd, 222 P.3d 303 (Colo. 2009). When reviewing a municipal ordinance, our primary task is to give effect to the intent of the drafters, which we attempt to discern by looking first to the ordinance's plain language. Jackson & Co. v. Town of Avon, 166 P.3d 297, 299 (Colo.App. 2007). If we can give effect to the ordinary meaning of the words used by the drafter, the ordinance should be construed as written. Id. But if the ordinance is ambiguous and therefore susceptible of multiple interpretations, we may resort to various aids of statutory construction in determining intent. Jefferson Cty. Bd. of Equalization v. Gerganoff, 241 P.3d 932, 935 (Colo. 2010). We must also refrain from rendering a judgment that would be inconsistent with the municipal body's legislative intent and must avoid any interpretation that would produce an illogical or absurd result. Id.; Waste Mgmt. of Colo., Inc. v. City of Commerce City, 250 P.3d 722, 725 (Colo.App. 2010).

         ¶ 19 Interpreting a tax code requires a similar analysis. Welby Gardens v. Adams Cty. Bd. of Equalization, 71 P.3d 992, 995 (Colo. 2003). We must construe it as a whole to give consistent, harmonious, and sensible effect to all its parts. Id. Additionally, however, we adhere to Colorado's longstanding rule of construction that "tax provisions like those at issue here will not be extended beyond the clear import of the language used, nor will their operation be extended by analogy." Waste Mgmt., 250 P.3d at 725 (citing City of Boulder v. Leanin' Tree, Inc., 72 P.3d 361, 367 (Colo. 2003)). We construe all doubts against the government and in favor of the taxpayer. Id.

         B. The Accommodation Tax Ordinance's Language

         ¶ 20 B.T.C. section 3-4-1 (the preamble) states, in part, as follows:

[The] legislative intent of the town council in enacting this chapter is that every person who, for consideration, leases or rents any hotel room, motel room, or other accommodation located in the town shall pay and every person who furnishes for lease or rental any such accommodation shall collect the tax imposed by this chapter.

         ¶ 21 An implementing provision provides that "an excise tax of three and four-tenths percent (3.4%) [shall be assessed] on the price paid for the leasing or rental of any hotel room, motel room, or other accommodation located in the town." B.T.C. § 3-4-3.

         ¶ 22 The code also imposes liability for unpaid taxes on "any lessee or renter of a hotel room, motel room, or other accommodation located in the town" who fails to pay or "any lessor or renter of such accommodation" who fails to collect the accommodation tax. B.T.C. § 3-4-4(A).

         ¶ 23 The B.T.C. does not define the terms "leasing, " "renting, " "lessor, " or "renter." Nor does the code define the operative term used in its preamble, "furnishes for lease or rental."

         ¶ 24 When a statute fails to define an integral term, we may refer to a dictionary to determine the common usage of the term. See Roalstad v. City of Lafayette, 2015 COA 146, ¶ 34 (If a "statute does not define a term, the word at issue is a term of common usage, and people of ordinary intelligence need not guess at its meaning, we may refer to dictionary definitions in determining the plain and ordinary meaning." (quoting Mendoza v. Pioneer Gen. Ins. Co., 2014 COA 29, ¶ 24)). Thus, we look to dictionary definitions of the terms "lessor, " "renter, " "lease, " "rent, " and "furnish" to ascertain their plain and ordinary meanings.

         ¶ 25 Black's Law Dictionary defines those terms as follows:

. "lessor" (n.) is "[s]omeone who conveys real or personal property by lease; especially], landlord";
. "lease" (n.) is a "contract by which a rightful possessor of real property conveys the right to use and occupy the property in exchange for consideration, " and (v.) is "[t]o grant the possession and use of (land, buildings, rooms, movable property, etc.) to another in return for rent or other consideration"; and
. "rent" (n.) is "[consideration paid, usu[ally] periodically, for the use or occupancy of property."

         Black Law's Dictionary 1024, 1026, 1043, 1488 (10th ed. 2014).

         ¶ 26 Similarly, Webster's Third New International Dictionary defines the terms as follows:

. "lessor" (n.) is "one that surrenders possession of real estate under a lease";
. "lease" (n.) is a "a contract by which one conveys lands, tenements, or hereditaments for life, for a term of years, or at will or for any less interest than that of the lessor, usu[ally] for a specified rent or compensation, " and (v.) is "to grant or convey to another by lease";
. "rent" (n.) is "income from a property, " and "a piece of property that the owner allows another to use in exchange for a payment in services, kind, or money";
. "renter" (n.) is "one that rents: as . . . the lessee or tenant of lands, tenements, or other property"; ...

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