Heard in the Court of Appeals November 19, 2013
This Decision is not final until expiration of the twenty-one day rehearing period. [North Carolina Rules of Appellate Procedure 32(b)]
Wake County. Master File No. 06 CVS 16256. Buncombe County. No. 07 CVS 585. Dare County. No. 07 CVS 56. Mecklenburg County. No. 08 CVS 741.
Ward and Smith, P.A., by Gary J. RicknerMr. and Joseph A. SchoutenMr.; and Law Office of Michael Y. Saunders, by Michael Y. SaundersMr., for plaintiff-appellants.
Williams Mullen, by Charles B. Neely, Jr.Mr., Christopher G. Browning, Jr.Mr., Nancy S. RendlemanMr., Mr. Robert W. Shaw; Kelly Hart & Hallman, LLP, by Brian S. StagnerMr., pro hac vice, and Marcus G. MungioliMr., pro hac vice; Skadden, Arps, Slate, Meagher & Flom LLP, by Darrel J. HieberMr., pro hac vice, and Mr. Randolph K. Herndon, pro hac vice, for defendant-appellees.
For Buncombe County, Plaintiff-Appellant: Mr. Steve R. Warren, Primary Attorney, Attorney at Law, Long, Parker, Warren, Anderson & Payne, Asheville, NC.
For Wake County, Plaintiff-Appellant: Mr. Brandon S. Neuman, Primary Attorney, Attorney at Law, Mr. John E. Branch, III, Attorney at Law, Shanahan Law Group, PLLC, Raleigh, NC.
BRYANT, Judge. Judges McGEE and STROUD concur.
Appeal by plaintiffs from Order and Opinion filed on 19 December 2012 by Judge Calvin E. Murphy in Special Superior Court for Complex Business Cases. Heard in the Court of Appeals 19 November 2013.
Where the trial court did not err in concluding that defendants are not subject to plaintiffs' occupancy tax and where the trial court did not err in concluding that defendants were not required to collect and remit an occupancy tax, we affirm the trial court's grant of summary judgment in favor of defendants. Where the trial court dismissed plaintiffs' claim seeking recovery for collected but not remitted taxes on the basis of a contractual obligation because of plaintiffs' failure to provide sufficient notice of the claim in their pleadings, we affirm the dismissal. Lastly, where the trial court granted summary judgment in favor of defendants on plaintiffs' claims for an accounting, conversion, and seeking to impose a constructive trust, we affirm.
Defendants are approximately eleven online travel companies (OTC) that operate websites which allow consumers to select and pay for hotel rooms directly online using a credit card. Consumers can make reservations with airlines, car rental companies, and cruise lines in addition to hotels. Defendants negotiate and contract with hotels to obtain rooms at discount rates, these rooms are then sold to customers at a rate the hotel is obligated to honor. Consumers who take advantage of this offer never pay the hotel directly, only the OTC.
Plaintiffs are four counties--Wake, Dare, Buncombe, and Mecklenburg--who are required by North Carolina statutes and local ordinances to collect and remit an occupancy tax based on a percentage of the receipts derived from the rental of hotel rooms in their respective counties. Plaintiffs claim that defendants charge consumers a rate higher than the discount rate negotiated with the hotel yet only remit to plaintiffs a tax amount based on the reduced rate. Plaintiffs contend defendants are liable for substantial unremitted tax amounts.
We discuss the procedural history for the lawsuits initially brought by each county.
In Wake County Superior Court on 2 November 2006, Wake County filed a verified complaint and action for declaratory judgment against defendants Hotels.com, LP; Hotwire, Inc.; Trip Network, Inc. (d/b/a Cheap Tickets.com); Expedia, Inc.; Internetwork Publishing Corp. (D/B/A Lodging.com); Lowestfare.com, Inc.; Maupin-Tour Holding, LLC ; Travelport, Inc. (f/k/a Cendant Travel Distribution Services Group, Inc.); Orbitz, LLC; Priceline.com, Inc.; Site59.com, LLC; Travelocity.com, LP; Travelweb LLC; and Travelnow.com, Inc. Wake County asserted that the action was to collect occupancy taxes and penalties due Wake County from gross receipts defendants derived from the rental of rooms, lodging, and other accommodations furnished by hotels, motels, and similar places located in Wake County. By county ordinance, Wake County imposed a six percent " room occupancy tax" on the gross proceeds derived from the rental of hotel rooms and other accommodations within the county. Wake County sought a declaratory judgment and injunction declaring that defendants' actions subjected defendants to payment of the occupancy tax. Wake asserted the following: violation of the room occupancy tax ordinance; conversion; imposition of a constructive trust; a demand for accounting; unfair and deceptive trade practices; agency; and claim for statutory penalties pursuant to Wake County ordinances. Wake County alleged damages in excess of $1,000,000.00 annually.
In Dare County Superior Court, on 26 January 2007, Dare County filed a verified complaint and action for Declaratory Judgment against the identical entities named in the Wake County complaint., , Dare County, like Wake County, asserted that the action was to collect occupancy taxes and penalties due Dare County from gross receipts defendants derived from the rental of rooms, lodging, and other accommodations furnished by hotels, motels, and similar places located in Dare County. Dare County imposed a five percent " room occupancy tax" on the gross proceeds from the rental of hotel rooms and other accommodations within the county. Like Wake County, Dare County sought a declaratory judgment and injunction declaring that defendants' actions subjected defendants to payment of the occupancy tax. Dare asserted the following: violation of the room occupancy tax ordinance; conversion; imposition of a constructive trust; a demand for accounting; unfair and deceptive trade practices; agency; and claim for statutory penalties pursuant to enabling legislation for the Dare County ordinance enacted by the North Carolina General Assembly. Dare County alleged damages in excess of $1,000,000.00 annually.
In Buncombe County Superior Court on 1 February 2007, Buncombe County filed a declaratory judgment action against Hotels.com ; Hotels.com, LP ; Hotels.com GP, LLC; Hotwire, Inc.; Trip Network, Inc., d/b/a Cheaptickets.com; Travelport, Inc., (f/k/a Cendant Travel Distribution Services Group, Inc.); Expedia, Inc.; Internetwork Publishing Corp., d/b/a Lodging.com; Lowestfare.com, Inc.; Orbitz, Inc.; Orbitz, LLC; Priceline.com, Inc.; Priceline.com LLC; Sites59.com, LLC; Travelweb, Inc.; Travelnow.com, Inc.; Cheap Tickets, Inc.; and Sabre, Inc. Buncombe County sought " a declaratory judgment concerning its power, privilege, and right to audit and collect from  defendants the North Carolina Occupancy Tax, N.C.G.S. 153A-155 . . . ." Buncombe County alleged that its ordinances imposed a room occupancy and tourism development tax on the gross receipts derived from the rental of any room, lodging, or similar accommodation furnished by any hotel, motel, inn, tourist camp, or other similar place within the county. On the date the declaratory judgment action was filed, the room occupancy tax was four percent.
In Mecklenburg County Superior Court on 14 January 2008, Mecklenburg County filed a verified complaint and action for declaratory judgment against the same entities named in the Wake County complaint with the exception of Maupin-Taylor Holding, LLC, and Travelnow.com, LLC. Mecklenburg County asserted that the action was to declare the rights of the parties concerning taxes and penalties due to Mecklenburg County from receipts realized by defendants derived from the rental of rooms, lodging and other accommodations furnished by hotels, motels, and similar places located in Mecklenburg County. Mecklenburg County alleged that at the time the complaint was filed, it imposed an eight percent " room occupancy tax" and defendants failure to remit the tax owed deprived Mecklenburg County of more than $1,000,000.00 annually. In addition to its request for an injunction, Mecklenburg County asserted the following claims: violation of occupancy tax ordinances; conversion; imposition of constructive trust; demand for accounting; unfair and deceptive trade practices; agency; and a claim for statutory penalties pursuant to both the Mecklenburg County tax ordinance and North Carolina General Statutes.
All defendants filed motions to have their respective actions designated as complex business cases. Thereafter, Chief Justice Sarah Parker issued orders designating each action as a complex business case.
On 4 April 2007, Special Superior Court Judge Albert Diaz of the North Carolina Business Court was appointed to preside over the designated complex business cases and granted defendants' motions to consolidate the actions filed in Buncombe County, Dare County, and Wake County for pretrial matters. Thereafter, Mecklenburg County's complaint was consolidated and joined with the other actions.
On 1 November 2010, all parties filed motions for summary judgment under seal; plaintiffs filed a consolidated motion as did defendants.
On 4 February 2011, a summary judgment hearing was held before the Honorable Calvin E. Murphy, Special Superior Court Judge presiding in the North Carolina Business Court. After considering the parties' motions and briefs, including supporting authority and arguments of counsel, the trial court granted defendants' motion for summary judgment and denied plaintiffs' motion for summary judgment. Plaintiffs appeal.
On appeal, plaintiffs raise the following questions: (I) whether the trial court erred in concluding that defendants have no liability under the ordinances; (II) concluding that defendants are not contractually obligated to collect and remit the occupancy tax; (III) concluding that there was no legal support for plaintiffs' collected but not remitted claim; and (IV) dismissing plaintiffs' claims for accounting, conversion, and constructive trust.
Standard of Review
" We review a trial court's order granting summary judgment de novo, viewing the evidence in the light most favorable to the nonmoving party. We are to determine whether there is any genuine issue of material fact and whether the moving party is entitled to a judgment as a matter of law." Adkins v. Stanly Cnty. Bd. of Educ., 203 ...