DocketNumber: Case Nos. 3:05 CV 7443, 3:07 CV 2117
Citation Numbers: 561 F. Supp. 2d 917
Judges: Katz
Filed Date: 6/19/2008
Status: Precedential
Modified Date: 11/26/2022
MEMORANDUM OPINION
I. Background
This matter is before the Court on parallel motions to dismiss in two cases. This Court has jurisdiction pursuant to 28 U.S.C. § 1332. The moving defendants in
The basic factual allegations made by the plaintiffs are as follows:
Defendants contract with hotels for rooms at negotiated discounted room rates. Defendants then mark up their inventory of rooms and sell the rooms to members of the public, who actually occupy the rooms. Defendants charge and collect taxes from occupants based on the marked up room rates, but only remit to Plaintiffs the tax amounts based on the lower, negotiated room rates. Each Defendant then pockets the difference.
First Amended Consolidated Complaint at 5.
In memorandum opinions and orders issued July 26, 2006 and July 23, 2007, 2007 WL 2138585, this Court dismissed some of the original plaintiffs’ claims, and denied dismissal as to other claims. See City of Findlay v. Hotels.com, L.P., 441 F.Supp.2d 855 (N.D.Ohio 2006); Case No. 3:05-CV07443 at Doc. 62; Case No. 3:07-CV-02117 at Doc. 80. At issue is (original and amended) Count 1, violations of the transient occupancy tax ordinances pursuant to municipal ordinances and Ohio Rev. Code § 5739.02.
In both cases, Defendants have filed motions to dismiss the amended complaints. Although total dismissal is ostensibly sought, the motions specifically seek an extension of the Court’s previous determinations about the applicability of the origi
II. Standard of Review
Fed.R.Civ.P. 12(b)(6) provides for dismissal of a lawsuit for “failure to state a claim upon which relief can be granted.” To warrant dismissal, “it [must] appear[ ] beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Kottmyer v. Maas, 436 F.3d 684, 688 (6th Cir.2006) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). “A district court considering a defendant’s motion to dismiss under Rule 12(b)(6) must construe the complaint in the light most favorable to the plaintiff and accept the plaintiffs allegations as true.” Thurman v. Pfizer, Inc., 484 F.3d 855 (6th Cir.2007). However, it is unnecessary for the court to “accept as true legal conclusions or unwarranted factual inferences.” Kottmyer, 436 F.3d at 688 (citing Gregory v. Shelby County, 220 F.3d 433, 446 (6th Cir.2000)).
III. Discussion
The Court’s prior decisions were limited to the ordinances of City of Findlay, City of Columbus, and City of Dayton. Those decisions, however, remain the law of the case for both cases, and this Court will analyze the nine new plaintiffs’ ordinances accordingly. The ordinances of Rossford, City of Perrysburg, and Monclova use the term “vendor” (as did those of Findlay and Columbus); those of the Cities of Toledo, Northwood, and Maumee use the term “operator” (as did Dayton’s); and those of the Townships of Perrysburg, Springfield, and Lake use only a statutory definition of “hotel.”
A. Monclova Township and Cities of Perrysburg and Rossford
The ordinance of the City of Findlay provided that “[t]he transient guest tax ... shall be paid by the transient guest to the vendor....” Findlay Ord. § 195.06. The ordinance defined “vendor” as one “who is the owner or operator of [a] hotel.... ” Findlay Ord. § 195.03(d). City of Columbus Code § 371 levies a tax “on transactions by which lodging by a hotel ... is or is to be furnished to transient guests....” Columbus City C. § 371.02(a). Columbus defines “vendor” as “the person who is the owner or operator of the hotel ... and who furnishes the lodging.” Columbus City C. § 371.01(d). This Court found that the definition of “vendor” was too narrow to reach the web-based defendants because they do not own or operate the hotels.
Monclova Township Lodging Tax Code of Regulations § 2(K) defines “vendor” as “a person who is required to have an Ohio Retail Sales Tax Vendor License ... and who operates a hotel which furnishes lodging to guests and includes the agents and employees of such person who performs the functions of the vendor on his behalf.” Section 3(A) taxes “each transaction in Monclova Township by which lodging is or is to be furnished by a vendor....” The City of Rossford defines “vendor” as “the person who is the owner or operator of the hotel ... and who furnishes the lodging.” Rossford Ord. § 195.01 (Nov. 11, 1974). The City of Perrysburg taxes “vendors,” defined as “the person who is the owner or
The language in these three ordinances is strikingly similar to the language in the Findlay ordinance. For the same reasons as discussed in the Court’s July 26, 2006 memorandum opinion, the Court finds that Defendants are not directly obligated to pay the Monclova, City of Perrysburg, and Rossford hotel taxes, but the plaintiffs do have a viable legal theory by which they may pursue money collected by the Defendants as taxes but not remitted to the plaintiffs. See City of Findlay, 441 F.Supp.2d at 858-61.
B. Cities of Maumee, Northwood, and Toledo
City of Dayton Ord. § 36.131 levies a tax “on transactions by which lodging by a hotel is or is to be furnished to transient guests.” “The tax shall be paid by the transient guest to the operator, and each operator shall collect from the transient guest the full and exact amount of the tax payable on each taxable transaction.” Dayton Ord. § 36.133. An operator is
[a]ny person who is proprietor of the hotel whether in the capacity of owner, lessee, licensee or any other capacity. Where the operator performs his functions through a managing agent of any type or character, other than an employee, the managing agent shall be deemed an operator for the purposes of this division, and shall have the same duties and liabilities as his principal. Compliance with the provisions of this chapter by either the principal or the managing agent shall, however, be considered to be compliance by both.
Dayton Ord. § 36.130.
The same reasoning applies here as with regard to the “vendor” definition. The defendants cannot be considered “operators” because they are not alleged to be proprietors of the hotels in question. Neither can they be considered “managing agents” of the hotels’ proprietors based solely on the fact that they negotiate lower hotel room rates and then sell the rooms to the public. By so doing, Defendants do not take on the functions of a “managing agent” performing duties of a hotel proprietor. They do not perform a proprietor’s functions, but rather they contract as third parties for rooms which they then sell to the people who actually occupy the rooms. They are more similar to travel agents than to hotel managers. Ultimately, the hotel is being paid at the negotiated rate for the rooms it contracts to Defendants, and the plaintiffs’ ordinances impose the tax on the hotel’s rental fees, which are paid to the proprietor or managing agent by Defendants.
City of Maumee Ordinance § 195.02 levies a tax “on transactions by which lodging by a hotel is or is to be furnished to transient guests.” “Such tax constitutes a debt owed by the transient guest to the City, which is extinguished only by payment to the operator as trustee for the City, or to the City.” City of Maumee Ord. § 195.02.
“Operator” means any person who is the proprietor of the hotel, whether in the capacity of owner, lessee, licensee or any other capacity. Where the operator performs his functions through a managing agent of any type or character, other than an employee, the managing agent shall be deemed an operator for the purposes of this chapter, and shall have the same duties and liabilities as his principal. Compliance with the provisions of this chapter by either the principal or the managing agent shall, however, be considered to be compliance by both.
City of Maumee Ord. § 195.01(f).
The ordinances of Northwood and Toledo use almost identical language to the
C. Townships of Lake, Perrysburg, and Springfield
The Lake Township resolution of March 30, 1968 levies a 3% tax on hotels and motels, defining hotel by reference to Ohio Rev.Code § 5739.01(N): “every establishment kept, used, maintained, advertised or held out to the public to be a place where sleeping accommodations are offered to guests.... ” Perrysburg Township Resolution No. 88.68, adopted May 6, 1968, taxes hotels and motels and uses the same definition from the Ohio Rev.Code. The Springfield Township resolution adopted on November 6, 1981, uses the same language.
These resolutions lack even the “vendor” and “operator” definitions used in the other plaintiffs’ ordinances. The taxes in Lake, Perrysburg, and Springfield Townships apply directly to hotels as defined therein. Defendants do not meet that definition, as they are not alleged to be “establishments” in the sense that hotels typically are. Defendants’ business model is decidedly different, as discussed above. For these reasons, the Court finds that Defendants are not directly obligated to pay the Lake, Perrysburg, and Springfield Township hotel taxes, but the plaintiffs do have a viable legal theory by which they may pursue money collected by the Defendants as taxes but not remitted to the plaintiffs.
IV. Conclusion
For the reasons discussed herein, and in the Court’s previous memorandum of law, see City of Findlay, supra, Defendants’ motions are hereby denied (Case No. 3:05-CV-07443 at Doc. 218; Case No. 3:07-CV-02117 at Doc. 165).
IT IS SO ORDERED.
JUDGMENT ENTRY
For the reasons stated in the Memorandum Opinion filed contemporaneously with this entry, IT IS HEREBY ORDERED, ADJUDGED and DECREED that Defendants’ motions to dismiss are denied (Doc. 218 & 165).
. The Court addressed claims other than those discussed herein (e.g., Ohio Consumer Sales Practices Act, constructive trust, conversion), but those issues are not relevant to the matter as currently before the Court, and so are not discussed at length herein.
. The plaintiffs cite City of Fairview Heights v. Orbitz, Inc. et al., Case No. 05-CV-840-DRH (S.D.Ill. July 12, 2006) for support. In Fair-view Heights, the city ordinance's definition of "owner” was "any person having an ownership interest in, conducting the operation of a hotel or motel room, or receiving consideration for the rental of such hotel or motel room.” Id. at 10 n. 7. That definition is significantly different from the definitions in the plaintiffs’ ordinances, and this Court’s analysis is necessarily different from that of the Fairview Heights court.