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The Village of Rosemont, Illinois v. Priceline.Com Inc

July 31, 2012

THE VILLAGE OF ROSEMONT, ILLINOIS, PLAINTIFF,
v.
PRICELINE.COM INC, TRAVELWEB LLC, TRAVELOCITY.COM LP, SITE59.COM LLC, EXPEDIA, INC., HOTELS.COM, LP AND HOTWIRE, INC., DEFENDANTS.



The opinion of the court was delivered by: Judge Ronald A. Guzman

MEMORANDUM OPINION AND ORDER

On October 14, 2011, the Court found that the Rosemont Hotel Tax Ordinance requires defendants to pay taxes to Rosemont on the retail rate of hotel rooms they sell to consumers. The case is now before the Court on the parties' cross-motions for summary judgment on the issue of damages. For the reasons set forth below, the Court grants in part and denies in part the parties' motions.

Discussion

The amount of damages defendants must pay depends on: (1) the length of the limitations period that governs plaintiff's claims and the date on which it started to run; (2) the method of computing interest on the unpaid taxes; and (3) the amount of penalties, if any, that are assessed. The Court will address each issue in turn.

The statute of limitations applicable to claims under the Hotel Tax Ordinance is set forth in the Illinois Taxpayers' Bill of Rights Act ("ITBR"), which provides:

. . . . Each unit of local government must provide appropriate statutes of limitation for the determination and assessment of taxes . . . provided, however, that a statute of limitations may not exceed the following:

(1) No notice of determination of tax due or assessment may be issued more than 4 years after the end of the calendar year for which the return for the period was filed or the end of the calendar year in which the return for the period was due, whichever occurs later.

(2) If any tax return was not filed or if during any 4-year period for which a notice of tax determination or assessment may be issued by the unit of local government and the tax paid or remitted was less than 75% of the tax due for that period, the statute of limitations shall be no more than 6 years after the end of the calendar year in which the return for the period was due or the end of the calendar year in which the return for the period was filed, whichever occurs later. In the event that a unit of local government fails to provide a statute of limitations, the maximum statutory period provided in this Section applies.

50 Ill. Comp. Stat. 45/30; (see Pl.'s Mot. Summ. J. Damages, Ex. D, Village of Rosemont Ordinance 2000-12-6D ("Tax Rights Ordinance"), § 15 (same).) Because there is no dispute that the hotels filed monthly tax returns with respect to the transactions at issue here, defendants say the four-year limitations period set forth in the ITBR and Tax Rights Ordinance governs.

The Court disagrees. The returns filed by the hotels reflect the taxes on the net room rates they charged defendants, not the retail rates defendants charged consumers. It is undisputed that defendants did not collect or remit any tax on the retail room rates or file returns reflecting such taxes. Thus, the six-year period of the ITBR and the Tax Rights Ordinance applies.

Alternatively, defendants contend that by measuring the limitations period from the date a tax determination notice is issued, the ITBR and Tax Rights Ordinance make the issuance of such a notice a condition precedent to filing suit. Because the only notice of liability plaintiff gave to defendants was its October 31, 2010 expert report, defendants argue that plaintiff cannot recover any taxes due before that date.

There are several problems with defendants' argument. First, according to the plain language of the ITBR and Tax Rights Ordinance, the limitation periods start to run from the end of the calendar year for which a return was filed or due or the date a tax determination notice is issued. See 50 Ill. Comp. Stat. 45/30(1); Tax Rights Ordinance, § 15. Moreover, defendants' argument assumes that the limitations period for plaintiff's claims continued to run after this suit was filed, a violation of "the basic rule in Illinois that the filing of suit terminates the running of the statute of limitations." Ill. Dep't of Revenue v. Country Gardens, Inc., 495 N.E.2d 161, 166 (Ill. App. Ct. 1986); see Baird & Warner, Inc. v. Addison Indus. Park, Inc., 387 N.E.2d 831, 845 (Ill. App. Ct. 1979) ("[T]he filing of the suit terminates the running of the statute [of limitations] or makes it irrelevant."). In short, the Court rejects defendants' argument that the limitations period started, and thus plaintiff's recovery should be measured from, the date its expert report was issued.

The Court agrees with plaintiff that the limitations period is subject to the discovery rule; that is, that the period began to run when "plaintiff knew or should have known of the existence of the right to sue." Shelton v. Country Mut. Ins. Co., 515 N.E.2d 235, 240 (Ill. App. Ct. 1987) (quotation omitted); see Tom Olesker's Exciting World of Fashion, Inc. v. Dun & Bradstreet, Inc., 334 N.E.2d 160, 162 (Ill. 1975) ("'[W]here the passage of time does little to increase the problems of proof, the ends of justice are served by permitting plaintiff to sue within the statutory period computed from the time at which he knew or should have known of the existence of the right to sue.'") (quoting Rozny v. Marnul, 250 N.E.2d 656, 664 (Ill. 1969)); see also Hermitage Corp. v. Contractors Adjustment Co., 651 N.E.2d 1132, 1135-36 (Ill. 1995) (stating that the discovery rule originated in tort cases but has been applied to a variety of claims because "courts have been more concerned with whether the underlying facts support application of the discovery rule than how [an] action [is] characterized"). "Whether the injured person has become possessed of sufficient information concerning his or her injury and its cause to put a reasonable person on inquiry to determine whether actionable conduct is involved is usually a question of fact." Pruitt v. Schultz, 601 N.E.2d 1372, 1374 (Ill. App. Ct. 1992).

Plaintiff states that it first realized defendants were liable for hotel taxes in March or April 2009, when it received from its counsel a description of defendants' "merchant model" business strategy. (Volk Decl. Resp. Defs.' Cross-Mot. Summ. J. Damages, Ex. 1, Rosenthal Dep. 62, 218.) There is no dispute, however, that defendants described the merchant model in their SEC filings as early as 2001. (Volk Decl. Supp. Pl.'s Cross-Mot. Summ J. Liability, Ex. 2, Interactive 2002 Form 10-K at 20; id., Ex. 9, Hotels.com 2002 Form 10-K at 8; id., Ex. 14, Travelocity.com 2001 Form 10-K at 6; Defs.' Resp. Pl.'s Stmt. Add'l Facts Opp'n Defs.' Cross-Mot. Summ. J. Damages, Ex. A, InterActive Corp. Sept. 2003 Form 10-Q at 35.) Moreover, defendants have offered articles that appeared in the Philadelphia Inquirer, the Boston Globe, the Orlando Sentinel, the St. Louis Post-Dispatch, the Los Angeles Times, Newsday, the San Jose Mercury News, the New York Times and the Chicago Tribune between 2002 and 2005, describing the merchant model and questioning whether defendants were underpaying local taxing authorities. (See Defs.' LR 56.1 Stmt. Add'l Facts Opp'n Pl.'s Mot. ...


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