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Arkansas Supreme Court Certifies Class Suit Against Online Travel Companies

Pine Bluff Advertising and Promotion Commission, Jefferson County, the city of North Little Rock, brought a suit for themselves and others similarly situated against on-line travel companies ("OTCs") such as Hotwire, Orbirtz, Hotels.com, etc.

The suit alleged that the OTCs failed to collect and remit local hotel sales taxes when they collect payment for hotel bookings: OTCs acquire rooms from hotels at discounted rates, and then charge higher rates to customers who book rooms through the companies' websites and collect taxes from the customers based on those higher rates. The complaint claims that the OTCs then pay city and county taxes based on the lower, discounted rates and pocket the difference in violation of Arkansas law.

The class representatives moved for class certification and the Circuit Court entered an order certifying two classes. The OTCs appealed to the Arkansas Supreme Court saying that administrative remedies were not exhausted and that the predominance requirement, under Rule 23, was not satisfied. The Supreme Court disagreed. In so doing, the Court noted that "the predominance element can be satisfied if the preliminary, common issues may be resolved before any individual issues. In make this determination, we do not merely compare the number of individual versus common claims. Instead, we must decide if the issues common to all plaintiffs 'predominate over' the individual issues, which can be resolved during the decertified stage of bifurcated proceedings." The Court found that there were overarching common issues, including whether the OTCs where "providers of accommodations to transient guests" within the meaning of the Gross Receipts Tax Act, that could be addressed before resolving individual issues.

The Supreme Court upheld the certifications and stated Rule 23 had been satisfied in full.

The case is styled Hotels.com, L.P., et al. v. Pine Bluff Advertising & Promotion Commission, et al., Case No. CV-13-342, — S.W.3d —, 2013 Ark. 392 (Ark. 2013).

The Simon Law Firm, P.C. has years of experience handling cases such as this one. For any questions, please feel free to contact us.

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