Cabral v. Caesars Entm't Corp., Case No. 2:17-cv-02841-APG-VCF

MARGARITA CABRAL, et al., Plaintiffs, v. CAESARS ENTERTAINMENT CORPORATION, et al., Defendants.

Case No. 2:17-cv-02841-APG-VCF

UNITED STATES DISTRICT COURT DISTRICT OF NEVADA

June 11, 2018

ORDER GRANTING MOTION TO DISMISS AND DENYING MOTION TO CONSOLIDATE AS MOOT

(ECF Nos. 6, 22)

The plaintiffs bring this proposed class action lawsuit against several resort hotels in Las Vegas. They allege the hotels charge overnight guests a mandatory per-night resort fee that includes payment for Internet access. The plaintiffs allege that the defendants applied the Clark County Combined Transient Lodging Tax to the entire amount of the resort fee, including that portion that covers Internet access. The plaintiffs assert this violates the Internet Tax Freedom Act (ITFA), a federal statute that precludes States and their political subdivisions from taxing Internet access.

The defendants move to dismiss for lack of jurisdiction, arguing the Tax Injunction Act (TIA) bars the plaintiffs' claims in federal court. Alternatively, the defendants request I dismiss the case based on principles of comity or abstain under Burford v. Sun Oil Co., 319 U.S. 315 (1943). The plaintiffs respond that the TIA does not apply because they are not challenging the Lodging Tax itself. Rather, they contend they are challenging the defendants' unilateral, non-mandatory decision to bundle Internet access charges with other services into a single resort fee and then applying the Lodging Tax to the total amount of the resort fee. Alternatively, the plaintiffs argue that Congress exempted ITFA suits from the TIA's scope. For similar reasons, the plaintiffs argue neither comity nor Burford abstention is appropriate. I grant the motion to dismiss for lack of jurisdiction under the TIA and based on comity principles.

I. BACKGROUND

A. The Lodging Tax

Clark County Code Chapter 4.08 sets forth the Lodging Tax, which is a tax on revenue derived from short-term room rentals for dwelling, lodging, or sleeping purposes, such as hotel rooms. The tax applies to "rent," which "[m]eans the amount charged for a sleeping room/space in a transient lodging establishment, valued in money, whether received in money or otherwise," including "[c]harges that would normally be part of an all inclusive room rate," such as late check-out fees, cancellation fees, and the like. Clark County Code 4.08.005(17)(a). The term rent also includes a catchall provision for "[a]ny charges for services, amenities, accommodations, or use, not otherwise specified above, that are mandatory in nature and charged in connection with rental of a sleeping/room space." Id. at 4.08.005(17)(a)(viii).¹

The tax is collected from "every operator in Clark County." Id. at 4.08.010(a). An operator means "the proprietor of a transient lodging establishment." Id. at 4.08.005(12). "The tax, when due, constitutes a debt owed by the operator to the county which is extinguished only by payment thereof to the Clark County department of business license." Id. at 4.08.010(b). The operator may collect the tax "from the paying transient guests," but the "operator is liable to Clark County for the tax whether or not it is actually collected from the paying transient guest." Id. at 4.08.010(c). "Combined transient lodging taxes collected by the operator are public monies from the moment of their collection and shall be held in trust by the operator collecting such taxes for the use and benefit of the agencies for whom such revenues are collected." Id. at 4.08.055(b).

The operator owes the tax "on the first day of each month for the preceding month," and it is "payable to the Clark County Department of Business License." Id. at 4.08.055(a). However, the Code allows for a "discount" for operators in the amount of two percent of the Lodging Tax collected by the operator if the operator pays the Lodging Tax "on or before the fifteenth day of the month following the month for which the tax is due." Id. at 4.08.040.

The operator must refund any "over-collection" of the Lodging Tax "to the occupant from whom it was incorrectly collected." Id. at 4.08.055(c). If the over-collection is not refunded to the occupant for any reason within a certain period of time, it must be remitted to the Clark County Department of Business License. Id. at 4.08.055(d).

The Code allows for refund requests. "Refunds of transient lodging tax collected by operators pursuant to Section 4.08.015 of this code must be requested from the department in writing" within two or three years, depending on the type of tax collected. Id. at 4.08.075(a), (b). "No transient lodging tax may be refunded to an operator who collected it unless the operator has refunded the transient lodging tax to the occupant who paid it." Id. at 4.08.075(c).

The Clark County Department of Business License has issued a General Information Guide for Transient Lodging Establishments to assist operators in complying with their obligations related to the Lodging Tax.² That Guide contains a chart listing "revenues that transient lodging establishments commonly collect from their guests," and identifies the different types of revenues as either (1) rent that is subject to the Lodging Tax or (2) non-rent or non-revenue that is not subject to the Lodging Tax. Guide at 6. The chart contains an entry for "Internet Access Fee (not mandatory with room rental)" and identifies it as non-rent that is not subject to the Lodging Tax. Id. at 7. The Guide notes that "[a]s a rule of thumb, any charges that are mandatory in nature and collected in connection with rental of a sleeping room/space/unit, will be considered rental revenue by the Department and therefore subject to the combined transient lodging tax." Id. at 6. The Guide states that "[f]ailure to segregate taxable rental revenue from exempt rental revenue . . . could result in the entire amount being subject to the combined transient lodging tax. Transient lodging operators are cautioned, therefore, against recording various types of rent in single G/L accounts without making a distinction between taxable and exempt revenue entries." Id. at 8 n.1.

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B. The Allegations

The defendants are resort hotels in Las Vegas that charge overnight guests a mandatory per-night resort fee that includes various services such as Internet access, local phone calls, and access to the fitness center. ECF No. 1 at 3. According to the complaint, the primary service of value included in the resort fee is the Internet access. Id. The defendants applied the Lodging Tax to the entire amount of the resort fee, even though the ITFA precludes state and local taxation of Internet access. Id. The plaintiffs were overnight guests at the resorts who were charged the Lodging Tax on the entire resort fee. Id. at 5-11.

The plaintiffs allege that the defendants previously did not bundle Internet access into a resort fee and did not apply the Lodging Tax to unbundled Internet access fees before they began imposing the mandatory resort fee in March 2013. Id. at 4, 22, 25. According to the complaint, the defendants do not apply the Lodging Tax to add-on Internet services, such as guests who pay additional Internet access fees for more devices or faster service. Id. at 40. The plaintiffs allege the defendants bundle Internet access into the mandatory resort fee so they can apply the Lodging Tax to the entire amount because the defendants receive two percent of the Lodging Tax funds they collect. Id. at 4.

Based on these allegations, the plaintiffs bring a class action complaint and assert claims for (1) violation of ITFA, (2) violation of Clark County Code § 4.08.005 for failing to refund over-collection of the Lodging Tax, (3) violation of the Nevada Deceptive Trade Practices Act, (4) breach of the covenant of good faith and fair dealing, (5) money had and received, (6) conversion, (7) unjust enrichment, and (8) declaratory judgment. The plaintiffs seek injunctive relief, declaratory relief, and damages.

II. ANALYSIS

A. TIA

The TIA provides that a federal district court "shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State." 28 U.S.C. § 1341. The statute "was designedexpressly to restrict the jurisdiction of the district courts of the United States over suits relating to the collection of State taxes." Hibbs v. Winn, 542 U.S. 88, 104 (2004) (quotation omitted). Consequently, if the TIA applies, I must dismiss for lack of subject matter jurisdiction. May Trucking Co. v. Oregon Dep't of Transp., 388 F.3d 1261, 1275 (9th Cir. 2004).

1. The Lodging Tax is a Tax under the TIA

"Federal law determines whether an assessment qualifies as a 'tax' for purposes of the TIA." Wright v. Riveland, 219 F.3d 905, 911 (9th Cir. 2000). To determine whether an assessment is a tax, I consider: "(1) the entity that imposes the assessment; (2) the parties upon whom the assessment is imposed; and (3) whether the assessment is expended for general public purposes, or used for the regulation or benefit of the parties upon whom the assessment is imposed." Bidart Bros. v. Cal. Apple Comm'n, 73 F.3d 925, 931 (9th Cir. 1996). As to the first factor, an assessment imposed by a legislature "is more likely to be a tax than an assessment imposed by an administrative agency," but the fact that it is imposed by "a non-legislative body is not dispositive in determining that it is not a tax." Id. As to the second factor, an assessment "imposed upon a broad class of parties is more likely to be a tax than an assessment imposed upon a narrow class," but "an assessment upon a narrow class of parties can still be characterized as a tax under the TIA." Id. Finally, assessments that are "general revenues and paid into the state's general fund are taxes," whereas an assessment "placed in a special fund and used only for special purposes is less likely to be a tax." Id. at 932. "However, even...