Hotels.com v. Pine Bluff Advert. & Promotion Comm'n

688 S.W.3d 399

2024 Ark. 86

HOTELS.COM, L.P.; Hotwire, Inc.; Trip Network, Inc. (d/b/a CheapTickets.com); Expedia, Inc.; Internetwork Publishing Corp. (d/b/a Lodging.com); Orbitz, LLC; Priceline.com Incorporated (n/k/a Booking Holdings, Inc.); Priceline.com, LLC; Travelocity.com, L.P. (n/k/a TVL LP); Travelweb, LLC; and Site59.com, LLC, Appellants

v.PINE BLUFF ADVERTISING AND PROMOTION COMMISSION, Jefferson County, Arkansas, and All Others Similarly Situated; City of North Little Rock, Arkansas, and All Others Similarly Situated; and the State of Arkansas, Appellees

No. CV-23-416

Supreme Court of Arkansas.

Opinion Delivered: May 16, 2024

APPEAL FROM THE JEFFERSON COUNTY CIRCUIT COURT [NO. 35CV-09-946], HONORABLE ROBERT H. WYATT, JR., JUDGE

Quattlebaum, Grooms & Tull PLLC, by: Steven W. Quattlebaum, E.B. Chiles IV, R. Ryan Younger, Little Rock, and S. Katie Calvert, for appellants.

State of Arkansas ex rel. Larry Jegley, Special Dep. Prosecuting Att’y for the Sixth Judicial District, on behalf of William Jones, Sixth Judicial District Prosecuting Att’y.

Thrash Law Firm, P.A., Little Rock, by: Thomas P. Thrash, and William T, Crowder; Law Office of W. Jackson Williams, PLLC, Little Rock, by: W. Jackson Williams, for appellees Pine Bluff Advertising and Promotion Commission; Jefferson County, Arkansas; City of North Little Rock, Arkansas; and all others similarly situated.

Linda Burgess, Arkansas Municipal League; Colin R. Jorgensen, Association of Arkansas Counties, for the Arkansas Municipal League and the Association of Arkansas Counties as amici curiae on behalf of appellees Pine Bluff Advertising and Promotion Commission; Jefferson County, Arkansas; City of North Little Rock, Arkansas; and all others similarly situated.

Wright, Lindsey & Jennings LLP, Little Rock, by: Michael A. Thompson and T.J. Lawhon for Arkansas State Chamber of Commerce as amicus curiae.

JOHN DAN KEMP, Chief Justice

₁Appellants, a group of online travel companies ("OTCs"), appeal a series of Jefferson County Circuit Court orders finding that several Arkansas tax statutes applied to the OTCs and that the OTCs were liable for unpaid taxes under the statutes. The circuit court ordered them to pay previously unpaid taxes, plus penalties, interest, and attorneys’ fees and costs. For reversal, the OTCs argue that the circuit court erred by (1) imposing the state gross receipts tax, local gross receipts tax, state tourism tax, and local tourism tax (collectively "hotel taxes") prior to the enactmeht of Act 822 of 2019; (2) deciding claims for which the Department of Finance ₂and Administration ("DF&A") had primary jurisdiction and allowing a prosecuting attorney to sue for taxes; and (3) awarding penalties. We reverse.

I. Facts

In September 2009, appellees Pine Bluff Advertising and Promotion Commission and Jefferson County, Arkansas, on behalf of themselves and others similarly situated, filed this declaratory-judgment action against the OTCs. Those appellees sought a declaration that the OTCs were liable for the local gross receipts tax and local tourism tax. In April 2011, the City of North Little Rock intervened in the case on behalf of itself and other similarly situated Arkansas cities and alleged a similar declaratory-judgment claim. The circuit court granted class certification in February 2013,¹ and this court affirmed. Hotels.com, L.P. v. Pine Bluff Advert. & Promotion Comm’n, 2013 Ark. 392, 430 S.W.3d 56.

Following discovery, Class A and Class B appellees (collectively, "class appellees") moved for partial summary judgment on liability, and the OTCs filed a cross-motion for summary judgment. In May 2018, the circuit court denied the OTCs’ motion and granted the class appellees’ motion. It found that "[t]he OTCs [were] liable for the taxes established in Ark. Code Ann. § 26-75-602(c)(1) and Ark. Code Ann. § 26-52-301(3)(A)(i) on the full gross ₃receipts they receive from customers[.]" It also allowed the class appellees thirty days "to petition for additional relief permissible under the law relating to past taxes owed, supplemental relief or otherwise, including but not limited to amending the Complaint." The OTCs filed a petition for writ of prohibition or certiorari in this court, challenging the circuit court’s authority to proceed on damages. We denied that petition. This court also dismissed the OTCs’ appeal from the May 2018 order for lack of a final order. Hotels.com, L.P. v. Pine Bluff Advert. & Promotion Comm’n, 2019 Ark. 384, 2019 WL 6869541.

In February 2020, the class appellees filed an amended and supplemental complaint requesting a judgment against the OTCs "for all unpaid taxes from 1995 to the present, plus penalties and interest" in an amount to be calculated from the OTCs’ transaction data. Two months later, more than 150 advertising and promotion commissions, cities, and counties sought to intervene. The circuit court denied that motion but found that the class appellees could seek damages on their behalf. The class appellees filed a second amended and supplemental complaint and an amended petition for supplemental relief. The OTCs moved to strike and dismiss that complaint and the amended petition and moved to decertify the class for purposes of seeking damages on a class-wide basis. The circuit court denied the OTCs’ motions, and this court dismissed the OTCs’ appeal of those rulings for lack of a final order. Hotels.com, L.P. v. Pine Bluff Adver. & Promotion Comm’n, 2021 Ark. 196, 632 S.W.3d 742.

Also in February 2020, the State of Arkansas, represented by Larry Jegley in his capacity as the duly elected Sixth Judicial District Prosecuting Attorney, was granted permission to intervene in the case. The State sought a declaration that the state gross receipts tax applied to the OTCs. The State and the OTCs filed cross-motions for summary judgment on liability, and the circuit court granted the State’s motion and denied the OTCs’ motion. In March 2021, the ₄State filed a petition for supplemental relief in which it sought damages and alleged that the state tourism tax also applied to the OTCs before the governing statutes were amended in 2019. After the State and the OTCs filed cross-motions for summary judgment on state-tourism-tax liability, the circuit court entered an order in April 2022 granting the State’s motion and denying the OTCs’ motion.

Following mediation, the parties stipulated to the amount of taxes, interest, and penalties that would be owed by each OTC to each category of appellee. The stipula- tion included language that the OTCs "contest their liability under the Orders and [appellees’] entitlement to any and all of the above categories but, pursuant to this Stipulation, [the OTCs] will not contest the mathematical calculation of the amounts presented herein." In September 2022, appellees moved for summary judgment on damages, seeking more than twenty-two years’ worth of unpaid taxes, interest, penalties, and attorneys’ fees. The QTCs responded, maintaining that the circuit court erred in its liability finding, and objected to penalties, interest, and attorneys’ fees. After a hearing, the circuit court entered an order in February 2023, awarding appellees $34,161,155 in damages and penalties, plus $11,499,292 in attorneys’ fees and costs to be paid from the damages recovered from the OTCs. The OTCs timely filed their notice of appeal, and this appeal followed.

II. Imposition of Pre-2019 Hotel Taxes on the OTCs

For their first point on appeal, the OTCs argue that the circuit court should be reversed because it erred in finding that the pre-2019 versions of the hotel-tax statutes were applicable to them and their services. The OTCs contend that pursuant to the plain meaning of the statutes, they were not subject to the pre-2019 hotel taxes, nor did the taxes extend to the ₅services they provided. They further contend that to the extent that the statutes were ambiguous, the circuit court erred in failing to construe the statutes against taxation.

[1–3] Ordinarily, on appeal from a summary-judgment disposition, the evidence is viewed in the light most favorable to the party resisting the motion, and any doubts and inferences are resolved against the moving party. Am. Honda Motor, Co. v. Walther, 2020 Ark. 349, at 10–11, 610 S.W.3d 633, 639. However, when parties file cross-motions for summary judgment, as was done in this case on this point, they essentially agree that there are no material facts remaining, and summary judgment is an appropriate means of resolving the case. Id. at 11, 610 S.W.3d at 639. As to issues of law, our review is de novo. Id., 610 S.W.3d at 639.

A. The Hotel Taxes

The four hotel taxes at issue here are the state gross receipts tax, the local gross receipts tax, the state tourism tax, and the local tourism tax.² First, the state gross receipts tax is an excise tax of 3 percent levied on the gross proceeds or gross receipts derived from the sale of certain services, including the "[s]ervice of furnishing rooms, suites, condominiums, townhouses, rental houses, or other accommodations by hotels, apartment hotels, lodging houses, tourist camps, tourist courts, property management companies, or any other provider of accommodations to transient guests." Ark. Code Ann. § 26-52-301(3)(A)(i) (Supp. 2017). Second, the local gross receipts tax authorizes cities and counties to levy taxes on goods and services subject to the state gross receipts tax pursuant to Arkansas Code Annotated section 26-74-212 (counties) (Repl. ₆2008) and Arkansas Code Annotated section 26-75-207 (cities) (Supp. 2017). Third, the state tourism tax imposes an additional 2 percent tax on the gross proceeds or receipts derived from the sale of certain services, including "[t]he service of furnishing a … [g]uest room, suite, or other accommodation by a hotel, motel, lodging house, tourist camp, tourist court, property management company, or any provider of an accommodation to a transient guest." Ark. Code Ann. §...