Justices to review S.A.’S objection to court costs
City appealing $2.2M award in case on hotel room taxes
The city of San Antonio’s bid to upend $2.2 million in court costs awarded to online travel booking companies — which prevailed in a lengthy legal battle over unpaid hotel occupancy taxes — got a boost with the U.S. Supreme Court agreeing to review the dispute.
The court granted the city’s petition for certiorari Friday, almost eight months after a threejudge panel of the 5th U.S. Circuit Court of Appeals affirmed a lower court ruling directing the city to pay court costs.
“We were disappointed with the 5th Circuit ruling that affirmed a $2 million cost award against the city,” City Attorney Andy Segovia said in a statement Monday. “(We) are looking forward to making our case to the
United States Supreme Court.”
San Antonio and 172 other Texas cities had filed a class-action lawsuit against 11 online travel companies in 2006. The companies — including Hotels.com, Hotwire Inc., Expedia Inc., Orbitz LLC and Priceline.com — were accused of underpaying hotel occupancy taxes, costing the cities millions of dollars in revenue.
The lawsuit resulted in a $20.5 million jury verdict for the cities in 2009. A final judgment was entered in 2016, with the amount owed swelling to $84.1 million because of added penalties and accumulated interest from the day the lawsuit was filed.
The federal appeals court, however, reversed the lower court ruling, and judgment was rendered in favor of the compa
nies in 2017.
The companies then sought to have San Antonio pay almost $2.4 million in various costs associated with the case. About $2 million related to the cost of bonds the companies posted so they could appeal the jury verdict.
The city opposed the companies’ request, arguing in a 2018 court filing that it would be “grossly unfair to foist these costs on San Antonio taxpayers.”
Chief U.S. District Judge Orlando L. Garcia in San Antonio subsequently awarded the companies about $2.2 million in costs, or roughly 95 percent of what they asked for.
The city appealed, but the appeals court ruled in May that the lower court “correctly recognized that it lacked discretion to deny
or reduce the appeal bond costs.”
The city asked the entire 5th Circuit to reconsider its ruling, but the court denied the request by a 10-6 vote.
On Sept. 10, the city requested the Supreme Court take up the dispute.
In its petition, the city said the 5th Circuit’s ruling conflicts with decisions in other federal appeals courts on the question of whether district courts have the ability to reduce or deny a cost award after a successful appeal.
The 5th Circuit “rejected the ‘contrary’ position applied by every other circuit to have confronted the question,” the petition stated. “In those circuits, unlike the 5th Circuit, district courts have ‘broad discretion to deny costs to a successful’” party.
“The 5th Circuit’s outlier position is wrong, and it now stands alone on the
wrong side of a lopsided split,” the city said. “The circuit conflict is open and entrenched, and it should be resolved by” the Supreme Court.
The petition added that Garcia found a “persuasive” argument for reducing or denying the court costs but couldn’t because of existing precedent established by the 5th Circuit in 1991.
In their Dec. 2 reply, the online travel companies argued that the city “overstates any circuit split.” Even if there is a split, the companies said, “it is a stale one that has existed for approximately 30 years without noticeable adverse consequences.”
The companies also said San Antonio taxpayers will not be on the hook if the city loses the fight.
“And while the city laments the alleged plight of local taxpayers, it neglects to inform the court that it
will not be required to pay the appellate costs awarded because the city’s contingency fee attorneys
agreed to pay those costs as part of the agreement by which they were hired to handle the case,” the com
panies said.
Calls to attorneys for the companies were not returned.