Consumers who book and pay for hotel rooms via Reservations.com have been cheated by Bellevue-based Expedia through an inflated hotel “tax and fee” according to a new class-action lawsuit filed by Hagens Berman.
The lawsuit filed in the U.S. District Court for the Western District of Washington states consumers who book hotel rooms with Reservations.com pay a “Service Fee” room charge and “Tax Recovery Charges and Fees.” Consumers are told these “tax recovery charges and fees” are “monies that the hotels must pay to the government.” However, these “taxes and fees” are not actual taxes and exceed the real amount of taxes and fees actually owed on the hotel room.
For example, Reservations.com showed a room rate of $159 and “Tax Recovery Charges & Fees” of $50.88 for a reservation at the W Hotel in Seattle for Nov. 22-24, 2018. The real total state and local Seattle tax for a Seattle hotel room is 15.6 percent, plus $2 per night. Therefore, the total “Taxes & Fees” on this room should have been $27 – not $50.88 as listed. According to the lawsuit, Expedia then keeps the “tax” overcharge of $23.88.
Reservations.com represents that 4 million rooms have been booked through its website. If one takes the overcharge of $23.88 on the room at the W hotel and multiplies it by 4 million, Expedia has collected at a minimum more than $95 million dollars in unlawful “tax” charges.
According to the lawsuit, the excess amount is siphoned off by Expedia, the “back room” supplier of much of Reservations.com’s room inventory. Expedia pays the taxes that are actually owed and pockets the remaining “tax” overcharge on hotel rooms booked on the Reservations.com website, nationwide, as a secret profit in addition to the mark-up it collects on each hotel room rate.
“While Expedia takes an under-the-table cut through its deal with Reservations.com, consumers are left completely in the dark, unknowingly paying inflated costs disguised as ‘taxes and fees,’” said Steve Berman, managing partner and co-founder of Hagens Berman. “Any reasonable consumer would assume this to be a government-regulated hotel tax, and that’s exactly what Expedia has banked on and profited from, for years.”
The lawsuit states that testing based on information on the Reservations.com website reveals that the tax overcharge practice is widespread and violates the Racketeer Influenced and Corrupt Organizations (RICO) Act.
Expedia, Inc. and its subsidiaries, together with Reservations.com, “operated an association-in-fact enterprise engaged in interstate and foreign commerce, which was formed for the purpose of obtaining money from consumers for inflated ‘Taxes & Fees’ payments, through which they conducted a pattern of racketeering activity” in violation of RICO, the suit states.
“Consumers are often warned that the ‘devil is in the details’ of any online transaction, but here we have indeed uncovered what we believe to be an intentionally unlawful scheme to dupe consumers,” Berman added.
The lawsuit seeks to collect and return to consumers the secret overpayment of taxes made by unwitting consumers, nationwide. In addition to federal RICO allegations, the suit alleges violations of state laws against conversion and unjust enrichment.
“Expedia should have known that it was only a matter of time before this consumer scam was brought to light, and we intend to fight to reclaim consumers’ losses,” Berman said.
Hagens Berman Sobol Shapiro LLP is a consumer-rights class-action law firm with 10 offices across the country. The firm’s tenacious drive for plaintiffs’ rights has earned it numerous national accolades, awards and titles of “Most Feared Plaintiff’s Firm,” and MVPs and Trailblazers of class-action law. The firm also achieved a $184 million summary judgment against Expedia in a previous consumer scheme. More about the law firm and its successes can be found at www.hbsslaw.com. Follow the firm for updates and news at @ClassActionLaw.