A Washington state consumer is suing Expedia and its subsidiaries for operating what attorneys say amounts to “highway robbery” according to consumer-rights law firm Hagens Berman.
The sneaky scheme detailed in the lawsuit filed Jan. 11, 2019 in U.S. District Court for the Western District of Washington centers on what Reservations.com calls "Tax Recovery Charges and Fees,” that actually have nothing to do with taxes, according to the filing. According to the lawsuit, these additional fees are tacked on by Expedia, who pockets the excess charge.
Consumers are told the “tax recovery charges and fees” are “monies that the hotels must pay to the government.” However, the “taxes and fees” are not actual taxes and exceed the real amount of taxes and fees owed on the hotel room.
“Simply put, this kind of fleecing is illegal,” said Steve Berman, managing partner of Hagens Berman representing consumers in the class action. “Consumers are being told that these excessive fees are related somehow to taxes, but when we ran the numbers, Expedia’s math was full of holes. These amounts are higher than local hotel taxes, and Expedia is profiting from its falsehoods.”
Attorneys say Expedia and its subsidiaries have actually escalated their fraud since they filed the first lawsuit about the “tax” overcharges in December: ”Defendants have continued their unlawful scheme, even after the filing of a related case challenging this practice. For example, if one got online today and booked a room for the Grand Hyatt in Seattle for January 14-15, the following charges are listed…” The suit shows a screenshot of online “Tax Recovery Charges & Fees” listed as $140.09. But as the complaint shows, under local hotel taxes, the correct “Tax Recovery Charges & Fees” should have been a total of $72.28, meaning this particular booking would have defrauded a consumer by $67.81.
“These are brazen lies,” Berman said. “And the fact that defendants in this case have only increased their underhanded scheme since we filed our original case is shameful.”
The lawsuit goes on to list other examples: 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 states 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, Defendants have collected over $95 million dollars in unlawful “tax” charges.
“We consider this attempting to get away with highway robbery to the tune of potentially $95 million,” Berman added.
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.
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.
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.