Expedia to Appeal $184 Million Court Ruling

Expedia will appeal a Washington state King County Superior Court judge’s ruling on May 28 that Expedia, the world's leading online travel booking site, pay $184 million for allegedly breaching its contractual obligations to consumers. Plaintiffs in a class action said Expedia charged service fees under false pretenses in millions of hotel transactions.

“We believe that the court's decision is wrong on the law and wrong on the facts," Expedia said in a statement. "Because we believe that the court's decision is inconsistent with both the facts and the law, we will vigorously pursue our rights on appeal. On May 29, 2009, Expedia.com received an order from the King County Superior Court granting the plaintiffs' motion for partial summary judgment on the plaintiffs' breach of contract claim, without the benefit of a trial on the merits.

“The plaintiffs' breach of contract claim was based on Expedia.com's website Terms of Use that were in effect from February 2003 through December 2006," Expedia continued. "Expedia.com charged its customers a service fee for certain transactions during the period described above, fully disclosing those fees to each customer before a booking was completed.

“We are confident that we have fulfilled all applicable obligations to our customers," Expedia said. "Because we believe that the court's decision is inconsistent with both the facts and the law, we will vigorously pursue our rights on appeal.”

The judgment is reportedly the largest in Washington state history for a consumer class action and was filed in 2005 by Steve Berman, managing partner of the Seattle law firm Hagens Berman Sobol Shapiro (HBSS) on behalf of Expedia customers. The suit claimed that the travel giant paid taxes based on the wholesale price, but collected taxes from consumers based the higher retail price, pocketing the difference.

According to Andrew Volk, a partner at HBSS, the firm found that Expedia's scheme went further, involving the addition of a "service fee" to each transaction, purporting to cover the company's expenses incurred in servicing a reservation.  According to court documents, HBSS said Expedia bundled the service-fee charges with taxes into a single line item, failing to disclose the separate amounts of each to consumers.

“Because Expedia only remits taxes based on the wholesale price -- which it never disclosed to consumers -- the taxes appear higher to consumers than they actually are, and Expedia is able to mask the considerable size of its service fees,” Volk added. 

In its Terms of Use agreement, which governs every hotel transaction, Expedia promised that it would collect service fees only to “cover the costs” of servicing a given hotel reservation. The Court found that Expedia breached that promise by collecting service fees as pure profit, HBSS says. 

Superior Court Judge Monica Benton ruled that Expedia collected a total of $184,470,452 in service fees, which she is ordering the company return to consumers who purchased hotel or travel packages including a hotel stay from February 18, 2003 to December 11, 2006, according to HBSS.

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