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Case 25CH1:11-cv-2211 Document 279 Filed 07/12/2021 Page 1 of 11

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IN THE CHANCERY COURT OF HINDS COUNTY, MISSIJ;;IPP~UL
FIRST JUDICIAL DISTRICT
12 2021 @
THE STATE OF MISSISSIPPI ex rel.
ATTORNEY GENERAL LYNN FITCH PLAIN FF

vs. CAUSE NO. G-2011-02211 0/3

PRICELINE.COM, INC., et al. DEFENDANTS

FINAL JUDGMENT

THIS MATTER is before the Court on the plaintiffs, the State of Mississippi,

(hereinafter the "State" or "Plaintiff') Motion for Summary Judgment on the Issue of

Damages Through June 30, 2019, against the defendants. The defendants consist of

several on line travel companies and for this order are referred to as "OTCs". This Court

has reviewed all relevant filings, all relevant case law, and has held a hearing on the

matter with arguments from counsel for State and the OTCs. Being fully advised in the

premises, this Court finds and orders as follows:

Legal History

The State initiated this lawsuit almost ten years ago, on December 29, 2011, and

Defendants began to receive a summons and complaint as early as January 12, 2012.

Defendants moved to dismiss this lawsuit according to Miss. R. Civ. P. 12(b)(6) on

March 23, 2012. This Court denied that motion on September 20, 2012, but granted

Defendants' request for a more definite statement, which was provided on January 1,

2013. Afterward, the parties began discovery. On April 9, 2013, this Court entered the

parties' agreed-upon Stipulated Discovery Sharing Agreement (the ''DSA"). The DSA

allowed the State to use documents, depositions, and other discovery materials from
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similar lawsuits around the country. The DSA intended to increase efficiency, streamline

the lawsuit and prevent duplicative and burdensome discovery. On July 24, 2014,

Defendants entered into a revised-discovery-sharing agreement ("Revised DSA" or

"DSA") with Plaintiffs in seven lawsuits, including this one, all of whom were or are

represented by the State's outside counsel. According to the Revised DSA, in addition

to using the documents and testimony from the DSA, the State was granted the ability

to depose the corporate representative of each of the defendants about claims filed by

the plaintiffs in those lawsuits, including the claims brought here. Those depositions

occurred in the fall of 2014. The Revised DSA also effectuated the withdrawal of the

State's prior discovery requests and Defendants' objections and responses. The State

and the defendants adopted the discovery requests, objections, and responses from a

similar lawsuit pending in the Northern District of Illinois. The parties continued to meet

and confer about the State's objections and responses to Defendants' discovery

requests that were not affected by the Revised DSA. The defendants proffered a

proposed scheduling order with a trial date in September 2014. The State objected to a

September 2014 trial date as being "too far out for this trial." The State failed to respond

with either a revised scheduling order or a proposed trial date at that time. In March

2014, the defendants again raised the issue of a scheduling order. As a result, there

was no movement in this lawsuit for almost four years. The State served supplemental

responses to all of Defendants' discovery requests on February 23, 2015.

On August 30, 2018, the defendants, according to the Mississippi Rule of Civil

Procedure 41 (b), moved for this Court to dismiss with prejudice the plaintiff's claims due

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to the plaintiffs failure to prosecute. This Court denied that motion on December 12,

2018.

On July 2, 2019, this Court entered an Order (MEG #148) denying the OTCs'

Motion for Partial Summary Judgment and Granting the Plaintiffs Motion for Partial

Summary Judgment. This Court's Order included a finding of liability against the OTCs

and provided: "the court finds that the State is entitled to partial summary judgment as a

matter of law on the issue of liability, with the amount of damages to be later resolved at

trial." The OTCs moved for this Court to alter or amend the Order Granting Partial

Summary Judgment on July 12, 2019. This Court granted the defendant's Motion to

Alter or Amend in its Amended Order and Additional Orders of the Court filed October 1,

2019 (MEG #171).

The damages, in this case, are the amounts of unpaid and underpaid taxes. To

calculate those amounts, the State retained an economist to review the transaction data

from the OTCs in detail and, consequently, to determine the amount of unpaid taxes by

applying the relevant tax rate to the total amount collected by the OTCs in each

transaction. Early in discovery, Defendants agreed to produce the relevant transaction

data for the transactions in Mississippi. The State received the transaction data in

August 2014. At that time, the OTCs produced transaction data for transactions through

March 31, 2014. Following the entry of this Court's Order on liability, the State

requested that the OTCs supplement their discovery responses with transaction data

from April 2014 through that present time for calculation of revised damages. On July

19th, the OTCs refused, claiming the demand was premature and "the defendants will

not be providing the transaction data today as you requested." At that point, no appeal

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had been filed and there was no stay of proceedings. The State filed its Motion to

Compel Updated Transaction Data on July 23, 2019. Defendants entered a Motion to

Stay on July 30, 2019. This Court granted Defendant's Motion to Amend Judgment,

granted the State's Motion to Compel, and denied Defendant's Motion to Stay with the

issuance of its Amended Order and Additional Orders of the Court filed October 1, 2019

(MEC #171).

Plaintiff and Defendants entered into a Stipulation as to Tax Amounts (MEC #

198) (the "Stipulation") on January 24, 2020. The parties previously stipulated on

October 19, 2018, that the State's claims under the Sales Tax and Local Hotel Taxes for

non-breakage transactions were limited to the recovery of those taxes only on the

OTCs' markup and fees. The State also sought recovery under the Sales Tax and Local

Hotel Taxes for breakage transactions based upon the net rate collected by the OTCs.

In response to the parties' previously filed motions for summary judgment addressing

the liability issues in this case, on July 2, 2019, this Court entered an order granting

Plaintiff's Motion for Partial Summary Judgment and denying Defendants' Cross Motion.

On October 1, 2019, this Court amended its July 2, 2019 Order Granting Partial

Summary Judgment (MEC #148) by entering an Amended Order and Additional Orders

of the Court (MEC #171) in response to Defendants' Motion to Alter or Amend. In the

Stipulation, Defendants stated their intent to appeal this Court's Order and Amended

Order once a final appealable judgment was entered. A final appealable judgment

cannot be entered until all remaining issues of damages are addressed by this Court.

Plaintiff provided to Defendants calculations of the taxes that would be owed through

June 30, 2019, if this Court's Order and Amended Order were affirmed on appeal. The

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Parties agreed the most efficient manner of proceeding was to compromise on any

differences that might arise from competing calculations of the taxes that would be

owed for the State's claims under the Sales Tax and Local Hotel Taxes for non-

breakage transactions, as described in the Stipulated Order if this Court's Order (MEC

#148) and Amended Order (MEC #171) are affirmed on appeal. The Parties stipulated,

agreed, and acknowledged that Defendants intended to appeal this Court's Order (MEC

#148) and Amended Order (MEC #171) and any resulting or related judgment or orders

and that nothing in the Stipulation constituted a waiver of any arguments Defendants

may have to contest liability or to contest any rulings concerning penalties, interest, or

other additions to the stipulated tax amount. Defendants expressly reserved all rights to

appeal and to contest any ruling that Defendants are subject to or liable for the taxes,

interest, or penalties at issue in this case. Defendants only agreed to the tax amounts

that would be owed only on non-breakage transactions in the event this Court's rulings

are affirmed and after entry of a final judgment on appeal. The parties stipulated that the

total tax amounts owed for non-breakage transactions through June 30, 2019, is

$10,162,129.32. The stipulation did not waive the State's right to seek interest and

penalties on that amount or any of the defendants' arguments in response to the State's

efforts to seek interest and penalties on this amount. The Parties did not stipulate or

agree as to any amounts alleged to be owed for breakage transactions or penalties,

interest, or other additions to the stipulated tax amount.

On March 5, 2020, (MEC #206) the State moved for partial summary judgment

against the defendants via its Sealed Motion for Partial Summary Judgment on the

Issue of Damages Through June 30, 2019, per this Court's July 2, 2019 Order Granting

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the State's Partial Summary Judgment on the Issue of Liability. On August 8, 2020, this

Court, in its Order of the Court on Plaintiffs Motion for Summary Judgment on the Issue

of Damages through June 30, 2019, denied in part and granted the remainder of the

State's motion for partial summary judgment on August 8, 2020.

Legal Analysis

The issues of intentional disregard and reasonable cause with respect to tax

liability in this case are a matter of first impression for this Court. Miss. Code Ann. § 27-

65-39 provides the elements to determine whether damages and penalties are applied.

This statute addresses any part of the deficient or delinquent tax is due to intentional

disregard. It also provides a way for a taxpayer to avoid penalties. It states in pertinent

part:

If any part of the deficient or delinquent tax is due to negligence

or failure to comply with the provisions of this chapter or authorized
rules and regulations promulgated under the provisions of this
chapter without intent to defraud, there may be added as damages
ten percent (10%) of the total amount of deficiency or delinquency in
the tax, or interest at the rate of one percent ( 1%) per month, except
as otherwise provided in this section, or both, from the date such tax
was due until paid, and the tax, damages, and interest shall become
payable upon notice and demand by the commissioner.
If any part of the deficient or delinquent tax is due to intentional
disregard of the provisions of this chapter or authorized rules and
regulations promulgated under the provisions of this chapter, or is
due to fraud with intent to evade the law, then there may be added
as damages fifty percent (50%) of the total amount of the deficiency
or delinquency of the tax, and in such case the whole amount of tax
unpaid, including the charges so added, shall become due and
payable upon notice and demand by the commissioner, and interest
of one percent (1 %) per month, except as otherwise provided in this
section, of the total amount of the deficiency or delinquency of the
tax may be added from the date such tax was due until paid.
Provided, however, no such damages shall be added if the taxpayer
establishes reasonable cause for his negligence or failure to comply.

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A taxpayer's purported disregard of instructions given through an

audit shall not be a basis for the imposition of the penalty provided in
this paragraph. (emphasis added).
Determination of "intentional disregard" by this Court presents as the primary

responsibility and, indeed, the only avenue to settling this matter. The OTCs knew about

Mississippi sales tax on hotel room transactions. Their argument of "subjective belief'

bears this out. Additionally, the testimony at trial established this awareness. To decide

whether or not taxes apply, taxes would have to be recognized and analyzed. The

OTCs collected MS sales tax on every merchant model booking. Each merchant model

booking is processed according to a negotiated contract through which the OTCs take

on the sole responsibility to collect all monies from the customer upfront as the

merchant of record. These contracts prevent any other company from collecting any

other taxes for the room booking. The OTCs displayed the tax on their website to

customers shopping for Mississippi hotel rooms as part of a line-item charge and

presented the tax in their terms and conditions with customers. They then charged and

collected taxes consistent with Mississippi's exact tax rates. This was performed

hundreds of thousands of times over approximately twenty (20) years.

The OTCs do not dispute that they are not remitting taxes to the MOOR. The

court finds the submission of Exhibit 1 (M EC # 273-1) as attached to the defendant's

Trial Brief - Defendant's Closing Brief of April 1, 2021 's (MEC #273) is not properly

before this Court due to evidentiary concerns, e.g., hearsay, authenticity, and

foundational in addition to the prejudice it would create for the State. The defendant's

corporate and legal representatives testified about their tax exposure and liability,

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including the fact that the OTCs investigated such exposure and liability through their

lawyers.

The State sought to establish "knowledge of the existence" of the tax and their

"intentional disregard". The OTCs' only path to penalty avoidance was to prove at trial

they had "reasonable" cause. The onus is on the business or the individual engaged in

the taxable activity to know and understand the law where they are conducting

business. The plain language of the legal standard only requires a showing that "any

part" of the OTCs' tax liability was done with the knowledge of tax law and with

"intentional disregard" of it.

The root word of "intentional" is intent. Intent often indicates some action was

taken. Again, the onus is on the business or the individual engaged in the taxable

activity to know and understand the law where they are conducting business. The OTCs

made a conscious decision to not contact the Mississippi Department of Revenue, the

state attorney general, or anyone else. In so doing, the defendants demonstrated

intentional disregard of the tax laws of the State of Mississippi. Ms. Bartlett testified

about how the OTCs could have asked the MOOR for a letter ruling or sought guidance

regarding any questions they had regarding their taxability. (T.T. at p. 144:11-22).

Deciding to not complete due diligence and inquire as to what taxes may apply is still a

decision, and a decision requires intent. Now, it could be argued that a tax information

request and the resultant response from the MOOR or the attorney general is not law -

and that would be correct. A simple attempt to inquire about what taxes might and might

not apply would negate the appearance of intentional disregard of the law, however. It

beggars belief that these OTCs, with all of their resources, could not take this simple

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step. Yet, that is exactly what happened. A simple letter, email, or telephone call could

have taken place thereby demonstrating an intent to comply and obey the law. The

OTCs intentionally disregarded the tax laws by simply not inquiring about possible

application of taxes which, in turn, signified the decision on their part to intentionally

disregard and not comply with the tax laws and intentionally disregard their resultant

duty to remit taxes collected to the state of Mississippi.

In July 2019 after this Court's order declaring the OTCs liable, the OTCs

continued their business practices of collecting, but not remitting the taxes to the State.

The OTCs could have remitted these tax monies under protest if there was a dispute of

taxability and they could have contacted the MOOR or attorney general. They made a

conscious decision not to.

Miss. Code Ann.§ 27-65-39 states that "no such damages shall be added if the

taxpayer establishes reasonable cause for his negligence or failure to comply. ... "

(emphasis added). The OTCs failed to establish that their actions were reasonable and

this Court finds that the OTCs exercised intentional disregard - there is no finding of

negligence or merely a failure to comply. Miss. Code Ann.§ 27-65-39 provides

reasonable cause as a defense to negligence or a failure to comply only. This holding is

not a finding of negligence or a failure to comply. As such, reasonable cause is not a

defense against intentional disregard. The OTCs argue they "subjectively believed" that

the taxes in question did not apply to them. Which, again, demonstrates they knew of

the tax. With the resources available to the OTCs, contacting the Mississippi

Department of Revenue for guidance would have been quite simple - an email or

telephone call. The statute says those taxes belong to the State as soon as they are

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received and are to sit in protected reserve. It is a well-worn maxim that "ignorance of

the law is no excuse".

Miss Code Ann.§ 27-65-39 provides for the assessment of a fifty percent penalty

if

any part of a delinquent tax amount is due to intentional disregard of the

provisions of the chapter or authorized rules and regulations. Miss. Code
Ann. § 27-65-39 provides: If any part of the deficient or delinquent tax is
due to intentional disregard of the provisions of this chapter or authorized
rules and regulations promulgated under the provisions of this
chapter ... then there may be added as damages fifty percent (50%) of the
total amount of the deficiency or delinquency of the tax, and in such case
the whole amount of tax unpaid, including the charges so added, shall
become due and payable upon notice and demand ...
The OTCs have made no showing that penalties and interest should be abated in

equity. This Court previously rejected this argument - "no equitable considerations

weigh in favor of abatement." The argument that the time in which the parties were

conducting discovery prejudiced the OTCs or somehow warrants an abatement of

penalties or interest is without merit. As previously mentioned, they could have taken

the steps to inquire with the MOOR or remit the taxes under protest.

Miss. Rule of Civ. Pro. 54(b) states that failure to certify

... any order or other form of decision, however designated which

adjudicates fewer than all of the claims or the rights and liabilities of
fewer than all the parties shall not terminate the action as to any of
the claims or parties and the order or other form of decision is
subject to revision at any time before the entry of judgment
adjudicating all the claims and the rights and liabilities of all the
parties.

It is the act of this Court to enter this judgment as the final determination of this action

and terminate this litigation. This Court certifies this order in this matter according to

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M.R.C.P. Rule 54(b) so that it may be finalized and appealable and so as to enable the

defendants to perfect an appeal as of right of this final judgment. This Court certifies this

judgment also for measuring the time period for appeal and the possible filing of various

motions.

The OTCs intentionally disregarded the law and collected tax monies due and did

not remit them to the state of Mississippi. Therefore, this Court, in exercising its

discretion, declines to abate the penalties and interest applicable here and applies the

fifty-percent penalty (50%) under Miss. Code Ann.§ 27-65-39 to all amounts due.

. //Jtv-
so ORDERED, ADJUDGED, and DECREED this the __f_aL_ day of July 2021.

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