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Woodell v. Expedia Inc.

United States District Court, W.D. Washington, Seattle

July 22, 2019

PATRICIA WOODELL, Plaintiff,
v.
EXPEDIA INC, et al., Defendants.

          ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS

          JAMES L. ROBART, UNITED STATES DISTRICT JUDGE.

         I. INTRODUCTION

         Before the court is Defendants Expedia, Inc. (“Expedia”), EAN.com, LP (“EAN”), Travelscape, LLC (“Travelscape”), and Hotels.com, L.P.'s (“Hotels.com”) (collectively, “Defendants”) motion to dismiss Plaintiff Patricia Woodell's putative class action complaint. (MTD (Dkt. # 15).) Ms. Woodell opposes the motion. (Resp. (Dkt. # 37).) The court has considered Defendants' motion, all submissions filed in support of and in opposition to the motion, the relevant portions of the record, and the applicable law. Being fully advised, [1] the court GRANTS in part and DENIES in part Defendants' motion and DISMISSES Ms. Woodell's complaint. The court also GRANTS Ms. Woodell leave to amend her complaint within 20 days of the date of this order.

         II. BACKGROUND

         In her putative class action complaint, Ms. Woodell alleges as follows: Consumers book hotels online “primarily for convenience and in order to shop for the best price.” (Compl. (Dkt. # 1) 1.) Reservations.com, which is not a party to this lawsuit, is an online booking company. (Id. ¶¶ 2, 21.) Reservations.com obtains its hotel room inventory from third-party suppliers such as Expedia and its subsidiaries, including EAN, Travelscape, and Hotels.com. (Id. ¶¶ 2, 22.) Hotels give Defendants the right to sell their room reservations at retail rates generally set by Defendants. (Id. ¶ 3.)

         When a consumer purchases a room reservation on Reservations.com's website or through its call center, the consumer pays a “Service Fee” of $14.99 per room to Reservations.com. (Id. ¶¶ 4, 29, 32.) In addition, the consumer pays an amount to Defendants, which is generally labelled as “Taxes & Fees.” (See Id. ¶¶ 4, 29) Ms. Woodell alleges that the “Taxes & Fees” “are represented to be monies ‘the hotels must pay to the government, '” but “even without this representation[, ] a reasonable consumer would understand ‘Taxes & Fees' to be monies owed to the government.” (Id. ¶ 4, 33, 34.) When Reservations.com sells a room reservation from Defendants' inventory, the consumer's credit card is charged $14.99 by Reservations.com, and the balance-the room charge plus the “Taxes & Fees” charge-is charged by Defendants. (Id. ¶¶ 4, 35.) Ms. Woodell's complaint addresses solely the “Taxes & Fees” charges collected by Defendants. (Id. ¶ 5.)

         Ms. Woodell alleges that “[c]ontrary to Reservations.com's representations and/or the expectations of consumers, the ‘Taxes & Fees' charged by Defendants are not the actual taxes and fees remitted to governmental authorities but contain additional amounts surreptitiously added by Defendants (the ‘tax overcharge').” (Id. ¶ 6; see also Id. ¶ 39.) Ms. Woodell generally alleges that Defendants “populate[]” the room rates and “Taxes & Fees” fields on the Reservation.com website and “unlawfully collect and retain the ‘Taxes & Fees' overcharge.” (Id. ¶¶ 9, 10; see also Id. ¶ 23.) Ms. Woodell specifically alleges that “the room rates and ‘Taxes & Fees' charged on the Reservations.com website are pass-through line items established and collected by Expedia.” (Id. ¶ 36.) She further generally alleges that Defendants remit some of the “Taxes & Fees” charge to the hotels, or sometimes directly to the governmental taxing authorities, but they retain the tax overcharge. (Id. ¶¶ 10, 23.) More specifically, however, Ms. Woodell asserts that “Expedia . . . remits the applicable taxes and fees to either the hotels or, in some jurisdictions, to the government, ” and “Expedia pockets the tax overcharge as additional profit (above and beyond the ‘markup' it already makes on the room price).” (Id. ¶¶ 36, 39.)

         Ms. Woodell has not sued Resevations.com. (See generally id.) Indeed, she admits that Reservations.com is not involved in the collection of the “Taxes & Fees” charge at issue in this case or the remission process. (Id. ¶ 23.) However, Ms. Woodell contends that Defendants have “engaged and continue to engage in a scheme to unlawfully collect overcharges of taxes and fees through the use of online travel agents, including but not limited to, Reservations.com.” (Id. ¶ 40.) She also alleges “[o]n information and belief, Reservations.com has, at all relevant times hereto and continuing through the present, been a knowing and willing participant in this scheme with [Defendants].” (Id.)

         Concerning her specific experience, Ms. Woodell alleges that on September 12, 2016, she booked a hotel room in Boise, Idaho, on the Reservations.com website, and paid a total of $111.12 for the reservation. (Id. ¶¶ 46, 52.) Two charges-totaling $111.12-appeared on her credit card statement. (See Id. ¶¶ 49-50.) Ms. Woodell paid $14.99 for a “Service Fee” to Reservations.com, and $96.23, which included $81.41 for the room and $14.82 for “Taxes & Fees, ” to Expedia. (Id. ¶¶ 47, 49-50.) Ms. Woodell asserts that the total applicable taxes and fees that must be paid to the government for her hotel reservation totaled $6.51, and therefore she was overcharged by $8.31. (Id. ¶ 48; see also Id. ¶ 8 (“Expedia subjected [Ms. Woodell] to a tax overcharge in 2016.”).) She further alleges that because Reservations.com charges a $14.99 per room “Service Fee, ” the difference between the “Taxes & Fees” charged and actual taxes paid to governmental entities “cannot reasonably be understood to be for ‘services.'” (Id. ¶ 61.) Ms. Woodell alleges that a similar tax overcharge is applied to every reservation through Reservations.com that uses Expedia's room inventory, resulting in millions of dollars of overcharges annually throughout the United States. (Id. ¶¶ 53-63.)

         Ms. Woodell alleges that the “Taxes & Fees” portion of her bill is charged in a manner “[c]ontrary to Reservations.com's representations and/or the expectations of consumers.” (Id. ¶ 6; see also Id. ¶ 39.) However, Ms. Woodell does not allege that she noticed the “Taxes & Fees” charge at the time of booking, that the charge factored into her decision to book the hotel room at issue, that she was confused by the charge, how she interpreted the charge, or whether the charge would have made a difference in her decision to book the hotel room if she had noticed it and understood it differently at the time of booking. (See generally id.) As noted above, she alleges that consumers book hotels online “primarily for convenience and in order to shop for the best price” (id. ¶ 1), and she does not allege that any other considerations motivated her at the time she made her booking on September 12, 2016 (see generally id.)

         Ms. Woodell alleges that non-party Reservations.com has, “[a]t times, ” explained “Taxes & Fees” as follows:

The taxes are tax recovery charges we pay to our vendors. We retain our service fees and compensation in servicing your travel reservation. Amounts displayed in the Taxes and Fees line for prepaid hotel transactions include an estimated amount we expect the hotel to bill for applicable taxes, government fees, and other charges that the hotels must pay to the government. Please note that you may also incur other charges that we do not collect and are not included in the quotes price, such as hotel resort fees, hotel energy surcharges, parking fees, pet fees, and incidental charges. These amounts will be collected from you directly by the hotel unless otherwise indicated on the site.

(Id. ¶ 33 (italics in complaint).) Ms. Woodell does not claim that she saw this alleged misrepresentation or that it was on the Reservations.com website at the time of her booking. (See generally id.) She does not explain when or where Reservations.com made this alleged misrepresentation. (See generally id.)

         Ms. Woodell alleges that Reservations.com “hosts” its website and “does its own marketing of its services.” (Id. ¶ 18.) She does not allege any communication, meeting, agreement, or moment in time when Defendants and Reservations.com agreed to coordinate regarding representations about the “Taxes & Fees” charge that appears on the Reservations.com website. (See generally id.)

         Ms. Woodell brings a claim under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(C)-(D). (Compl. ¶¶ 74-110.) In doing so, she alleges that Defendants, along with Reservations.com and other entities, “associated with, and conducted or participated in the affairs of, a RICO enterprise (the ‘Tax Fraud Enterprise'), whose purpose was to deceive consumers into believing they were paying a legitimate ‘Taxes & Fees' charge.” (Id. ¶ 77.) She alleges that Defendants and 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 under 18 U.S.C. § 1961(4).” (Compl. 78.) Alternatively, she alleges that non-party Reservations.com “constitutes a single legal entity ‘enterprise' within the meaning of 18 U.S.C. § 1961(4), through which . . . Defendants conducted their pattern of racketeering activity in the [United States].” (Compl. ¶ 79.) She also alleges that Defendants committed at least two predicate acts of racketeering activity involving mail and wire fraud under 18 U.S.C. §§ 1341 (mail fraud) and 1343 (wire fraud). (Compl. ¶ 94-110.)

         In addition to her RICO claim, Ms. Woodell asserts a claim for violation of Washington's Consumer Protection Act (“CPA”), RCW ch. 19.86. (Compl. ¶¶ 132-40.) She also asserts equitable claims of conversion (id. ¶¶ 111-16), unjust enrichment (id. ¶¶ 117-24), and constructive trust (id. ¶ 125-31). Defendants move to dismiss each of Ms. Woodell's claims. (See generally MTD.) The court now considers Defendants' motion.

         III. ANALYSIS

         A. Standard of Review

         Federal Rule of Civil Procedure 12(b)(6) provides for dismissal for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). When considering a motion to dismiss under Rule 12(b)(6), the court construes the complaint in the light most favorable to the nonmoving party. Livid Holdings Ltd. v. Salomon Smith Barney, Inc., 416 F.3d 940, 946 (9th Cir. 2005). The court must accept all well-pleaded facts as true and draw all reasonable inferences in favor of the plaintiff. Wyler Summit P'ship v. Turner Broad. Sys., Inc., 135 F.3d 658, 661 (9th Cir. 1998). The court, however, is not required “to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).

         “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also Telesaurus VPC, LLC v. Power, 623 F.3d 998, 1003 (9th Cir. 2010). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 677-78. “A pleading that offers ‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action will not do.' . . . Nor does a complaint suffice if it tenders ‘naked assertion[s]' devoid of ‘further factual enhancement.'” Id. at 678 (quoting Twombly, 550 U.S. at 555, 557). General, conclusory allegations of wrong-doing that do not identify how each defendant purportedly engaged in the wrongful conduct and do not provide each defendant fair notice of the claims against them do not meet the Supreme Court's Iqbal/Twombly pleading standard. See Trice v. Damion, No. 216CV01348MMDNJK, 2017 WL 187149, at *2 (D. Nev. Jan. 17, 2017) (citing Iqbal, 556 U.S. at 678; Twombly, 550 U.S. at 555); see also Doop v. Woodford, No. 1:14CV01933 DLB PC, 2015 WL 2345314, at *2 (E.D. Cal. May 14, 2015) (“Plaintiff cannot simply group all Defendants together and allege, generally, that they violated his rights. Such statements do not meet the pleading requirements.”) (citing Iqbal, 556 U.S. at 678). Dismissal under Rule 12(b)(6) may also be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990).

         Claims of fraud are subject to the heightened pleading requirements of Federal Rule of Civil Procedure 9(b). See Fed. R. Civ. P. 9(b). Under Rule 9(b), “a party must state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). “Fraud can be averred by specifically alleging fraud, or by alleging facts that necessarily constitute fraud (even if the word ‘fraud' is not used).” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1105 (9th Cir. 2003). Rule 9(b) requires that an allegation of fraud be “specific enough to give defendants notice of the particular misconduct . . . so that they can defend against the charge and not just deny that they have done anything wrong.” Id. at 1106 (quoting Neubronner v. Milken, 6 F.3d 666, 672 (9th Cir. 1993)). In other words, an allegation of fraud “must be accompanied by ‘the who, what, when, where, and how' of the misconduct charged.'” Id. (citing Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997)). The plaintiff must identify “what is false or misleading about the statement, and why it is false.” Id. (quoting Decker v. GlenFed, Inc., 42 F.3d 1541, 1548 (9th Cir. 1994)).

         B. RICO

         Under RICO, a plaintiff must allege that the defendant participated in the conduct of an enterprise through a pattern of racketeering activity that proximately caused the plaintiff's harm. Eclectic Props. E., LLC v. Marcus & Millichap Co., 751 F.3d 990, 997 (9th Cir. 2014). Defendants argue that Ms. Woodell's RICO claim fails because she inadequately alleges the following elements: (1) any racketeering activity; (2) a pattern of such activity; (3) an enterprise; (4) that Defendants directed the conduct of an enterprise; and (5) proximate causation. The court will consider each of these elements in turn.

         1. Racketeering Activity

         Ms. Woodell bases her RICO claim on mail and wire fraud as the alleged underlying racketeering activity. (See Compl. ¶¶ 94-102); see also 18 U.S.C. §§ 1341 (mail fraud), 1343 (wire fraud). Because she bases her RICO claim on fraud, her allegations must comply with Federal Rule of Civil Procedure 9(b), which requires that circumstances constituting fraud be stated with particularity. Fed.R.Civ.P. 9(b); see Alan Neuman Prods, Inc. v. Albright, 862 F.3d 1388, 1392-93 (9th Cir. 1989) (concluding that a complaint failed to properly allege a RICO claim based on mail and wire fraud because the allegations were not sufficiently particular to satisfy Rule 9(b)); Bitton v. Gencor Nutrientes, Inc., 654 Fed.Appx. 358, 363 (9th Cir. 2016) (“Circumstances constituting fraud must be pleaded with particularity; that is also the case when alleged fraud forms the predicate acts of a RICO claim.”) (internal quotation marks and citations ...


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