Court Opinion

ID: 808160
Source: CourtListenerOpinion
Date Created: 2012-09-10 14:12:56+00
Date Added: 2024-06-11T18:00:29.222218
License: Public Domain

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                              File Name: 12a0316p.06

             UNITED STATES COURT OF APPEALS
                           FOR THE SIXTH CIRCUIT
                             _________________

 CITY OF COLUMBUS, OHIO; CITY OF DAYTON; X
                                                  -
                                                  -
 CITY OF FINDLAY; CITY OF NORTHWOOD;
 CITY OF ROSSFORD; CITY OF MAUMEE;                -
                                                  -
                                                     Nos. 10-4531/4545
 PERRYSBURG TOWNSHIP; SPRINGFIELD
                                                  ,
                                                   >
 TOWNSHIP; FRANKLIN COUNTY CONVENTION -
 TOWNSHIP; MONCLOVA TOWNSHIP; LAKE

                                                  -
                        Plaintiffs-Appellants, --
 FACILITIES AUTHORITY,

                                                  -
                                                  -
                                                  -
            v.
                                                  -
                                                  -
 HOTELS.COM, L.P.; EXPEDIA, INC.;
 INTERNETWORK PUBLISHING CORPORATION;             -
                                                  -
                                                  -
 ORBITZ, LLC; PRICELINE.COM, INC.;
                                                  -
 TRAVELOCITY.COM, LP; TRAVELWEB, LLC;
                                                  -
 TRIP NETWORK, INC.; HOTWIRE, INC.;
 LOWESTFARE.COM, INC.,                            -
                       Defendants-Appellees. -
                                                 N
                  Appeal from the United States District Court
                   for the Northern District of Ohio at Toledo.
               No. 3:05-CV-7443—David A. Katz, District Judge.
                              Argued: May 29, 2012
                     Decided and Filed: September 10, 2012
            Before: MARTIN, GILMAN, and WHITE, Circuit Judges.

                              _________________

                                   COUNSEL
ARGUED: John T. Murray, MURRAY & MURRAY, Sandusky, Ohio, for Appellants.
Michael R. Gladman, JONES DAY, Columbus, Ohio, for Appellees. ON BRIEF: John
T. Murray, MURRAY & MURRAY, Sandusky, Ohio, Michael P. Foley, RENDIGS,
FRY, KIELY & DENNIS, Cincinnati, Ohio, for Appellants. Michael R. Gladman, Grant
W. Garber, JONES DAY, Columbus, Ohio, James P. Karen, JONES DAY, Dallas,
Texas, Jeffrey A. Rossman, MCDERMOTT WILL & EMERY LLP, Chicago, Illinois,
Steven R. Smith, CONNELLY, JACKSON & COLLIER LLP, Toledo, Ohio, Brian S.
Stagner, Derek L. Montgomery, KELLY HART & HALLMAN LLP, Fort Worth, Texas,

                                        1
Nos. 10-4531/4545     City of Columbus, et al. v. Hotels.com, et al.                Page 2

Darrel J. Hieber, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP, Los Angeles,
California, Karen L. Valihura, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP,
Wilmington, Delaware, for Appellees.

                                  _________________

                                       OPINION
                                  _________________

       BOYCE F. MARTIN, JR., Circuit Judge. This case concerns alleged violations
of local occupancy-tax laws by various online travel companies. Plaintiffs—cities,
townships, and a county in the state of Ohio—sued various online travel companies,
asserting that the online travel companies violated local tax laws by failing to pay a
transient-occupancy tax on the difference between a contractually agreed-upon
“wholesale” room rate, charged by the hotels to the online travel companies, and a
higher “retail” rate charged by the online travel companies to the customers. The
localities seeking recovery—the cities of Columbus, Dayton, Findlay, Northwood,
Rossford, and Maumee; the townships of Perrysburg, Springfield, Monclova, and Lake;
and Franklin County—have each enacted a separate ordinance, regulation, or resolution
imposing guest occupancy taxes. The online travel companies filed a motion to dismiss.
The district court granted the motion in part and denied the motion in part, determining
that the online travel companies had no obligation to collect and remit guest taxes under
any of the various guest tax laws at issue, but that the localities could still recover for
any amounts the online travel companies collected as a tax but failed to remit to the
localities. After the partial dismissal, the only remaining claim concerned whether the
online travel companies collected money as a tax without remitting the collected money
to tax authorities. The district court granted the online travel companies’ motion for
summary judgment, finding that the cities had not produced sufficient evidence to create
a genuine issue of material fact as to whether the online travel companies collected taxes
that were not remitted to the cities. The localities now appeal: (1) the district court’s
ruling that the online travel companies had no obligation to collect and remit guest taxes
under the enacted laws; (2) the district court’s order granting summary judgment for the
online travel companies; and (3) the district court’s order denying a motion to certify
Nos. 10-4531/4545     City of Columbus, et al. v. Hotels.com, et al.              Page 3

questions to the Ohio Supreme Court. For the reasons set forth below, we AFFIRM the
judgment of the district court.

                                            I.

       Defendants Hotels.com, L.P., Expedia, Inc., Hotwire, Inc., Travelocity, L.P.,
Orbitz, LLC, and Priceline.com, Inc., as well as certain subsidiaries and corporate
siblings of these entities, are online travel companies. Although the online travel
companies have various business practices, the parties agree that the online travel
companies share the same basic business model. The online travel companies agree to
pay lodging establishments a contractually agreed-upon “wholesale” rate if the online
travel companies find customers to rent available rooms at the lodging establishments.
Customers who rent the rooms from the online travel company then pay the online travel
companies a higher “retail” rate to rent the rooms; the online travel companies pay the
original “wholesale” rates, plus any taxes applicable to the “wholesale” price, to the
lodging establishments. The localities allege that the online travel companies have
violated local tax laws by failing to pay the local occupancy tax on the revenue they
collect in the form of the difference between the “wholesale” room rate and the higher
“retail” rate charged by the online travel companies.

       Ohio allows municipalities and townships to levy excise taxes on “transactions
by which lodging by a hotel is or is to be furnished to transient guests.” Ohio Rev. Code
§ 5739.08. Each of the localities in this action enacted laws—ordinances, resolutions,
and regulations—imposing excise and occupancy taxes on hotel lodging and transient
accommodation. See Columbus, Ohio, City Codes §§ 371.01-371.99; Findlay, Ohio,
Cod. Ords., pt. 1, §§ 195.01-195.99; Rossford, Ohio, Cod. Ords., pt. 1, tit. 9, ch. 195;
Monclova Twp., Ohio, Monclova Twp. Lodging Tax Code of Regs.; Franklin Cnty.,
Ohio, Franklin Cnty. Convention Facilities Auth., Tax Reg.; Dayton, Ohio, §§ 36.130-
36.143; Northwood, Ohio Code of Ords., §§ 882.01-882.99; Maumee, Ohio, Cod. Ords.
§§ 195.01-195.06; Perrysburg Twp., Ohio, Res. No. 505.56; Springfield Twp. Ohio, Res.
No. 505.56; Lake Twp., Ohio, Trs. Res. No. 505.56.
Nos. 10-4531/4545     City of Columbus, et al. v. Hotels.com, et al.               Page 4

       Based on these laws, the localities seek to recover allegedly unpaid occupancy
taxes from the online travel companies. The district court divided the tax laws at issue
into three groups. The first category—the ordinances in the cities of Findlay, Columbus,
and Rossford, the regulation in the Township of Monclova, and the regulation in
Franklin County—places the tax collection burden on the “vendor.” These laws define
“vendor” as a person who owns or operates the hotel or transient accommodation “and
who furnishes the lodging.” The Monclova regulation also defines vendor to include
“the agents and employees of such person.” The second category—the ordinances
adopted in the cities of Dayton, Northwood, and Maumee—places the tax collection
burden on the “operator.” “Operator” is defined as a person who is the “proprietor of
the hotel whether in the capacity of owner, lessee, licensee, or any other capacity.”
Where an owner operates the hotel through a “managing agent of any type or character
. . . the managing agent shall be deemed an operator for the purposes of this division.”
The final category—the resolutions in the townships of Perrysburg, Springfield, and
Lake—places the tax collection burden on “hotels.” “Hotels” are defined as “every
establishment kept, used, maintained, advertised, or held out to the public to be a place
where sleeping accommodations are offered to guests.”

        This case began as two separate suits. The first, brought by the City of Findlay,
was filed in state court and was removed to the Northern District of Ohio. The second,
filed by the cities of Columbus and Dayton, was filed in the Southern District of Ohio.
In both cases, the online travel companies moved to dismiss pursuant to Federal Rule of
Civil Procedure 12(b)(6). The later-filed action was transferred to the district court
handling the first-filed action, and the district court granted each motion in part and
denied each motion in part. The district court ruled first on the claims brought by
Findlay and later extended that ruling to the suits involving Columbus and Dayton. The
two cases were consolidated, and the other localities joined the suit as plaintiffs. After
consolidation, the district court ruled that its determinations regarding Findlay,
Columbus, and Dayton applied with equal force to the ordinances from Northwood,
Rossford and Maumee, and to the resolutions enacted in the townships of Springfield,
Lake, and Perrysburg, and the regulations enacted in Monclova Township and Franklin
Nos. 10-4531/4545     City of Columbus, et al. v. Hotels.com, et al.                 Page 5

County.

        In granting the online travel companies’ motion to dismiss, the district court
determined that the online travel companies had no obligation under any of the
ordinances, regulations, or resolutions to collect and remit guest taxes. The district court
determined that the localities could still recover for any amounts the online travel
companies labeled as a tax and collected from customers, but did not remit to taxing
authorities. In so deciding, the district court determined that the laws created tax-
collection obligations only for “vendors,” “operators,” and “hotels,” and that the online
travel companies do not fit into any of these definitions.

        Both the localities and the online travel companies moved for summary judgment
on the issue of whether the online travel companies had collected money “denominat[ed]
as a sales and/or bed tax” that was not remitted to the localities. The localities also
sought to certify questions to the Ohio Supreme Court. The district court granted
summary judgment for the online travel companies and denied summary judgment for
the localities. The district court found that the localities had not produced sufficient
evidence to create a genuine issue of material fact as to whether the online travel
companies collected money denominated as a tax that was not remitted to the localities.
The district court also denied the localities’ motion to certify questions to the Ohio
Supreme Court. The localities now appeal: (1) the district court’s ruling that the online
travel companies had no obligation to collect and remit guest taxes under the tax laws;
(2) the court’s grant of summary judgment for the online travel companies; and (3) the
court’s denial of the motion to certify questions to the Ohio Supreme Court.

                                            II.

        A.      Motion to Dismiss

        This Court reviews grants of Rule 12(b)(6) motions de novo. Courie v. Alcoa
Wheel & Forged Prods., 577 F.3d 625, 629 (6th Cir. 2009). “To survive a motion to
dismiss, [plaintiffs] must allege ‘enough facts to state a claim to relief that is plausible
on its face.’” Traverse Bay Area Intermediate Sch. Dist. v. Mich. Dep’t of Educ.,
Nos. 10-4531/4545     City of Columbus, et al. v. Hotels.com, et al.                 Page 6

615 F.3d 622, 627 (6th Cir. 2010) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007)). All facts in the complaint must be accepted as true. Courie, 577 F.3d at
629 (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).

                1.      The Tax Laws Apply to “Vendors,” “Operators,” and “Hotels”

        The localities’ primary contention is that the district court wrongfully dismissed
the claim that the online travel companies were liable for failing to collect and remit
taxes imposed by the tax laws. The district court found that the claim could not go
forward because the laws’ tax obligations do not apply to the online travel companies.
The localities contend that the laws impose a tax on the online travel companies because
either the companies are “vendors,” “operators,” or “hotels” within the meaning of the
laws, or the online travel companies are otherwise subject to the laws. The district court
determined that the online travel companies had no obligation to collect taxes under the
tax laws.

        “To determine whether the [online travel companies] fall under the purview of
the ordinances, we begin by analyzing the statutory language.” Louisville/Jefferson
Cnty. Metro Gov’t v. Hotels.com, L.P., 590 F.3d 381, 384 (6th Cir. 2009). We apply
Ohio law because jurisdiction in this case is based on diversity of citizenship. Id. at 385.
“Essentially, we are obliged to decide the case as we believe the [Ohio] Supreme Court
would do.” Id. “When construing a statute, [Ohio courts] first examine its plain
language and apply the statute as written when the meaning is clear and unambiguous.”
AT&T Commc’ns of Ohio, Inc. v. Lynch, 132 Ohio St. 3d 92, 96, 969 N.E.2d 1166, 1171
(Ohio 2012). “When a statute is susceptible of more than one interpretation, courts seek
to interpret the statutory provision in a manner that most readily furthers the legislative
purpose as reflected in the wording used in the legislation.” State ex rel. Toledo Edison
Co. v. City of Clyde, 76 Ohio St. 3d 508, 513, 668 N.E.2d 498, 504 (Ohio 1996). Under
Ohio law, where courts find “statutes defining subjects of taxation to be ambiguous,
[they] resolve the ambiguity in favor of the taxpayer.” Zalud Oldsmobile, Inc. v.
Limbach, 68 Ohio St. 3d 516, 519, 628 N.E.2d 1382, 1385 (Ohio 1994); B.F. Goodrich
Co. v. Peck, 161 Ohio St. 202, 206, 118 N.E.2d 525, 528 (Ohio 1954) (“A statute which
Nos. 10-4531/4545     City of Columbus, et al. v. Hotels.com, et al.                Page 7

authorizes the levying of a tax will be construed strictly against the taxing authority.”
(internal quotation marks omitted)).

       Like the district court, we will separately analyze each of the three types of laws.
First, we assess those ordinances and regulations that impose an obligation to collect and
remit occupancy taxes only on “vendors,” meaning “owners or operators” of hotels who
“furnish[] lodging.” The district court determined that the online travel companies do
not meet this definition of “vendors,” and therefore are not covered by the ordinances
or regulations. The localities argue that the online travel companies are “vendors” when
they resell hotel rooms via the Internet. The ordinances and regulations define “vendor”
as “the person who is the owner or operator of the hotel who furnishes the lodging.” The
ordinances of Findlay, Columbus, Rossford, and the regulation of Franklin County
define “hotel” to mean “every establishment kept, used, maintained, advertised or held
out to the public to be a place where sleeping accommodations are offered for
consideration to guests.” Monclova’s regulation defines a “vendor” as a person who
“operates a hotel” or “agents and employees of [the vendor] who perform the functions
of the vendor on his behalf.” It is undisputed that the online travel companies in this
case do not, and are not alleged to, perform functions associated with owning or
operating a hotel (i.e., maintaining rooms, employing hotel staff, providing keys, or
performing other similar activities). The Complaint did not allege that the online travel
companies were owners or operators of hotels, but rather identified the online travel
companies as having contracts with hotels to sell rooms. Because the online travel
companies, unlike hotels, do not provide customers with lodging, we find that the district
court correctly concluded that the online travel companies are not “vendors” within the
meaning of the relevant ordinances and regulations.

       We turn next to the second category of laws. These ordinances impose a tax
collection obligation on “operators,” defined as “proprietors” or “managing agents.”
The district court held that these ordinances also do not apply to the online travel
companies because the online travel companies are neither proprietors nor managing
agents of hotels. Each of these ordinances defines an “operator” as the “proprietor” of
Nos. 10-4531/4545     City of Columbus, et al. v. Hotels.com, et al.               Page 8

the hotel, including individuals in the capacity of “the owner, lessee, [or] licensee.”
Where a “managing agent of any type or character” performs the function of the
operator, the “managing agent shall be deemed an operator for purposes” of the
ordinance. The localities do not allege that the online travel companies are hotel
proprietors—acting as owners, lessees, mortgagees, licensees, or otherwise—and it is
undisputed that the online travel companies do not operate, own, or maintain hotels. Nor
are the online travel companies “managing agents” of hotel proprietors because they are
not alleged to “perform the functions” of an operator or proprietor. According to the
terms of the ordinances and the function of the online travel companies, the online travel
companies are not “operators” within the meaning of the applicable ordinances and are
thus not subject to the Dayton, Maumee, and Northwood ordinances.

       Finally, we turn to the third category of tax laws, resolutions adopted by
townships. The resolutions impose a tax-collection obligation on “hotels.” The district
court reasoned that these resolutions do not apply to the online travel companies because
the online travel companies are not “hotels” as defined by the resolutions; the localities
argue that the online travel companies are “hotels” within the meaning of the resolutions.
The resolutions define “hotels” to include “every establishment . . . advertised or held
out to the public to be a place where sleeping accommodations are offered to guests, in
which five or more rooms are used for the accommodation of such guests.” The plain
meaning of these words imposes a tax-collection obligation on the “establishment[s],”
not the online travel companies with whom the establishments contract. The hotels and
motels themselves are, under the resolutions’ plain meaning, “establishments . . . in
which . . . rooms are used for the accommodation of . . . guests.” Though the online
travel companies advertise places that offer sleeping accommodations, the online travel
companies do not advertise themselves to be places where sleeping accommodations are
offered. Based on the plain meaning of the resolutions, the online travel companies
cannot plausibly be understood to be hotels.

       We conclude that the district court correctly dismissed the localities’ claim that
the online travel companies violated each of the localities’ tax laws to the extent the
Nos. 10-4531/4545     City of Columbus, et al. v. Hotels.com, et al.                 Page 9

claim was based on the theory that the online travel companies have a collection
obligation under the adopted tax ordinances, regulations, or resolutions.

                2.      Hotels’ Delegated Collection Duty

        The localities argue that even if the online travel companies do not have a
collection obligation under the laws, the district court erred in dismissing their claim for
liability under the laws because the hotels contractually delegated their duty to collect
taxes to the online travel companies. Though the localities raise this delegation claim
as part of their appeal from the district court’s decision regarding the online travel
companies’ motion to dismiss, the localities first raised this delegation claim before the
district court in response to the online travel companies’ motion for summary judgment.
Because of the late-arising nature of the claim, the district court declined to address the
argument. On appeal, we will not consider claims first raised in response to a summary
judgment motion. See, e.g., Tucker v. Needletrades, Indust. & Textile Emps., 407 F.3d
784, 787-89 (6th Cir. 2005) (declining to consider colorable promissory estoppel claim
raised for the first time in briefs seeking summary judgment). This litigation was almost
five years old by the time the district court ruled on the summary judgment motion, and
the localities had ample opportunity prior to this ruling to raise a claim of contractual
liability but did not do so before the online travel companies’ motion for summary
judgment. The district court did not err in declining to address this claim because it was
raised for the first time in response to the online travel companies’ motion for summary
judgment.

                3.      Laws Tax “Transactions” by Which Lodging is Furnished, or
                        “Rents Paid”

        The localities argue that, even assuming the online travel companies are not
vendors, operators, or hotels within the meaning of the localities’ laws, the online travel
companies nonetheless have tax-collection obligations under the laws’ obligation to pay
taxes either on “transactions” that result in the furnishing of transient lodging, or “rents
paid” by customers for a room. Ohio Revised Code § 5739.08 enables localities to tax
transient guests and specifically allows “a municipal corporation” to levy a tax on
Nos. 10-4531/4545      City of Columbus, et al. v. Hotels.com, et al.               Page 10

“transactions by which lodging by a hotel is or is to be furnished to transient guests.”
Many of the local ordinances, regulations, and resolutions have nearly identical
language. The localities argue that the transactions between the online travel companies
and their customers are “transactions by which lodging by a hotel is or is to be furnished
to transient guests” within the meaning of Ohio Revised Code section 5739.08 and the
tax laws it enables. The localities also argue that the online travel companies are subject
to taxation under local ordinances that tax the “rent paid” by a customer for a room. For
example, Dayton’s ordinance taxes “all rents paid or to be paid by transient guests for
lodging.” The tax ordinances from Northwood, Maumee, and the regulation from
Monclova, include substantively similar “rent paid” language. The localities argue that
these ordinances and the regulation levy a tax on the retail rate, and not the wholesale
rate, because the statutes are designed to cover the amount “paid by [the] transient
guests.”

        We agree with the online travel companies’ assertion that the ordinances,
regulations, and resolutions before us levy a tax on the amount charged by the hotel or
otherwise paid for lodging or occupancy, and not on charges beyond this amount. For
example, Franklin County’s regulation defines “transaction” as “the charge by a hotel
for each occupancy by [a] transient guest.” Franklin Cnty. Convetion Auth., Tax Reg.
§ 1(d) (emphasis added). Likewise, Dayton imposes its occupancy tax on “all rents paid
. . . by transient guests for lodging.” Dayton Ord., §§ 36.131(A), 36.130 (emphasis
added), (defining “rent” as “consideration received for occupancy valued in money”).
Maumee, Northwood, Rossford, Findlay, Monclova Township, and Columbus have
provisions identical or substantively similar to the Dayton ordinance. See, e.g., Maumee
Ord. §§ 195.01(e), 195.02(b) (imposing tax on “all rents paid or to be paid by the
transient guest for the lodging” and defining “rent” as “consideration received for
occupancy”); Northwood Ord. § 882.02(b) (imposing tax on the “amount paid or to be
paid by the transient guest for the lodging”); Rossford Ord. §§ 195.02(b) (same); Findlay
Ord. § 195.02 (same); Monclova Ord. §§ 2(H), 3(A) (imposing tax on “transaction[s]
. . . by which lodging is or is to be furnished by a vendor to a transient guest . . . at the
rate of [three percent] of the rent for each such transaction” where rent is defined as “the
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aggregate in money . . . paid . . . for hotel lodging”); Columbus Ord. §§ 371.02(a),
371.03 (imposing tax on “each taxable lodging”). The tax ordinances before us are
specifically concerned with the amount paid to the hotel for lodging, and not the amount
paid for service or booking fees or for the cost of using the services of the online travel
company. The language of the ordinances, regulations, and resolutions is aimed
expressly at taxing the cost of furnishing hotel lodging, and does not purport to tax the
additional fees charged by the online travel companies.

               4.      Other Arguments by the Localities

       The localities argue that it is “nonsensical” to interpret the occupancy-tax laws
such that they do not apply to the online travel organizations. The localities rely on the
reasoning explained by the Southern District of Illinois in City of Fairview Heights v.
Orbitz, Inc., No. 05-CV-840-DRH, 2006 WL 6319817, at *5 (S.D. Ill., July 12, 2006).
In City of Fairview Heights, the district court noted that interpreting a similar local
Illinois tax ordinance to tax only the wholesale value, and not the retail value, of hotel
rooms purchased through online travel companies “would open up a potentially gaping
loophole: a hotel operator could simply incorporate a shell entity[,] . . . rent the hotel
rooms to that entity for a nominal amount, and then re-rent the rooms to consumers, who
would be taxed only on the nominal sum paid by the side entity to the operator.” Id. We
considered, and rejected, this reasoning when assessing similar tax ordinances enacted
in Louisville, Kentucky and Jefferson County, Kentucky. See Louisville/Jefferson Cnty.
Metro., 590 F.3d at 388-89. As we noted, the decision to assign liability to online travel
companies is one that remains in the hands of the legislature and not this Court. Id. at
389 Moreover, “unlike in the hypotheticals [discussed in City of Fairview Heights],
none of the [online travel companies] here are under common ownership with the
physical establishments that control the rooms.” Id.; see also Pitt Cnty. v. Hotels.com,
L.P., 553 F.3d 308, 314 (4th Cir. 2009) (rejecting concerns of the hypothetical
“loophole” discussed in City of Fairview Heights); City of Goodlettsville v.
Priceline.com, Inc., 844 F. Supp. 2d 897, 909 (M.D. Tenn. 2012) (same; determining
that online travel companies are not “operators” under occupancy-tax ordinance and the
Nos. 10-4531/4545     City of Columbus, et al. v. Hotels.com, et al.              Page 12

ordinance therefore did not apply to them). Therefore, the concerns raised by the Illinois
court are not relevant to the claims before us.

       Finally, the localities argue that the online travel companies violated the laws by
collecting taxes and service fees together, without disclosing which portion of the
collected amount is for taxes and which portion is for service fees. The ordinances of
the cities of Dayton, Findlay, Northwood, and Maumee, and the regulation from
Monclova Township, each contain language that requires the tax to be “shown separately
on any record,” bill, or statement. See, e.g., City of Dayton Code, § 36.134(A)-(B). The
localities raise this possible violation for the first time on appeal. Generally, “an
argument not raised before the district court is waived on appeal to this Court.”
Scottsdale Ins. Co. v. Flowers, 513 F.3d 546, 552 (6th Cir. 2008); see also Foster v.
Barilow, 6 F.3d 405, 400 (6th Cir. 1993). There are narrow exceptions to this rule that
do not apply here; we have “rarely” exercised our discretion to depart from the rule,
Scottsdale Ins. Co., 513 F.3d at 552, and we decline to do so here. See Overstreet v.
Lexington-Fayette Urban Cnty. Gov’t, 305 F.3d 566, 578 (6th Cir. 2002) (holding that
this Court “will not consider arguments raised for the first time on appeal unless our
failure to consider the issue will result in a plain miscarriage of justice”). We find that
the localities have waived their right to argue this claim on appeal.

       B.      Summary Judgment

       The localities appeal the district court’s grant of the online travel companies’
motion for summary judgment, arguing that the district court erred by finding that there
was no genuine issue of material fact as to whether the online travel companies collected
fees denominated as taxes without remitting the collected money to the taxing
authorities. The localities argue that the online travel companies collected money from
consumers labeled as a tax, but failed to remit that money to the taxing authorities.
Under Ohio law, the online travel companies have a duty to remit any money collected
as taxes, regardless of whether the tax code required the collection of the money.
See Geiler Co. v. Lindley, 66 Ohio St. 2d 514, 517, 423 N.E.2d 134, 136-37 (Ohio 1981)
(finding that appellant was required to remit amounts collected as “sales tax” where
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“sales tax” was itemized on customer invoices, and customers were “deceived as to the
actual amount of appellant’s charge and whether some portion of their payment would
be forwarded to the state treasury”); Barker Furnace Co. v. Lindley, No. 6813, 1981 WL
2815, at *1 (Ohio App. 1981) (requiring contractor to remit to state erroneously
collected, “separately itemized sales tax charges”); see also Ohio Rev. Code
§ 5739.02(E) (“[N]o person other than the state or such a county or transit authority shall
derive any benefit from the collection or payment of the tax levied . . . .”).

       “This Court reviews a district court’s grant of summary judgment de novo.”
Salling v. Budget Rent–A–Car Sys., Inc., 672 F.3d 442, 443 (6th Cir. 2012) (internal
quotation marks and alteration omitted). Summary judgment is proper if the materials
in the record “show that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “In deciding
a motion for summary judgment, the court must view the factual evidence and draw all
reasonable inferences in favor of the nonmoving party.” Banks v. Wolfe Cnty. Bd. of
Educ., 330 F.3d 888, 892 (6th Cir. 2003) (citing Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986)).

       The localities present evidence suggesting that the online travel companies
deliberately calculated the “fee” charges at the same percentage rate as the tax rate, and
that the online travel companies applied that percentage rate to the difference between
the retail rate and the wholesale rate of each room. In this manner, the fee charges on
each hotel room were equivalent to the amount that would have been charged as a tax
if the tax did apply to the retail rate. For example, a Hotels.com email states that
“Hotels.com calculates the tax recovery charge and service fees by applying the tax rate
to the reservation rate.” Emails from Expedia and Travelocity reflect a similar practice.
The localities also cite a 2004 email from a new hire at Hotels.com. The email states
that “Hotels.com has been calculating the tax recovery charge by applying the tax rate
to the top-of-the-line sales price.” An email from a different Hotels.com employee
references a fee that includes “the taxes collected over the Tax recovery fee.” A review
of this evidence does not show that Hotels.com, Expedia, or Travelocity mislabeled or
Nos. 10-4531/4545      City of Columbus, et al. v. Hotels.com, et al.               Page 14

misidentified to customers either the amounts they collected or the purposes for which
customers were being charged certain fees. Indeed, even if the online travel companies
intended to tie the amount of their service fees to the amount of a hypothetical tax
obligation, or internally referred to these items as “taxes collected over the Tax recovery
fee,” this does not show that the travel companies deceived customers or misrepresented
to customers the purpose of fees collected. See Geiler Co., 66 Ohio St. 2d at 517, 423
N.E.2d at 136-37 (finding that “[i]ntent is of no consequence” because the relevant
inquiry is whether defendants deceived customers by keeping amounts charged as a tax).
The localities adduce no evidence showing that the online travel companies represented
to customers that they were charging them for “taxes” that were not remitted.

        The localities also cite a statement by Hotwire acknowledging that “[t]he actual
tax cost paid to the hotel may differ slightly from the tax recovery charge, depending
upon the rate, taxability, etc. in effect at the time of the actual use of the hotel by you,
the consumer.” This, along with other statements by Hotwire and relied on by the
localities, does not alter our conclusion that the localities have not raised a genuine issue
of material fact regarding whether the online travel companies charged customers for
“taxes” that were not remitted. An examination of these statements reveals that they do
not mislabel fees as taxes but rather reflect Hotwire’s explanation that the amount
charged as a “tax recovery charge” “is an estimate amount based on all the hotels in the
eligibility band” rather than an actual collection of taxes.

        We agree with the district court that the localities have failed to provide evidence
that the online travel companies’ practice of combining service fees and tax fees
deceived customers into providing money to the online travel companies that the
customers believed would be remitted to the local or state government authorities as a
tax but was not so remitted. As the localities acknowledge, the online travel companies
collected the amounts at issue labeled as “Taxes and Service fees.” Moreover, it is also
undisputed that a portion of that combined charge was actually remitted to the hotels as
a tax due on the wholesale value of the hotel room. The localities have not come
forward with evidence suggesting that the online travel companies labeled charges as
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taxes when, in fact, the money collected was not remitted as a tax. Therefore, we affirm
the district court’s grant of summary judgment to the online travel companies.

        C.      Certification to Ohio Supreme Court

        The localities argue that the district court erred in denying their request to certify
questions regarding the applicability of the occupancy-tax laws to the online travel
companies. The localities requested certification as part of their cross-motion for
summary judgment, after the district court had resolved these questions during review
of the online travel companies’ motion to dismiss. “The decision whether or not to
utilize a certification procedure lies within the sound discretion of the district court.”
Pennington v. State Farm Mut. Auto. Ins. Co., 553 F.3d 447, 449-50 (6th Cir. 2009)
(internal quotation marks omitted). “Certification is most appropriate when the question
is new and state law is unsettled,” but the “federal courts generally will not trouble our
sister state courts every time an arguably unsettled question of state law comes across
our desks.” Id. (citations and internal quotation marks omitted). In an unpublished
opinion, we have stated that certification is disfavored where a plaintiff files in federal
court and then, after an unfavorable judgment, “seek[s] refuge” in a state forum.
Local 219 Plumbing & Pipefitting Indus. Pension Fund v. Buck Consultants, LLC,
311 F. App’x 827, 831 (6th Cir. 2009). “The appropriate time to seek certification of a
state-law issue is before a District Court resolves the issue, not after receiving an
unfavorable ruling.” Id. at 832. The view that state-law issue certification should be
sought before, not after, a district court resolves the issue, is shared by many of our sister
circuits. See, e.g., Thompson v. Paul, 547 F.3d 1055, 1065 (9th Cir. 2008) (“There is a
presumption against certifying a question to a state supreme court after a federal district
court has issued a decision.”); Enfield v. A.B. Chance Co., 228 F.3d 1245, 1255 (10th
Cir. 2000) (denying certification where party did not seek certification until adverse
decision and stating “[t]hat fact alone persuades us that certification is inappropriate”);
Perkins v. Clark Equip. Co., Melrose Div., 823 F.2d 207, 209-210 (8th Cir. 1987)
(discouraging requests for certification made by a party after summary judgment has
been decided against that party because “[o]therwise, the initial federal court decision
Nos. 10-4531/4545      City of Columbus, et al. v. Hotels.com, et al.                Page 16

will be nothing but a gamble with certification sought only after an adverse decision”).
The localities in this case waited to request certification until after the district court had
already made numerous decisions in this case. The district court did not abuse its
discretion in declining to certify this issue to the Ohio Supreme Court.

                                             III.

        For the foregoing reasons, we AFFIRM the judgment of the district court.