IN RE TRANSIENT OCCUPANCY TAX CASES

Respondents’ Answer Brief on the Merits

Cal.March 18, 2015

Case No. 218400 IN THE SUPREME COURT OF CALIFORNIA In re TRANSIENT OCCUPANCY TAX CASES FiLteo CITY OF SAN DIEGO, CALIFORNIA, 018 Petitioner, MAR 18 Vv. ; an kA. McGuire Clerk HOTELS.COM,L-P., etal., Fran Respondents. Deputy After an Opinion by the Court ofAppeal, Second Appellate District, Division Two, Case No. B243800 On Appeal from the Superior Court for the County of Los Angeles The Hon.Elihu M.Berle, Judge ofthe Superior Court, Department 323 Los Angeles County Superior Court Case No. JCCP 4472 RESPONDENTS’ ANSWER BRIEF ON THE MERITS Darrel J. Hieber (SBN 100857) Nathaniel S. Currall (SBN 210802) Stacy R. Horth-Neubert (SBN 214565) K&L GATES LLP Daniel M. Rygorsky (SBN 229988) 1 Park Plaza, Twelfth Floor SKADDEN,ARPS, SLATE, Irvine, California 92614 MEAGHER & FLOM LLP Telephone: (949) 623-3534 300 South Grand Ave., 34” FI. Facsimile: (949) 253-0902 Los Angeles, CA 90071 Brian S. Stagner (admitted pro hac) Telephone: (213) 687-5000 Chad Arnette (admitted pro hac) Facsimile: (213) 687-5600 KELLY HART & HALLMAN LLP Attorneysfor Respondents priceline.com 201 Main Street, Suite 2500 Incorporated (n/k/a The Priceline Group Inc.) and Fort Worth, TX 76102 Travelweb LLC Telephone: (817) 878-3567 , Facsimile: (817) 878-9280 Jeffrey A. Rossman (SBN 189865) Attorneyfor Respondents Travelocity.com, LP and McDERMOTTWILL & EMERY LLP. Site59.com, LLC 227 West Monroe Street Chicago, TL 60606 Elwood Lui (SBN 45538) Telephone: (312) 372-2000 ” Brian D. Hershman (SBN 168175) Facsimile: (312) 984-7700 Lo Erica L. Reilley (SBN 211615) . Attorneysfor Respondents JONES DAY ' Orbitz, LLC, Trip Network, Inc. (d/b/a 555 South FlowerStreet, 50th Floor ' Cheaptickets.com), and Internetwork Publishing Los Angeles, CA 90071 | Corp. (d/b/a Lodging.com) Telephone: (213) 243-2445 Facsimile: (213) 243-2539 Attorneysfor Respondents Expedia, Inc., Hotwire, Inc., Hotels.com, L.P., and Hotels.com G.P., LLC t | Case No. 218400 IN THE SUPREME COURT OF CALIFORNIA a eee In re TRANSIENT OCCUPANCY TAX CASES CITY OF SAN DIEGO, CALIFORNIA, Petitioner, Vv HOTELS.COM,L.P., et al., Respondents. After an Opinion by the Court ofAppeal, Second Appellate District, Division Two, Case No. B243800 On Appealfrom the Superior Court for the County of Los Angeles The Hon. Elihu M.Berle, Judge ofthe Superior Court, Department 323 Los Angeles County Superior Court Case No. JCCP 4472 RESPONDENTS’ ANSWERBRIEF ON THE MERITS ee Darrel J. Hieber (SBN 100857) Stacy R. Horth-Neubert (SBN 214565) Daniel M. Rygorsky (SBN 229988) SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 300 South Grand Ave., 34" Fl. Los Angeles, CA 90071 Telephone: (213) 687-5000 Facsimile: (213) 687-5600 Attorneysfor Respondents priceline.com Incorporated (n/k/a The Priceline Group Inc.) and Travelweb LLC Jeffrey A. Rossman (SBN 189865) McDERMOTT WILL & EMERY LLP. 227 West Monroe Street : Chicago, IL 60606 Telephone: (312) 372-2000 Facsimile: (312) 984-7700 Attorneysfor Respondents Orbitz, LLC, Trip Network,Inc. (d/b/a Cheaptickets.com), and Internetwork Publishing Corp. (d/b/a Lodging.com) Nathaniel S. Currall (SBN 210802) K&L GATES LLP . . 1 Park Plaza, Twelfth Floor Irvine, California 92614 Telephone: (949) 623-3534 Facsimile: (949) 253-0902 Brian S. Stagner (admitted pro hac) Chad Arnette (admitted pro hac) KELLY HART & HALLMAN LLP 201 Main Street, Suite 2500 Fort Worth, TX 76102 Telephone: (817) 878-3567 Facsimile: (817) 878-9280 Attorneyfor Respondents Travelocity.com, LP and Site59.com, LLC Elwood Lui (SBN 45538) Brian D. Hershman (SBN 168175) EricaL. Reilley (SBN 211615) JONES DAY 555 South Flower Street, 50th Floor Los Angeles, CA 90071 Telephone: (213) 243-2445 Facsimile: (213) 243-2539 Attorneysfor Respondents Expedia, Inc., Hotwire, Inc., Hotels.com, L.P., and Hotels.com G.P., LLC TABLE OF CONTENTS Page TABLE OF CONTENTS...cccssssscsssssesssessessssesesssrsssescaeseseasusensessssssuessessesenesaas i TABLE OF AUTHORITIES0.0.ccscsesssessesscescssecsecssesssaesesessecseessssescsssessassesenees iv INTRODUCTION.....cc cecsesssesescessessscessesssscsceceseseusessssseceesessessessssesecscessusssesensencas 1 SAN DIEGO’S TRANSIENT OCCUPANCYTAX (“TOT”) ORDINANCE........5 STATEMENTOF THE CASE... cccccccscsssssssssssssesecssecessessscessersesscssssssssssssosesaasess 8 A. The San Diego Action Is Part OfA Coordinated Proceeding... ceessesssccssecescssssessccsessseesseeseeeecsscersarsvessaceeves 8 B. The Anaheim Action: The Court OfAppeal Affirmed Judgment For The Online Travel Companies (“COTCS”), ....cccscssssssssssssseseessesscsesssssssssseessssesses 8 C. The San Diego Administrative Action...........ccccccsseseeesees 9 The Superior Court Set Aside San Diego’s ASSESSMEMIS,0.00... seseesessessescessescesneescecesaceseessesscsessecessenseenens 10 E. The San Diego Appeal: The Court OfAppeal Affirmed Judgment For The OTCS.........cccccessesessseseeseseees 12 STATEMENTOF FACTS woeccccccscessssessesecsesssssssesssssessseeeeessessessesssssssseesecseves 13 STANDARD OF REVIEWuu.ceccssscssesecssescsseesesssscesesecsssscnsssecaeenssncsessessssucessneess 14 ARGUMENT.....ccccccssssssesevseesessesscessesescessesesseessatenessessesseaessusesesesesesessssesssesevensess 15 I. THE RULES GOVERNING CONSTRUCTION OF TAX STATUTES COMPEL AFFIRMANCE.......cccccssssssessetsesssessseeess 15 I. JUDGMENT SHOULD BE AFFIRMED BECAUSETHE OTCS HAVE NO TAX OBLIGATIONSOR LIABILITY UNDER THE ORDINANCE.......ccccccsssssessssesseseessseeessesscevevsscnevees 17 A. The Ordinance Imposes Tax Obligations And Liability Only On “Transients” And Hotel “Operators,” scceccsecsscsceececcsscsseseesssesseessesssesscseacsssassaeesens 17 B. San Diego Concedes The OTCsAre Neither “Transients” Nor Hotel “Operators.” ..........cccccesssesesseesees 18 Il. JUDGMENT ALSO SHOULDBE AFFIRMED BECAUSE THE AMOUNT AN OTC CHARGES A CUSTOMERFOR ITS SERVICESIS NOT “RENT CHARGED BY AN OPERATOR”SUBJECT TO TAX............. 19 i IV. THE ORDINANCE’S EXPRESS TERMS FORECLOSE SAN DIEGO’S ATTEMPT TO IMPOSE TAX ON ANY AMOUNTTHATIS NOT “RENT CHARGED BY THE OPERATOR”... ccccccssesscessesceeseesssesecsssceassesersnsscoesrsacsestsasacscseaseeces 21 A. San Diego Cannot Trump The Ordinance’s Express “Rent Charged By The Operator” Limitation With A Supposed Implied Intent To Tax More Than That AMUDL,. oo. ceeeseseesesessseescasessensssessessesseseesessseeessasetsssnenss 21 B. San Diego Cannot Rewrite The “Rent Charged By - The Operator” Limitation To Tax Other Amounts............23 Cc, San Diego Cannot Treat The Amount An OTC Charges A Customer AndRetains ForIts Online Travel Services As IfIt Were “Rent Charged By The Operator.” 0... cccesssscssessesessessesscssacnsscserscesessscsacees 25 1. Rate Provisions In The OTCs’ Contracts With Hotels Do Not Transform The Additional Amounts An OTC Charges For Its Services Into “Rent Charged By The Operator.”ceeseeesssnsessessessssssesssssersssssecsecseseeees 25 The Timing Of When The Hotel Receives The Rent It Charges For A Transient’s Occupancy Does Not Transform The Additional Amounts An OTC Charges For Its Services Into “Rent Charged By The Operator.”sees sescesseeccsscsccssesesseseesesssscessessessseeees 29 That The OTC By Contract Collects The Hotel’s “Rent,” And Tax On That Amount, Does Not Transform The OTC’s Additional Amounts Into “Rent Charged By The Operator.”oo. ecccssccsessessessssssscesessesesecssesssessessenees 30 V. ONLY THE HOTEL OPERATOR COULD BE LIABLE FOR ANY ADDITIONAL TAX IF OWED...ecceesstceseeeeeeeenees 32 A. The OTCs’ Contracts With Hotels Are Not A Basis For Imposing Liability On The OTCs Under The Ordinance.........ccecesecccssessscesescessscesccscscsacccsscesecesssssesseess 32 1. The Hotel’s Contractual Delegation Of The Collection Of The Hotel’s “Rent,” And Tax On That Amount, Is Not A Basis For Imposing Liability On OTCs Under The Ordinance..........cccsccssessscsssscsesesecssesssssscsersecsessseseees 33 The City Cannot Impose Liability On OTCs Under The Ordinance As A Supposed Third- Party Beneficiary Of The OTCs’ Hotel COmtract......cecessessesseseeseceeeseseseseseessssseseseseseesteres 34 ii 3. Indemnity Provisions In The OTCs’ Contracts With Hotels Are Not A Basis For Imposing Liability On The OTCs Under The Ordinance...0....cccccescsscsseesssecsessessesscasscscescsessssesscess 36 B. California Civil Code Section 2344 Is Not A Basis For Imposing Liability On The OTCs Under The Ordinance. .........ccccccsssccssesccesececesscevsccctccessesssceseesecsseeessesens 38 VI. EVEN IF THE ORDINANCE WERE AMBIGUOUS, THE OTCS’ CONSTRUCTIONS MUST BE ADOPTED............0000.. 39 VII. IF SAN DIEGO WANTS TO IMPOSETAX LIABILITY AND OBLIGATIONS ON NON-OPERATORS,OR TAX ON AMOUNTS THAT ARE NOT “RENT CHARGED BY THE OPERATOR,” IT MUST AMENDITS ORDINANCE WITH VOTER APPROVAL......ccccescsesecsesseesecees 42 VII. THE COURT OF APPEAL PROPERLY CONSIDERED ITS PRIOR DECISIONS IN THIS COORDINATED PROCEEDING....cecccesesecneeeeesceeessscscesesesssseeceesesessscseesscscscacseees 44 CONCLUSION |... ecccccscssssssescscnesecseseussceeseesssesesseesssesseseeseesseeesesscseessussstsenssescasecnse 47 ili TABLE OF AUTHORITIES CASES PAGE(S) AB Cellular LA, LLC v. City of Los Angeles (2007) 150 Cal.App.4th 757 ooo. ccccccssssessessccsesessesscsessssseesssssceseenes 43 Agnew v. State Board ofEqualization (1999) 21 Cal.4th 310oeeseessesssseessscsseseesesesseessessesessesseeens 16 Alpha Beta Food Markets v. Retail Clerks Union Local 770 (1955) 45 Cal.2d 764 ooo. ececssccssscessetececesseeesessecsseneescsassesseesessreeses 34 Alpha Therapeutic Corp. v. County ofLos Angeles (1986) 179 Cal.App.3d 265... eecescessstscescessseessesesesscssassteesessesens 40 Bryan v. Banks (1929) 98 CabApp. 748.00... ccccsssesstesseesseecssecsscessessseeeeceseeerssreeees 37 California Teachers Association v. San Diego Community College District (1981) 28 Cal.3d 692 ooo cecessccseesseesseessecssssseseesesssseseesseesesessees 15 City ofAnaheim v. Superior Court (2009) 179 Cal.App.4th 825 ...cesessessecssseesesesnesssncsnneesensesntenns 40 Columbia Pictures Corp.v. DeT.oth (1948) 87 Cal.App.2d 620.......ceceseseeeeeeseeseesecsceateaeaseaeeneneeenaes 30 Conway v. Pasadena Humane Society (1996) 45 Cal.App.4th 163 oo.ccesessessecsesssssesseseesssssessssersees 40 In re Derrick B. (2006) 39 Cal4th 535 oieeecesessceseessesseesssessessssssesseseeesessssesseees 15 Elayyan v. Sol Melia, S.A. (N.D.Ind. 2008) 517 F.Supp.2d 886 oo... ccccssceesesseesersseesseeens 31 Environmental Protection Information Center v. California Department Forest & Fire Protection (2008) 44 Cal4th 459 ooo ccccssesseeeccssecssessecsseesesasessesseesseeeeens 15 Gould v. Gould (1917) 245 U.S. USD iecccseseneetssctseseesseesecsssssesessesessessesreeesens 16 Groves v. City 0 Los Angeles (1953) 40 Cal.2d 751 oo. eeceesccscssessseeseceseesseceecessssssseesessesseees 31, 32 Hess v. Ford Motor Co. (2002) 27 Cal.4th 516 occcceccsscessesseesessecssessessessseesesssssesssesasees 36 Hospital Service ofCalifornia v. City ofOakland (1972) 25 CalApp.3d 402.0... eccsscesecstsestecssesesesessecssseeesseseseesees 40 iv Jacks v. City ofSanta Barbara (Feb. 26, 2015, No. B253474) 2015 Cal.App.LEXIS 178 .............. 43 Johnson v. Superior Court . (2000) 80 Cal.App.4th 1050 oiiccecsssssssessssseesesssesesseessesseaes 35 Kowis v. Howard — (1992) 3 Cal.4th 888 oocescctecstecseessesssssssssesssssessenesseseesesseees 45 Lungren v. Deukmejian (1988) 45 Cal.3d 727 oeecescsscesceseeseesseceecssesesssessesaeesssssesseseeseeees 15 McGhan Medical Corp. v. Superior Court (1992) 11 CalApp.4th 804occccsessssssssesecessesesesssecseeseseesens 44 Parrish v. Greco (1953) 118 Cal.App.2d 556.00... ce ceccseseesecsscsenscesscessssesssseereseseeesees 36 People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415 woecccssssesescesssessesssscssesseseesseseseaecseeseeees 15 People v. Bobo (1992) 4 CalRptr.2d 763 .oceccccsccscssessssssscsscssssseccsscsssessessensesseeseees 19 Pioneer Express Co.v. Riley (1930) 208 Cal. 677 .ociecescsscscstcessssssssscesssssscsessssesesssaesscsseeenses 16 Pomona v. State Board ofEqualization (1959) 53 Cal.2d 305 oo eeecsessececssecsessececesssscessessesecssessceeceesseesees 4] Prouty v. Gores Technology Group (2004) 121 Cal.App.4th 1225 ooo cccsecsssssesstessseesssesetsessesees 35, 36 Scholastic Book Clubs, Inc. v. State Board ofEqualization (1989) 207 Cal.App.3d 734.0... ccssccssscssssscssessesessesessesseseesssceseeseesres 32 Select Base Materials v. Board ofEqualization (1959)51 Cal.2d 640 ooeenectcesstsessrssecsesssssssessseseeeessees beeseeeeeees 15 Silicon Valley Taxpayers’ Association, Inc. v. Santa Clara County Open Space Authority (2008) 44 Cal4th 43 1 occccccsecsssccsessecsseesssessesessessessesseeseresseeees 42 In re Transient Occupancy Tax Cases (“TOT Cases”) (2014) 225 CalApp.4th 56 oo.cce cccssecssssssesessessssseneceseeeensens passim STATUTES Civ. Code § 2344.cssescesecsenseeesscessesssssessseecsessssesssesseeseeseesueseseeseenees 38 Code Civ. Proc. § 404.1ecececcscssssecsesssssessesesssesesessesessssecssessesessesasenees 44 Code Civ. Proc. § 404.2 oo eecccccsscssscsecssecssecseseseeesssseecsreseeesesccesessessusesenens 44 Govt. Code § 53750 woeececcsessseseeseeseescsecsseesecsessesssssecsessessssessessessessesensas 43 CONSTITUTIONS Cal. Const., art. XTID C, § 2 ccc ccccccscssssccssseccsssesssssccsesssssecesscseeseareeeass 1, 16 RULES Cal. Rules of Court, rule 3.505 vice ccccccccccsesscccscecesesscccecsssecsssecesscecensuece 44 Cal. Rules of Court, rule 8.1105 ....ccccccccccsccccssscssesssesseesscccsecssssssscesseeeens 45 Cal. Rules of Court, rule 8.532 oo.cccclecccssccccccoscecsecsscsssessceccesseessscensscsessuass 19 ORDINANCES San Diego Municipal Ordinance Sections BS.OLOLeeececsscccsssccssssssssssccesseesecsssssssssscssvessecsesssessecetaneeeees 5,21 35.0102eeeeeeeceeeesssesececsseeseesseesessssesassesscsussusaeecessscesseesenss passim 35.0103 ooo. ecceccccscccssscecssscsnsesseeseseesscscseceesscssscsessasessesesasesaeeaters 6, 17, 19 35.0104 0... eecccsscesssscessccssnsesstscscsssesscnssssssssssesssecassevessveasrcecerecens 6, 19 35.0105oeeescccssccssssesssecsseseseeessecessecsssessecessvsesssecaeesenssenareecensesens 6, 19 35.0106... eecccccccssscessseesscesscesessscsscecusssssesssssscsassascesseeessetasecseeeees 6, 19 35.0107oe eecccscecsssceessessscceseeessescsesscscscuscssscesesssesscesessesueraceceneeeeenaeens 6 35.0108 oo. cccccesseessecssssssncersescsssscusvscssssssssvscesessnssesssesacenensens 6, 19 B5.O1LOeeesccssccsssesssesecssccseeecssecsssessssssscssssssasssecseaseassauecssensees 7,17 S5.OL LQeeeecccessecsssscssseseecesseeesscecsscesssssscsscsssrsessacenaeenesers 7,17, 25 35.0113eeccccessstsesssessseessecsssecssneccessesesssesussevssessessersseaceesasesenerees 7 SSOLL4eecccseseessccsscsseecessssssssscssesavsesssssssceseeseasesaserensesesens 7,17 BS OLD]eeeeeccccsssccesessecessseesesesecessssessceeessssssssscseseesecseseteeeees 8,17, 18 B5.OL18eceecccscesssseesseesssessecssssscssssscenssssscsecsecsacesesatcseeeseesueeeseners 8 35.121ee ecessecesssecssressetssscecessssssssscessesessscsecsessasesessecssecaseesauecenanens 7 35.0124ee eccccesccssecesseesscesseecsssscsesecescessesesenesseeensecsacsesessaens 7,17, 32 MISCELLANIOUS Legis. Analyst, Understanding Proposition 218 (Dec. 1996) occu 16 81 Op.Att’yGen. Cal. 104, 1998 Cal. AG LEXIS38 (Mar. 5, 1998)......... 43 Ballot Pamphlet, General Election (Nov. 5, 1996) text of Prop. 218, reprinted at 2A West’s Ann. Cal. Const. (2006 supp.) Historical Notes, foll. art. XTIT C, § 1 o...cce cc cccssscssscssssssscssesseeseeees 16 Oxford Dictionary (2014), online at http://www.oxforddictionaries.cOM..........cccsccscssessssecssesssctsssesseeees 23, 36 Vi INTRODUCTION In affirming judgment, the Court of Appeal properly rejected Petitioner City of San Diego’s (“San Diego”or “City”) attempt to go outside the boundsofits tax ordinance to impose Transient Occupancy Tax (“TOT”) liability on the Respondent Online Travel Companies (“OTCs’’). This Court should do the same.' Asthis Court has madeclear, a taxing authority may not impose tax obligations and liability beyond a tax statute’s express terms, and any ambiguity in a tax statute must be construed strongly against the taxing authority and in favor of the citizen. These fundamental rules are essential because a government’s exercise of its taxing power imposes burdens on citizens, takes their property, and has great potential for abuse. These same considerations led California’s voters to enact Proposition 218, which | amended the California Constitution to further ensure that general taxes — specifically including “hotel” occupancy taxes — cannot be broadened without voter approval. (Cal. Const., art. XIII C, § 2.) These rules doom San Diego’s case. This appeal turns on the express terms of San Diego’s TOT Ordinance (“Ordinance”), which imposestax on “the privilege of Occupancy.” The Ordinance focusesentirely on “Occupancy” and the two parties to its transfer — the “Transient” who obtains Occupancyofthe room, and the hotel “Operator” who provides it. The Ordinance imposes TOT obligations and liability only on those two persons, and taxes only the ' Respondent OTCsare Hotels.com,L.P., priceline.com Incorporated (n/k/a The Priceline Group Inc.), Travelweb LLC, Expedia, Inc., Hotwire, Inc., Hotels.com G.P., LLC, Travelocity.com, LP, Site59.com, LLC, Orbitz, LLC, Trip Network, Inc. (d/b/a/ Cheaptickets.com), and Internetwork Publishing Corp. (d/b/a/ Lodgingcom). “Rent” — the amount for the Transient’s “Occupancy” — “charged by the Operator.”” These express terms are dispositive. The City has conceded the OTCsare neither Transients nor Operators. Rather, the OTCsare intermediaries between travelers and airlines, hotels and rental car companies. The OTCs donot operate airlines, hotels, or rental car companies; instead, they operate websites on which they provide comparative information about such travel providers, and help customers request and pay for reservations from those providers. Because they are neither Transients nor Operators, the OTCs haveno tax obligations or liability under the Ordinance. Until this case, San Diego asserted TOT obligations andliability against only hotel Operators on the amount they charge for Occupancy, and not OTCsor other travel intermediaries on any additional amounts they charge a customer for their own services. However, in 2006, the City filed a complaint, and then audited and assessed the OTCs,alleging that, in addition to the actual hotel Operators, each OTCalsois the “Operator” of every hotel in the City from which any ofits customers obtain room reservations, and that the additional amounts the OTC charges a customer for its services also are taxable “Rent charged by the Operator.” The Superior Court granted the OTCs’petitions for a writ of mandamusandset aside the assessments. The court ruled (i) the OTCsare not Transients or Operators, and therefore have no TOT obligations or liability; and (ii) the OTCs’ added charges to customers for their services * The Ordinanceis codified at Chapter 3, Article 5 of the San Diego Municipal Code: §§ 35.0101-35.0138. All emphasis in quotations is added, andinternal citations omitted, unless otherwise indicated. are not taxable “Rent charged by the Operator.” San Diego reversed course on appeal, conceding the OTCsare not hotel “Operators” under the Ordinance, and that the hotel is the Operator in an OTC “merchant model”transaction.’ As the Court of Appeal recognized, the City’s concessionis fatal to its case. Because the OTCsare neither Transients nor hotel Operators, there simply is no basis for imposing TOT liability on the OTCs. Therefore, the court correctly affirmed judgment for the OTCs. Judgmentalso wascorrectly affirmed because, unlike the amount “charged by the Operator” for the Transient’s “Occupancy,”the additional amounts an OTC charges a customerfor its services are not taxable “Rent charged by the Operator.” Before this Court, the City again has conceded: e The Ordinance’s express terms impose obligations and liability only on “Transients” and “Operators”; e The OTCsare neither “Transients” nor “Operators”; e Only the Hotel is the “Operator” in an OTC merchant model transaction; e The only amount subjectto tax is “the rent charged by the hotel for transferring the privilege of Occupancy”to the Transient (Op.Br. 2). Oneneed go no further. These concessions compelaffitmance. Having concededthe dispositive issues, the rest of the City’s > While the OTCs use several different business models, the only one at issue is the “merchant model.” In “merchant model”transactions,“[t]he OTCshandleall financial transaction related to the hotel reservations, and become the merchantofrecord.” (TOT Cases (2014) 225 Cal.App.4th 56, 61 (hereafter TOT Cases).) Opening Brief is an attempt to end-run the Ordinance’s expresslimiting terms. The City primarily argues that the Ordinance must be construed to effectuate an implied intent to impose tax on the total amount charged to a Transient in a reservation transaction, regardless of by whom or for what. Butthis supposed implied intent directly conflicts with the intent evidenced by the Ordinance’s express terms, which impose tax only on the amount “charged by the Operator”to the Transient for “Occupancy” of a room, and not amounts charged to a Transient by anyone else for anything else. None ofthe provisions the City cites purportsto alter that express limitation, repeated six times in the Ordinance. San Diego then contends the additional amounts the OTC charges a customerfor its services should be treated as ifthey are “Rent charged by the Operator.” But again, doing so is contrary to the Ordinance’s express terms. First, San Diegoasserts that under the OTCs’ contracts with hotels, the hotel “dictate[s]” the entire amount charged in the room reservation transaction, and, therefore, the additional amounts the OTC charges a customerforits services are also taxable “Rent charged by the Operator.” Butthat assertion is directly contrary to the very contractualprovisionsthe City cites, as well as the hearing officer’s factual findings, which make clear the OTC,not the hotel, “sets,” charges, and receives those additional amounts, and does so on its own behalf. Those amounts therefore are not “charged by the Operator.” | Second, San Diego asserts that the additional amounts the OTC charges forits services are attributable to the hotel, and, thus, are taxable “Rent charged by the Operator,” because the OTC functions as the hotel’s agent. But the hearing officer found, and the City concedes, at most, an OTC doesso only to collect the rent the hotel is charging for Occupancy, along with tax on that rent, and remit those amounts to the hotel. Thus, only those amounts canbe attributed to the hotel Operator, not the additional amounts the OTC charges a customer on its own behalf. San Diegois left repeatedly asserting that the additional amounts the OTC chargesforits services “should” be subject to tax. But, again, a taxing authority may not impose tax obligations andliability beyond a statute’s express terms. If the City desires to impose TOT obligations and liability on persons other than hotel Operators, or impose tax on amounts not “charged by the Operator,” it must convinceits electorate to enact amendments that explicitly do so. Under Proposition 218, it is the voters’ province to weigh the economic andpolicy interests implicated by so broadening the TOT. If San Diego could instead expandits tax by administrative fiat, then taxing authorities statewide could do so with every tax statute, and against every taxpayer, business or individual. Judgment for the OTCs should be affirmed. SAN DIEGO’S TRANSIENT OCCUPANCY TAX ORDINANCE There can be no dispute about San Diego’s “Transient Occupancy Tax” Ordinance’s express terms. Its “purpose”is to “impose[] a tax on Transients.” (§ 35.0101(a).) Asits title reveals, it achieves this purpose by imposing a tax on “Occupancy.” | “Occupancy”is defined as “the use or possession, or the right to the use or possession, ofany room ... in any Hotel ....” (§ 35.0102.) A “Hotel” is “any structure a occupied, or intended or designedfor Occupancy, by Transients for dwelling, lodging, or sleeping purposes, and is held out as such to the public.” Jbid. Thus, “[flor the privilege of Occupancy in any Hotel located in The City of San Diego, each Transient is subject to and shall pay a tax in the amountofsix percent (6%) of the Rent charged by the Operator.” (§ 35.0103.) The Ordinancetherefore focuses exclusively on the twoparties to the exercise of that privilege — the “Transient” who obtains occupancy of the hotel room, andthe hotel “Operator” whoprovidesit. The City asserts the Ordinanceis “laser-focused” on the “Transient” (Op.Br. 3), but the Ordinancerefers to the hotel “Operator” eighty-five times. A “Transient”is “any Person who exercises Occupancy, oris entitled to Occupancy, by reason of concession, permit, right of access, license, or other agreement for a period of less than one (1) month.” (§ 35.0102.) An “Operator” is the one who owns or possesses and runs a Hotel that provides “Occupancy”ofrooms to Transients: the Person whois the proprietor of the Hotel, ... whether in the capacity.of owner, lessee, sublessee, mortgagee in possession,licensee, or any other capacity. “Operator” includes a managing agent ... of any type or character, other than an employee without managementresponsibility. Ibid. The Ordinance provisions stating the amount subject to tax further reflect its exclusive focus on “Occupancy” and the twoparties to its transfer — the “Transient” and hotel “Operator.” Tax is imposed only on “the Rent charged by the Operator.” (§ 35.0103.) The City Council amended the Ordinance four timesto increase the tax, and each time reaffirmed that tax is imposed only on “the Rent charged by the Operator.” (§§ 35.0104, 35.0105, 35.0106, 35.0108; see § 35.0107.) “Rent”is defined as: the total consideration charged to a Transient as shown on the guest receiptfor the Occupancy ofa room, ..., ina Hotel. ... “Rent” includes chargesfor utility and sewer ‘hookups, equipment ..., and in-room services .... “Rent” includesall receipts, cash, credits,property, and services of any kind or nature without any deduction therefrom. (§ 35.0102.) The Ordinance imposestax obligations andliability only on the “Transient” and “Operator.” The tax is a “debt owed by each Transient” (§ 35.0110(a)); the “Transient shall pay [the] tax imposed ... to the Operator of the Hotel” (§ 35.0110(b)); and (iii) if the Transient does not do so, the City “may require that the tax be paid directly to the City Treasurer” (§ 35.0110(e)). All remaining obligations andliability are imposed solely on the hotel “Operator.” Each “Operator”“shall collect” and “remit” the tax, or cause the tax to be collected and remitted. (§§ 35.0112, .0114(a), .0124(a), (b).) Each “Operator” “renting occupancy to transients” must “register” with the City, obtain a “Transient Occupancy Registration Certificate,” and postit “on the [Hotel] premises.” (§ 35.0113(a).) The “Operator” must (i) “maintainits financial and accounting records”;(ii) “account separately for ... taxable and nontaxable Rents and for taxes collected”; (iii) account for “[t]he costs of additional goods and services, which are not Rent” (§ 35.0112(£)-(h)); and (iv) use the same basis for accounting for “keeping books and records”that it uses for “reporting and remitting” (§ 35.0114(i)). The Ordinance’s administrative enforcement provisions also focus solely on the hotel “Operator.” The Operator must “keep and preserve”all “business records as may be necessary to determine the amountoftax for which the /O/peratoris liable for collection and paymentto the City.” (§ 35.0121.) The City Treasurer may “inspect” the “Operator’s” “business records” and “apply auditing procedures necessary to determine the amount of tax due to the City.” (/bid.) If an “{[O]perator” “fail[s] or refuse[s] to collect” or “remit” the tax, the Treasurer “shall ... assess the tax and penalties ... against the [O]perator.” (§ 35.0117(a), (c).) An “Operator” may request a hearing to challenge the assessment, and must be given notice of the final “determination and the amountof such tax and penalties” imposed. (§ 35.0118(a)-(e).) STATEMENT OF THE CASE A. The San Diego Action Is Part OfA Coordinated Proceeding. In December 2004, the City of Los Angeles filed an action in Los Angeles Superior Court alleging that, under its TOT ordinance, each OTC is the “Operator” of every hotel from which anyofits customers obtains a reservation using the “merchant model,” and as the Operator,is liable for TOT on the added amounts it charges a customer. (2JA10:407.) Los Angeles alleged the same claims on behalf of a purportedclass ofall California cities with a TOT ordinance imposingtaxliability on hotel “operators,” and tax on the “rent charged by the operator.” (/bid.) San Diego, a putative class member represented by the same outside counsel, then filed its own complaint, also alleging that, under its substantively identical ordinance, the OTCsare hotel “Operators”liable for TOTandtheir additional charges are taxable “rent charged by the Operator.” (2JA10:407.) Because the two cases share common questions of fact and law, they were coordinated through the Judicial Council and assigned to the Hon. Carolyn B. Kuhl in Los Angeles Superior Court. (Ibid.) The court sustained the OTCs’ demurrers, ruling both cities must exhaust administrative procedures undertheir ordinances. ([bid.) B. The Anaheim Action: The Court OfAppeal Affirmed Judgment For The OTCs. Following dismissal, the same outside counsel that represents San Diego and Los Angeles decided to use a different putative class member, the City of Anaheim,as the “test case” for their theory that the OTCs could be held liable for TOT as hotel “Operators.” (2JA10:407.) Thus, Anaheim wasthefirst city to audit and assess the OTCsas purported “Operators” underits substantively identical TOT ordinance. (/n re Transient Occupancy Tax (“TOT”) Cases (Anaheim), Case No. B230457 (Nov.1. 2012) (hereafter Anaheim Opn.) at p. 4 (unpub.).) A hearing officer selected by Anaheim upheld the assessments. The OTCspetitioned for writs of administrative mandamus. (Anaheim Opn.at p. 4.) Those actions were added-onto this coordinated proceeding, and transferred to Judge Kuhl. (/bid.) Judge Kuhl,acceptingthe hearing officer’s findings offact, granted the OTCs’ petition and set aside the assessments, ruling (i) the OTCs are not hotel “operators”; and (4i) the added amounts charged andretained by the OTCsfortheir services are not taxable rent “charged by the operator.” (Anaheim Opn.atpp. 5-6.) The Court ofAppeal affirmed on both grounds: “Underthe plain meaningofthe ordinance, the OTCs cannot be considered to be operators of the hotels for which they provide room reservations .... Therefore the servicefees and markupsthat they charge to transients are not ‘charged by an operator.” (Anaheim Opn.at p. 10.) On January 23, 2013, this Court denied Anaheim’spetition for review.’ C. The San Diego Administrative Action. In the meantime, San Diego audited and assessed the OTCs,again “ The same Court ofAppeal panel affirmed judgment against the City of Santa Monica, which sought to impose TOTliability on OTCs underits ordinance. (TOT Cases (Santa Monica), Case No. B236166 (Nov. 1, 2012).) This Court denied Santa Monica’spetition for review on January 23, 2013. asserting that each OTCis a hotel “Operator,” and that an OTC’s additional amountsare taxable “Rent charged by the Operator.” (2JA10:412; 1OAR, T.39, p. 236.) A hearing officer selected by San Diego upheld assessments totaling more than $21 million. The hearing officer made the following findings of fact: The OTCs use “the internet to advertise hotels and complete transactions between customers and hotels for reserving rooms.” (1JA4:198.) The OTCs “contract with hotels” for the right to advertise room reservations, and “handle all financial transactions related to the hotels reservations, and ... becomethe ‘merchant of record.’” (1JA4:199.) The hotel sets and charges a “wholesale price” for the room; and the OTC sets the “mark-up”or “margin”that is addedto that price before the customeris charged for the room, as well as an additional fee “for the services rendered by the OTCsto their customers.” (1JA4:199, 200.) After the customer “appear[s] at the hotel[] and check{s] in,”the hotel “send{s] the OTC[] a bill for (1) the wholesale price[] of the room[], and (2) the actual TOT required to be paid by the hotels for those rooms based on the wholesale price charged to the OTCs.” (1JA4:201.) The OTC then forwards the billed amountto the hotel, which remits the TOTto the City. (/bid.) Despite factual findings that make clear the OTCs do not possess or control the premises of any hotel, the hearing officer concluded (a) each OTC is somehow the “Operator” of every hotel from which any customers book any reservations using the OTC’s merchant model; and (b) the additional amounts the OTC chargesfor its services are taxable “rent charged by the operator.” (1JA4:208-10, 217.) D. The Superior Court Set Aside San Diego’s Assessments. The OTCspetitioned for writs of administrative mandamus. 10 (6JA19:1201.) San Diego,in its pleadings and briefing to the Superior Court, continued to assert that the OTCs are hotel “operators,” and that the OTCs’additional amounts are “Rent charged by the Operator.” (2JA9:372, 381.) The Superior Court, the Hon. Elihu M.Berle nowpresiding, granted the OTCs’ petitions, denied San Diego’s cross-petitions, and issued a writ vacating the hearing officer’s decision and setting aside the assessments. (8JA26:1702.) The court explained that the Ordinance’s express terms impose tax liability and obligations only on “Transients” and hotel “Operators,” and tax only “the ‘rent charged by the operator’ to the Transientfor the privilege of occupancy ‘in any hotel’” — a limitation “repeated six times.” (6JA19:1199, 1210.) “Operator”is limited to the “proprietor” or “managing agent” of a hotel. (6JA19:1210.) By their plain meaning, “operator” and “proprietor” “have in common the concept of a person or entity that controls and runs ... a hotel.” (6JA19:1213, citing dictionaries.) The court, based on the hearing officer’s “findings of fact,” determined the OTCsdo not have“the right to run the business of the hotel,” and, thus, are not hotel “proprietors.” (6JA19:1199-220.)° The court held that “managing agent”refers only to the “type of agencyrelationship” where the agent has the “discretion” to make “decisions that will ultimately determine corporate policy.” (6JA19:1218- 220, citing cases.) The OTCs are not “managing agents,” as none has “the right to manageany hotel or to exercise operational authority over a hotel, muchless set corporate policy for any hotel.” (6JA19:1220.) “Instead, ° The OTCsdid not challenge, and the Superior Court accepted, the hearing officer’s factual findings, but not any conclusions of law mislabeled as factual findings. (6JA19:1203.) 11 they run their own websites and perform online sales functions for the hotels, which is a very limited function far away from corporate policy decision making.” (6JA19:1221.) Finally, the court concluded the additional amounts the OTC charges for its services are not subject to tax: The phrase “charged by the operator” ... limits the tax base to those amounts that are charged by the operator for the privilege of occupancy. Since ... the OTCs are not operators ofthe hotels, the amount that the OTCs charge for their reservation services [is] notpart ofthe rent. (6JA19:1222.) E. The San Diego Appeal: The Court Of Appeal Affirmed © Judgment For The OTCs. As oneof the coordinated cases, San Diego’s appeal was assigned to the same panel as Anaheim. Although the City sued the OTCsas alleged “Operators,” audited and assessed them as “Operators,” and then defended those assessments on that basis before the hearing officer and Superior Court, the City reversed course on appeal. The City finally conceded the OTCsare not hotel “Operators,” but asserted the OTCs “need not be” Operators to be liable under the Ordinance. (App. Br. 39.) Instead, the City argued the OTCs should be held liable for TOT on the entire amount charged to a customerin a reservation transaction because the OTCsets the additional amounts it charges for its services, and directly charges the customer’s credit card. (App. Br. 40.) The Court of Appeal rejected the City’s attempt to impose TOT obligationsandliability contrary to the Ordinance’s express terms. The court explained that San Diego’s Ordinance,“[l]ike the Anaheim ordinance,” imposes tax only on “the rent charged by the hotel operator,” and “makes ... clear that the tax obligations are imposed only on 12 transients and hotel operators.” (TOT Cases, supra, 225 Cal.App.4that p. 64.) The Ordinance simply includes no provision “imposing any tax liability on any entity other than the hotel operatoror the transient.” bid.) Presented with the samefacts, the court reaffirmed and adopted the “logic” of its Anaheim decision, and held, “under the plain meaning”ofthe Ordinance’s express terms, the “OTCs cannot be considered to be operators — proprietors or managing agents — of the hotels for which they provide roomsreservations.” (/d. at p. 65.) Adhering to the Ordinance’s “Rent charged by the Operator” limitation, the court also held: “[T]he words of the ordinance do not reveal an intent to imposea tax on the service fees and markups charged by the OTCs.” (TOT Cases, supra, 225 Cal.App.4th at pp. 63-64.) A court cannot “enlarge the scope of the tax to embrace matters not included in the specific languageofthe statute,” and thus “the OTCs’ service[] charges and markupsare not within the scope of the City’s ordinance.” (/d.at p. 65.) Therefore, the court concluded the City’s concessions “that OTCs are not transients, and that OTCsare not hotel operators” were fatal to its case; in light of them,“there is simply no basis for imposition of TOT liability on the OTC[s].” (TOT Cases, supra, 225 Cal.App.4th at pp. 72- 73.)° STATEMENT OF FACTS _ The facts, as found by the hearing officer, and summarized by the Court ofAppeal, are not in dispute: The OTCs“publish comparative information aboutairlines, hotels, ° During San Diego’s appeal, Judge Berle issued judgments for the OTCsin twoother actions in this coordinated proceeding, rejecting San Francisco and Los Angeles’ attempts to impose TOT liability on the OTCs. (Resp. Br. 1.) Appeals in those cases are stayed pending this Court’s decision here. 13 and rental car companies on their websites[, and] allow consumers to book reservations with these different travel providers.” (TOT Cases, supra, 225 Cal.App.4th at p. 60.) Pursuant to their contracts with hotels, OTCsassist a customerin obtaining, and prepaying for, a reservation from a hotel. (Ud. at p. 61.) Underthose contracts, the OTC doesnot(i) own, possess, operate, or manage hotels; (ii) buy, resell, or lease hotel rooms;(iii) maintain an inventory or block of rooms; (iv) possess or obtain the right to occupy any rooms;or (v) have a right or ability to take and transfer possession of any rooms to anyone. (See p. 10, ante.) When a customer books a reservation through an OTC’s merchant model, the total amount the OTC charges a customer’s credit card is typically displayed in two components. Thefirst, referred to as the “Room Rate,” is the Rent the hotel is charging for providing Occupancy of a room to the Transient (the “wholesale”price), plus an amount the OTC sets and charges as compensation for its services (the “margin,” together with the Room Rate, the “retail” price). (TOT Cases, supra, 225 Cal.App.4that p. 61.) The second component combines two items: the “Tax Recovery Charge,” which is based on the “wholesale price” charged by the hotel, and a service “fee” charged by the OTC forits services. (Ibid.) The “wholesale price” is then “charged by the hotel to the OTCs,”along with the TOT owedbythe hotel on that amount, and the hotel remits that tax to the City. (Ibid.) STANDARD OF REVIEW Becauseneither San Diego nor the OTCschallenged “thefactual bases for the administrative decision[]” before the Superior Court, the parties “waived or abandoned”the right to do so, and this Court must 14 “accept that the administrative [factual] findings were supported by the evidence.” (Environmental Protection Information Center v. Cal. Dept. Forest and Fire Protection (2008) 44 Cal.4th 459, 479.) However,like the courts below, this Court reviews de novoall issues of law, including construction of the Ordinance. (People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 432.) ARGUMENT I. THE RULES GOVERNING CONSTRUCTION OF TAX STATUTES COMPEL AFFIRMANCE This Court is tasked to ascertain the intent of the legislative body so as to effectuate the purpose of the law. (Select Base Materials, Inc. v. Bd. ofEqualization (1959) 51 Cal.2d 640, 645 (hereafter Select Base).) To determine that intent, a court examinesthe statute’s express terms. (Cal. Teachers Assn. v. San Diego Community College Dist. (1981) 28 Cal.3d 692, 698.) Where the statute’s language is clear and unambiguous,there is no need for statutory construction. (Lungren v. Deukmejian (1988) 45 Cal.3d 727, 735; see In re Derrick B. (2006) 39 Cal.4th 535, 539 [“To determine ... intent, [a court] first turn[s] to the words ofthe statute, giving them their usual and ordinary meaning. Whenthestatutory language is clear, [one] need go no further.”’}.) Further, a statute should be construed “with reference to the whole system of law of whichit is a part so that all may be harmonized and haveeffect.” (Select Base, supra, 51 Cal.2d at p. 645.) Because the powerto tax is the powerto destroy, special rules further govern construction of tax statutes: In every case involving the interpretation ofstatutes levying taxesit is the established rule not to extend their provisions, by implication, beyondthe clear import ofthe language used, or to enlarge their operations so as to embrace matters not 15 specifically pointed out. In case ofdoubt they are construed most strongly against the government, and in favorofthe citizen. (Pioneer Express Co. v. Riley (1930) 208 Cal. 677, 687 [quoting Gould v. Gould (1917) 245 U.S. 151, 153].) These rules are in place to prevent taxing authorities from extending their tax laws in novel or discretionary ways. (Jbid.) Simply, a taxing authority must be held to the express terms of a tax statute as enacted. (Agnew v. State Bd. ofEqualization (1999) 21 Cal.4th 310, 327.) | Moreover, under Proposition 218, the California Constitution prohibits a local government from “impos[ing], extend[ing] or increas[ing] any general tax unless and until that tax is submitted to the electorate and approved by a majority vote.” (Cal. Const., art. XIII C, § 2.) “In general, the intent of Proposition 218 [was] to ensurethat alltaxes ... are subject to voter approval.” (Legis. Analyst, Understanding Proposition 218 (Dec. 1996) ch. 1 (hereafter LAO Analysis).) In approving Proposition 218, the voters declared that “[t]his measure protects taxpayers by limiting the methods by whichlocal governments exact revenue from taxpayers without their consent.” (Ballot Pamp., Gen. Elec. (Nov.5, 1996) text of Prop. 218, pp. 108-09, § 2, reprinted at 2A West’s Ann. Cal. Const. (2006 supp.) Historical Notes, foll. art. XIII C, § 1, p. 73.) The local “general purpose” taxes Proposition 218 wasintended to curtail include “most notably ... hote/, business license, and utility user taxes.” (LAO Analysis, supra, ch. 1.) Thus, consistent with the ambiguity rule, any effort to enlarge the scope of a tax statute to impose liability on additional persons or a broader tax base must be explicitly approved by voters. As shown below,these rules compelaffirmance here. 16 Il. JUDGMENT SHOULD BE AFFIRMED BECAUSE THE OTCS HAVE NO TAX OBLIGATIONS OR LIABILITY UNDER THE ORDINANCE A. The Ordinance Imposes Tax Obligations And Liability Only On “Transients” And Hotel “Operators.” The Ordinance imposestax on “the privilege ofOccupancy.” (§ 35.0103.) The Ordinance focuses exclusively on the “Transient” who obtains Occupancy of the room, and the hotel “Operator” who providesit. (See p. 6, ante.) The only persons with any obligations orliability under the Ordinance are the “Transient” and the “Operator.” (See p. 7, ante.) A “Transient” is “any person who exercises Occupancy[] oris entitled to Occupancy.” (§ 35.0102.) The tax is a “debt owed by each Transient,” who must pay the tax to the hotel Operator. (§ 35.0110(a)(b) & (€).) An “Operator”is “the proprietor of the Hotel”or its “managing agent,” i.e., one who ownsor possesses and runs a Hotel that provides Occupancy. (§ 35.0102.) Each “Operator” must “register” with the City, obtain a “Transient Occupancy Registration Certificate,” and postit “on the [Hotel] premises.” (See p. 7, ante.) Only the Operatoris required to “collect” the tax from the Transient and “remit” it to San Diego, or “cause” that to happen. (§§ 35.0112, .0114, .0124.) If an Operatorfails to collect or remit the tax, the “City shall require the Operator to pay the tax.” (§ 35.0112(b), .0117(a).) The Ordinance’s administrative enforcement provisionsalso focussolely on the hotel “Operator,” and authorize the City to audit and assess only “Operators” for TOT allegedly not collected or remitted. (See p. 7, ante.) | Asthe Court of Appeal concluded, “[t]he ordinance ... makesit clear that the tax obligations are only imposed on transients and hotel 17 operators. There is no provision imposing anytax liability on any entity other than the hotel operator or the transient.” (TOT Cases, supra, 225 Cal.App.4th at p. 64.) The City does not challenge this conclusion. B. San Diego Concedes The OTCs Are Neither “Transients” Nor Hotel “Operators.” Because the Ordinance’s express terms impose tax obligations and liability only on Transients and hotel Operators, the dispositive question here is whether the OTCsare either; if not, they have no obligations or liability under the Ordinance. San Diego itself has answered this question: It concedes the OTCs do not obtain Occupancy, and thus are not Transients. (E.g., Op. Br. 8.) It further concedes on appeal that the OTCsare not “Operators,” and only the hotel is the Operator in an OTCtransaction. (See p. 12, ante; Op. Br. 2.) These concessions alone compel affirmance ofjudgmentforthe OTCs. As the Court of Appeal recognized: “The City concedes that OTCs are not transients, and that the OTCsare not hotel operators. Under the circumstances, there is simply no basisfor the imposition ofTOTliability on the OTC.” (TOTCases, supra, 225 Cal.App.4th at pp. 72-73.) Indeed, San Diego’s concessions mean there was neveranybasis for issuing assessments to the OTCs. The City is wrong whenit says Ordinance Section 35.0117 authorizesit “to audit OTCs andto assess them for any room tax.” (Op. Br. 23.) That Section empowersthe City Treasurer to audit and assess only hotel “Operators”: “City Treasurer shall forthwith assess the tax and penalties ... against the [O]perator.” (§ 35.0117(a).) The City assessed the OTCs based on the assertion that each is the “Operator” of every hotel from which any OTC customer obtains a 18 reservation, and that the additional amounts it charges a customerare taxable “Rent charged by the Operator.” The City now admits that assertion was false; the OTCsare not hotel “Operators.” Thus, the City is asking this Court to reinstate assessments for which there was no basis under the Ordinanceto issuein thefirst place.’ Wl. JUDGMENT ALSO SHOULD BE AFFIRMED BECAUSE THE AMOUNT AN OTC CHARGES A CUSTOMER FOR ITS SERVICES IS NOT “RENT CHARGED BY AN OPERATOR” SUBJECT TO TAX San Diego’s concession that the OTCsare not Operatorsis fatal to its case for a second reason. The Ordinance imposestax “in the amount of [10.5%] of the Rent charged by the Operator.” (§§ 35.0103, .0104, .0105, .0106, .0108.) Thus, the tax base is expressly limited to the “Rent charged by the Operator.” Because the City concedes the OTCsare not Operators, the additional amount an OTC charges a customerfor its services cannot be taxable “Rent charged by the Operator.” Moreover, not all amounts a hotel Operator charges are subject to TOT — only “Rent charged by the Operator.” “Rent”is defined as: the total consideration charged to a Transient as shown on the guest receiptfor the Occupancy of a room,or portion thereof, in a Hotel .... “Rent” includes chargesfor utility and sewer hookups, equipment, (such as rollaway beds, cribs and television sets, and similar items), and in-room services (such as movies and other services not subject to California taxes), valued in money, whether received or to be received in money, goods, labor, or otherwise. “Rent” includes all receipts, cash, credits, property, and services of any kind or nature without any deduction therefrom. (§ 35.0102.) Underthe first sentence of the definition, Rent includes only the ’ For these reasons, the OTCs submit review was improvidently granted, and the petition should be dismissed. (Cal. Rules of Court, rule 8.532(c); see People v. Bobo (1992) 4 Cal.Rptr.2d 763 [dismissing review and ordering Court of Appeal opinion re-published].) 19 consideration “charged by the Operator”to the Transient “for the Occupancy of aroom.” Underthe second sentence, added charges for items and services provided by the Operator to the Transient are for Occupancy, and therefore included in Rent, only ifthe items and services are for use “in-room.” The third sentence provides, no matter the method and means of paymentby the Transient, the full amount charged by the Operator for Occupancyis taxed. The hearingofficer found the hotel sets the amountit charges for a Transient’s Occupancyofa room (the “wholesale” price), and the OTC collects that amount from the customer (along with the tax the hotel will oweon that amount), and then remitsit to the hotel. (1JA4:200-01.) That amountis the “Rent” — the amount for the Occupancyofa room — “charged by the [hotel] Operator.” The hearing officer also found that, under the OTCs’ contracts with hotels, the OTC sets the additional amounts it charges a customer forits services to obtain a reservation from a hotel. (See p. 10, ante.) Those additional amounts are the OTC’s “margin”(its charge on top of the “wholesale” price set by the hotel) and an additional service “fee.” (1JA4:199, 200.) Under the OTCs’ contracts with hotels, the hotel does not set, charge, receive, or have any interest in, the OTC’s additional amounts; the OTC charges andretains those amounts on its own behalf. (1JA4:201 ) Thus, the Superior Court concluded the additional amounts the OTC charges for its services are not taxable “Rent” because they are not “consideration charged by an operator for accommodations.” (6JA19:1222.) And the Court ofAppeal correctly affirmed, because the Ordinance taxes only the amount “charged by the hotel operator,” and “contains language limiting the taxable rent to the amount chargedfor the 20 occupancy ofaroom.” (TOT Cases, supra, 225 Cal.App.4th at p. 65, emphasis in original.) Accordingly, [b]ecause the City’s ordinance imposes tax only on rent charged by an operator, it does not reach amounts charged by the OTCfor its services ..... We therefore hold, as we did with the similar Anaheim ordinance, that the OTC’s service[] charges and markupsare not within the scope ofthe City’s ordinance. (1bid.) This ground too compels affirmance ofjudgmentfor the OTCs. IV. THE ORDINANCE’S EXPRESS TERMS FORECLOSE SAN DIEGO’S ATTEMPT TO IMPOSE TAX ON ANY AMOUNT THATIS NOT “RENT CHARGED BY THE OPERATOR” A. San Diego Cannot Trump The Ordinance’s Express “Rent Charged By The Operator” Limitation With A Supposed Implied Intent To Tax More Than That Amount. San Diego concedes the Ordinance’s express terms impose tax only on the “rent charged bythe hotel for transferring the privilege of occupancy to the customer.” (Op. Br. 2.) But San Diego asserts this language must be construed to carry out an implied intent to impose tax on the total amount charged to a Transient in a reservation transaction, regardless of by whom or for what. (/d. at p. 3.) This supposed implied intent, however, directly conflicts with the intent evidenced by the Ordinance’s express terms, which imposetax only on the amount “charged by the Operator”to the Transient for providing Occupancyofa room, and not amounts charged to Transients by anyoneelse or for anything else. (See p. 19, ante.) San Diegofirst asserts the intent to tax everything is implied by the Ordinance’s “Purpose and Intent” section (§ 35.0101(a)), which it contends makesthe “Transient” the “exclusive focus of the room tax.” (Op. Br. 29.) Butthat section merely states the City’s intent is to impose a “tax[] on Transients.” It says nothing about what amount is taxed. The sections that 21 do, impose tax only on the “Rent charged by the Operator.” (See p. 6, ante.) The Ordinance’s “exclusive focus” is on the Occupancy of a room, and the twoparties to its transfer — not just the “Transient,” but also the hotel “Operator,” who is mentioned eighty-five times, including in each ofthe six provisions stating the amount taxed. (See p. 6, ante.) San Diego next asserts an intent to tax the total “consideration charged to the customer” — regardless of by whom or for what — is implied because the Ordinance’s “trigger and purpose”is the Transient’s “purchase of Occupancy.” (Op. Br. 30.) But again, such an intent is contrary the Ordinance’s express “Rent charged by the Operator”limitation. Finally, citing section 35.0112, San Diego contendsthere is an implied intent to tax the total amount becausethe “taxable moment” occurs whenthe Transient is charged for Occupancy. (Op. Br. 31.) But that section merely requires that an Operator ensure tax is collected from the Transient when “Rent” is paid. The section says nothing about the amount taxed. Thus, the Court ofAppealcorrectly rejected San Diego’sattemptto broaden the tax baseto fulfill a supposed implied intent to tax amounts beyond the Ordinance’s express limiting terms: Weunderstandthe statute’s intent to impose a tax on transients; however, we also understand from thestatute’s plain languagethat the tax is limited. It may only be imposed uponthe amountofrent charged by the hotel operator to the transient. (TOTCases, supra, 225 Cal.App.4th at p. 72.) This “plain language interpretation” “fully comports with the stated intent of the ordinance.” (Ibid) 22 B. San DiegoCannot Rewrite The “Rent Charged By The Operator” Limitation To Tax Other Amounts. Unable to escape the “Rent charged by the Operator” limitation, San Diego impermissibly rewrites it to achieve its desired outcome. First, San Diego attempts to redefine “Rent charged by the Operator” by arguing the plain meaning of “charge”is the “amount of money demanded of someone wanting to acquire something.” (Op. Br. 40.) However, the sentence does not use the noun “charge,” but rather the verb “charged.” The very dictionary the City cites defines the verb “charge”as “to demand (an amount) as a price from someonefor a service rendered.” (Oxford Dict. Online (2014).) And the noun “charge”is “[a] price asked for goods or services.” ([bid.) Thus, by its express terms, the Ordinance taxes only the price “charged[i.e., demanded] by the Operator’?for the service ofproviding Occupancy ofa room, and nothing more.® Asthe Court of Appeal recognized, “[t]he OTC service charges are not charged by the Operator.” (TOT Cases, supra, 225 Cal.App.4that p. 69.) “In the merchant transactions at issue, no mark-up or service fee imposed by the OTCis ever charged by the hotel operator.” (Id. at p. 70.) Thus, the “laldditional fees charged only by the OTCsfortheir services cannot be included in th[e] taxable base.” (Jbid.) Second, San Diegoasserts the Ordinance defines Rent as “the total consideration charged to a Transient as shown on the guest receipt for the Occupancy of aroom ... without any deduction therefrom.” (Op. Br. 10, 42; ellipsis in original; emphasis in original at p. 42.) But San Diego ® The City complains a Transient maynotbe able to obtain Occupancy directly from the hotel for the “wholesale”price it charges in a merchant model transaction (Op. Br. 41). But even if so, only the “Rent charged by the Operator”is taxable, and, in a merchant model transaction, that amount is the hotel’s “wholesale”price. 23 cannot rewrite the definition of Rent by ellipsis. The text before the ellipsis is from thefirst sentence of the definition, while the text after the ellipsis is from the third sentence. By splicing the two fragments together, San Diego creates a new sentence. (/d. at p. 42.) But “without any deduction” does not modify the first two sentences — the first provides that “Rent”is limited to the Operator’s charge to the Transient for Occupancy, and the second providesthat the only added charges that are for Occupancyare those for “in-room”items or “services.” (See p. 20, ante.) The third sentence, which includes the phrase “without any deduction,” only addressesforms ofpayment for Occupancy (hence the inclusion of “cash” and “credits”), and as the Court ofAppeal recognized, “cannot be interpreted to read ‘Rent includes all chargesfor any services of any kind. Ifthe drafters had intended ‘rent’ to include charges for any and all services paid for by the transient, it would have included language specifying such an intent.” (JOT Cases, supra, 225 Cal.App.4th at pp. 67- 68, emphasis in original.) In any event, “regardless ofhow the term Rentis defined,” only amounts “charged by the Operator” can be taxed; thus, the OTCs’ “services charges” are not taxed. (/d. at p. 69.) Moreover, the Ordinance does not impose tax on the total amount “shown on the guest receipt.” (Op. Br. 43.) Indeed, in seeking this Court’s review, San Diego recognized the reference to the guest receipt in the “Rent” definition “do/es/n’t matter” ~ the first sentence in the definition would mean the same with or without it — “the consideration chargedfor the occupancy ofspace in a hotel.” (Pet. 20 fn.7.) Moreover, the Ordinance contemplates goods and services not subject to tax may besold as part of a package and not broken out on the Operator’s guest receipt: “The costs of additional goods andservices, 24 which are not Rent, but which maybe sold as a package ... shall be accounted for ....” (§ 35.0112(h).) Thus, the tax base may or may not be the entire amount shownon a guest receipt. And, again, “even if the term ‘rent’ could be read expansively to include items not specifically listed in the definition, those items are not taxable unless they are charged by the hotel operator.” (TOT Cases, supra, 225 Cal.App.4that p. 66.) C. San Diego Cannot Treat The Amount An OTC Charges Customer And Retains For Its Online TravelServices As Iftt Were “Rent Charged By The Operator.” Cabined by the Ordinance’s express “Rent charged by the Operator” limitation, San Diego asserts the additional amounts the OTC charges a customerforits services should nonetheless be treated as ifthey are “Rent charged by the Operator.” That assertion is contrary to the Ordinance’s express terms and the hearing officer’s factual findings. 1. Rate Provisions In The OTCs’ Contracts With Hotels Do Not Transform The Additional Amounts An OTC Charges For Its Services Into “Rent Charged By The Operator.” It is undisputed that the additional amounts an OTC chargesforits services are not actually charged by the hotel Operator. In an attempt to evadethis reality, San Diego points to whatit calls “rate parity” provisions in certain OTC-hotel contracts to assert that the hotel “dictate[s}”the total amount the OTC must chargeto the Transient, and, therefore, the additional amounts an OTC chargesforits services are “indirectly” charged by the hotel and subject to tax. (Op. Br. 3, 13, 31-32.) San Diego’s argumentfails for four reasons. First, San Diego’s assertion that fifty-nine of the sixty-three “standard merchant model contracts” include a “rate parity” provision “dictating” the amount an OTC can chargeforits services (Op. Br. 13 fn. 9) 25 is incorrect and misleading. In OTC-hotel contracts, when used,the label “rate parity” primarily describes provisions requiring the hotel to charge a “net rate” on par with the “netrate” it charges to other intermediaries.” These provisions merely ensure the OTC is treated as favorably as other intermediaries by the hotel, and do not address how much an OTC can charge a customerfor its services. In reality, only thirty-eight of the sixty- three contracts cited by the City include a provision that even discusses how much an OTC can charge a customerforits services.!° Moreover, the City distorted the record by excluding twenty-eight of the OTC-hotel contracts in the record, many of which concern the opaque “merchant model” that some OTCsusefor mostorall of their transactions. In the opaque model, no “room rate” is shownto the customer; rather the customer “bids” for a reservation at a price the customersets. (1JA4:207.) Including those contracts, only 41 of the 91 — 45% — include a provision that even discusses how much an OTCcan charge a customerfor its services. Thus, the City’s argument — that such provisions allow the hotel to “dictate” the additional amounts charged by an OTCfor its services — can haveno application to the majority of contracts in the record. Second, noneofthe thirty-eight contracts cited by the City that do include sucha provision allow the hotel to “dictate” the additional amounts an OTC chargesforits services. As San Diego concedes, those provisions are designed merely to ensure that the “room rate” shown to customers by the OTCis not less than the rate offered to customers by the hotel onits * (See, e.g., 16AR, T.57, p. 907; 17AR, T.62, p. 988; 39AR, T.284,p. 12241; 40AR, T.294, pp. 6289, 6292.) © Thus, the City’s assertion that 93.6% ofthe contracts it cites include such a provision is incorrect — only 60% do. 26 own website, because the hotel and OTCsare competitors for customers seeking reservations. (Op. Br. at p. 15 fn. 10.) Under these provisions, the OTC merely agrees to charge a “minimum” amountas its margin abovethe amountthe hotel is charging for Occupancy. (Op. Br. 13.) Those provisions make clear the OTC,not the hotel, “determines”or “sets” the OTC’s margin.'’ As San Diego admits, the OTC is free to setits “margin” higher than the minimum,constrained only by “the practicalities of competition,” i.e., market forces. (/d. at p. 15 fn. 11.) Nothing in those provisions transforms the OTC’s margin into an amountset, charged, and received by the hotel for Occupancy.” Moreover, the cited rate provisions say nothing about how much an OTCcan charge for its service fee. This point alone refutes the City’s assertion that these provisjons allow the hotel to dictate the entire amount charged in a reservation transaction. Indeed, the City contends “as a result of the mark up and fees charged by the OTC,” the customertypically “pays more” when using an OTC’sservices than when booking directly with a hotel. (/d. at p. 46 fn. 22.) Third, whatever San Diego meantbyasserting that hotels “dictate” the amount the OTC chargesfor its services, its counsel recently represented to the Hawaii Supreme Court that it did not intend to suggest in its Opening Brief to this Court that the hotel sets the OTC’s margin and service fee. (See OTCs’ Request for Judicial Notice.) '! (See, e.g., 16AR, T.57, pp. 904-05; 16AR, T.58, p. 937; 17AR, T.65, p. 1025; 18AR, T.85, pp. 1371-72; 19AR, T.93, pp. 1542-43.) 2 San Diego concedes the OTCsdonot possess roomsor “obtain any right of room occupancy” (Op.Br. 7-8), and thus, the additional amounts an OTCchargesandretains for its services cannot be “Rent” — consideration charged “for Occupancy” — because the OTC has no Occupancyto provide. 27 Fourth, any assertion that the hotel charges the additional amounts the OTC chargesforits services is contrary to the hearing officer’s findings. The hearing officer found that under the OTCs’ contracts with hotels, each hotel sets the “wholesale price” — the amountthe hotel is charging for a Transient’s Occupancy of a room, and the OTC sets its own “margin” and service “fee.” (See p. 10, ante.) The hotel does not set, charge, receive, or have any interest in or right to, those additional amounts; the OTCsets, charges, and receives them on its own behalf. (See p. 10, ante.) Those additional amounts are not “charged by the Operator,” directly or indirectly. Indeed, during the administrative process, San Diego argued that underthe hotel contracts “the OTCs exert broad transactional control” and set the “price paid by the transient.” (10AR, T.39, pp. 236-39.) In other words, the City then acknowledgedthe reality it now seeks to obscure — the OTC,not the hotel, controls the additional amounts it charges customers for its services in a room reservation transaction, and charges them on its own behalf. The City’s opposite assertions then and now highlightits struggles to concoct a way to tax the OTCs under an Ordinancethat plainly does not apply to them. | Before the Court ofAppeal, San Diego wentso far as to contend that because the OTCis the one directly charging the customer’s credit card, “the hotel charges nothing to the transient” in a merchant modeltransaction. (TOT Cases, supra, 225 Cal.App.4th at p. 66 fn. 10, emphasis in original.) “Counsel for the City stressed on this point considerably during oral argument, insisting repeatedly that the hotel operators are charging nothing during the transaction at issue.” (/bid., emphasis in original.) The court rejected this “absurd” notion, explaining that the “price set by the OTCs includes the amountpaid to the hotel for occupancyofits rooms, plus a 28 markup for the OTCs’ services.” (/bid.) San Diego’s opposite assertion to this Court — that the hotel indirectly charges everything, including the OTC’s additional amounts for its services, is equally absurd. The City’s attempt to find support in the Court ofAppeal’s refutation of its prior, opposite assertion (Op. Br. 32) is disingenuous. As the court explained, the OTC’s additional amounts are not charged by the Operator: The hotels are not giving away roomsfor free.... The hotels are in the business of making moneyby charging transients for occupancyoftheir rooms.... [T]he reality [is] that the wholesale room rate — which the hotel ultimately receives from the OTC pursuant to the contractual agreement between those entities — is in fact charged by the hotel. The OTC service fees are not. (TOTCases, supra, 225 Cal.App.4th at p. 66 fn. 10, emphasisin original.) 2. The Timing Of When The Hotel Receives The Rent It Charges For A Transient’s Occupancy Does Not Transform The Additional Amounts An OTC Charges For Its Services Into “Rent Charged By The Operator.” San Diegoasserts the total amount charged to the Transient should be treated as ifcharged by thehotel, because the hotel doesnot receiveits “cut”until after the reservation transaction. (See, e.g., Op. Br. 2, 3-4, 17, 20.) But, as the hearing officer found, under the OTCs’ hotel contracts, the hotel sets the “wholesale”price — the amountit is charging for providing Occupancy to a Transient — before the Transient’s reservation transaction. (See p. 10, ante.) San Diego concedes the amounts the hotel and OTC each receive are “contractually-agreed” upon. (Op. Br. 2.) That the hotel Operator receives the Rentafter the reservation transaction, does not change the Ordinance’s express edict that the only amounttaxedis the “Rent charged by the Operator.” San Diego’s “three transactional step” construct of a merchant model 29 transaction reflects this reality. (Op. Br. 13.) Underthe “first step,” the OTC’s contract with the hotel, and the hotel sets its charge for providing Occupancy before the reservation transaction. (bid.) The “secondstep,” the reservation transaction, involves charging the Transient the hotel’s preset Rent (and TOT on that amount), as well as the additional amounts the OTC chargesfor its services. (/d. at p. 20.) The “third step” involves the OTC remitting the hotel’s preset Rent (along with the TOT)to the hotel upon being invoiced. (/d. at pp. 20-21.) Asthe Court of Appeal determined: [N]one of the City’s arguments regarding the timing and meansof collection can change the plain meaning ofthe statute. The OTCs’ markup andservices fees cannot be considered “‘Rent charged by the Operator.” (TOT Cases, supra, 225 Cal.App.4th at p. 72.) 3. ThatThe OTC By Contract Collects The Hotel’s “Rent,” And Tax On That Amount, Does Not Transform The OTC’s Additional Amounts Into “Rent Charged By The Operator.” Finally, San Diegoasserts that the OTCs “function as the hotels’ agents,” and therefore the additional amounts the OTC charges a customer are attributable to the hotel, and, thus, taxable “Rent charged by the Operator.” (Op. Br. 33.) This assertion is refuted by the very case the City cites, which makesclearthat the only actsattributable to a principal are those performedby an agent “within the scope ofhis authority.” (Columbia Pictures Corp. v. DeToth (1948) 87 Cal.App.2d 620, 630.) The hearing officer found the OTCis, at most, a hotel’s agent for the limited purpose of collecting the amount charged bythe hotel for providing Occupancy of a room,plus the tax the hotel will owe on that amount. 30 ( 1JA4:207.)° San Diego concedes the OTCsare not “general agents” of hotels, but rather, only “with respectto the particular duties they have undertaken to perform.” (Op. Br. 53 fn. 29.) Thus, the scope of any purported OTC agencyis limited to “charging and collecting” the hotel’s “wholesale” price and tax on that amount. (/d. at p. 33.) Only those amounts are collected on the hotel’s behalf, and therefore can be attributed to the hotel. As the Court of Appeal explained, even if the OTCsare limited agents, the only amount subjectto tax is the “rent charged by the operator,” not “the fees that the OTCs themselves charge.” (TOT Cases, supra, 225 Cal.App.4th at p. 72.) Ignoring this reality, San Diego argues the total amount charged to the Transient by the OTC mustbeattributed to the hotel because “the entirety of what [the agent] collects is deemed collected on behalf of the principal.” (Op. Br. 34.) But the two casesit cites say no such thing. In Groves v. City ofLos Angeles (1953) 40 Cal.2d 751, this Court relied on the Insurance Code (not general principles of agency law), which it held required that any amount charged for insurance must be considered charged by the principal — the insurance company — and thus could not be subject to additional premium tax as the agent’s revenue. The Insurance Code provision at issue imposes tax on the “gross receipts” of an insurer, and not merely on the amountactually charged by the insurance company '8 The hearing officer did not conclude the OTCsare fiduciary agents of hotels, as opposed to agents in the colloquial sense of an intermediary performing contractual obligations. Nothing in his factual findings would support such a conclusion. (See Elayyan v. Sol Melia, S.A. (N.D. Ind. 2008) 571 F.Supp.2d 886, 892 [“[The hotel] does not control the content of [the OTCs’] websites, which are targeted at a worldwide audience. The online booking services are not agents of [the hotel] nor do they work exclusively for [the bath and [the hotel] does not control these online booking services.”’]. 31 for a specific service. (/d. at pp. 753-54.) In contrast, the Ordinance imposes tax only on the amount “charged by the Operator”for “Occupancy.” Andin Scholastic Book Clubs, Inc. v. State Bd. ofEqualization (1989) 207 Cal.App.3d 734, the court answered only whether “use of California’s teachers and schoollibrariansto solicit sales from California students constitutes a sufficient nexus for the imposition of ... use taxes.” (Id. at p. 740.) The court said nothing on the amount subject to tax, much less that any amountcollected by an agent, whether inside or outside the scope of its agency, wasattributable to a principal. V. ONLY THE HOTEL OPERATOR COULD BE LIABLE FOR ANY ADDITIONAL TAX IF OWED As demonstrated above, the additional amounts charged by an OTC for its services are not subject to TOT because they are not “Rent charged by the Operator.” (See pp. 19-21, ante.) But even if those amounts could be taxed, the only person that could be assessed and held liable for tax on those amountsis the hotel “Operator,” not the OTC. (See p. 17, ante.) “There is no provision [in the Ordinance] imposing anytaxliability on any entity other than the hotel operator or the transient.” (TOT Cases, supra, 225 Cal.App.4th at p. 60.) This is true even though the Ordinance expressly contemplates that an “operator” may use third party to “collect” tax from a Transient: an Operatorshall “collect or cause to be collected the [TOT] due from transient.” (§ 35.0124(a).) A. The OTCs’ Contracts With Hotels Are Not A Basis For Imposing Liability On The OTCs Under The Ordinance. San Diego contends that even though OTCsare not the Operators, they could be held liable under the Ordinance for tax if owed on their additional amounts, based on their contracts with hotels. The City’s effort 32 to expand the Ordinance’s reach has nobasis in those contracts or law. 1. The Hotel’s Contractual Delegation Of The Collection Of The Hotel’s “Rent,” And Tax On That Amount, Is Not A Basis For Imposin U de San Diego asserts the OTCs would be liable under the Ordinance for any additional tax if owed even though they are not Operators because, pursuant to their contracts with hotels, the OTCsare “solely responsible” for the “payment of room tax onthe full room rate” or any tax “determined to be due and owing. (Op. Br. 47.) This argumentfails for two reasons. First, San Diego’s characterization of the relevant contract provisionsis a fiction. For example, one contract it cites merely obligates the hotel to “remit any andall taxes” owed on the amountit charges for providing Occupancy to the Transient(the “wholesale rate”).'* Another provides the OTC will remitto the hotel the amountthe hotel charges for providing Occupancyto the Transient (and tax the hotel will owe on that amount), and, as between those parties, the OTC will be “solely responsible”financially “if any” tax is assessed on the additional amounts the OTC charges a customerforits services.” A third states the OTC will remit to the hotel the amountthe hotel charges for Occupancy (and tax on that amount), and that the OTCis “solely responsible” for remitting tax (to either the hotel or the taxing authority) on the additional amounts the OTC charges a customerfor its services, ifa determination is madethat tax is owed on that amount.’® The remaining contracts the City cites (Op. Br. 47 fn. 23) say nothing different. 4 16AR,T.57, p. 914. 'S 16AR,T.58,p. 937. '6 17AR, T.68, pp. 1114, 1125. 33 The contracts cited do not purport to assign to the OTC any tax obligationsor liability under any jurisdiction’s tax ordinance, much less make the OTC “solely responsible” for remitting tax to any authority. Rather, the contracts merely (i) provide the hote/ will receive and remit tax owed on the amountthe hotel charges for Occupancy; and(ii) assigns financial responsibility as between those two private contracting parties if tax is later determined to be owed on the additional amounts the OTC charges for its services. Nothing in the contracts purports to delegate any obligations or liability a hotel has under any jurisdiction’s statute or ordinance, muchless purport to transform the OTC into an entity with tax obligations andliability under any ordinance where none otherwise exists. Second, even if the contracts purported to do so, a contract between private parties cannot empowerSan Diego to imposeobligations and liability on persons beyond whatis authorized by the Ordinance’s express terms. A private contract cannot expand the scopeofa statute or ordinance any more than it could it restrict it. (Alpha Beta Food Markets, Inc.v. Retail Clerks Union Local 770 (1955) 45 Cal.2d 764, 771 [“[R]equirement under the law” cannot be “varied or evaded byprivate contract.”].) 2. The City Cannot Impose Liability On OTCs Under The Ordinance As A Supposed Third-Party Beneficiary Of The OTCs’ Hotel Contracts. San Diego contends it may, under the Ordinance,“directly enforce the OTCs’ collection and remittance duties” under the OTCs’ contracts with hotels as a third-party beneficiary. (Op. Br. 49.) The City’s argument, whichit never asserted at any stage below,also fails for two reasons. First, San Diego is not a third-party beneficiary to those contracts under the very twocasesit cites. A third-party beneficiary exists only where a contract was “made expresslyfor the benefit ofa thirdperson.” 34 (Johnson v. Superior Court (2000) 80 Cal.App.4th 1050, 1064.) “[T]he contracting parties must have intended to benefit that third party and such intent appears on the terms of the contract.” (/bid.) “The test ... is whether an intent to benefit a third person appears from the terms of the contract. If the terms of a contract necessarily require the promisor to confer a benefit on a third person, then the contract, and hencethe parties thereto, contemplate a benefit to a third party.” (Prouty v. Gores Technology Group (2004) 121 Cal.App.4th 1225, 1232 (hereafter Prouty).) Accordingly, the contract’s express terms must manifest an intent to necessarily confer a benefit on a third party. San Diegoasserts it is a “third-party beneficiary” of the contracts because their purposeis to “make sure that the City receivesall taxes owed.” (Op. Br. 49.) But, as shown,the provisionsit cites merely provide that the hotel! will remit tax on the amountthe hotel charges for Occupancy, and assign financial responsibility, as between the two private contracting parties, iftax is later determined to be owed on the OTC’s additional amounts. (See p. 34, ante.) Nothing in any ofthe cited contracts reflects an “express intent” to “necessarily require” that a benefit be conferred on the City. Either tax is owed under the Ordinanceorit is not; the division of financial responsibility between the private contracting parties for any potential tax liability is for their benefit, not the City’s. At most, San Diego could argue that the contracts incidentally benefit the City, but that is not enough, as held in the very caseit cites: [A] third party whois only incidentally benefitted by performanceofa contract is not entitled to enforce it. [T]hat [one] is incidentally named in the contract, or that the contract, if carried out accordingto its terms, would inure to his benefit, is not sufficient to entitle him to demandits fulfillment. (Prouty, supra, 121 Cal.App.4th at p. 1233.) 35 San Diego also contendsit is a third-party beneficiary under the contracts because the OTCs have become“primary obligors” on a debt owed bythe hotels to the City. (Op. Br. 50.) But under the very cases the City cites, one only becomesa primary obligor by formally assuming a knowndebt obligation of another party (such as an existing mortgage), and thereby becoming the “principal debtor.” (E.g., Parrish v. Greco (1953) 118 Cal.App.2d 556, 561.) The OTCs have not assumed any known debt obligation owed by hotels to the City under any of the contractual provisionsthe City cites. Second, even if San Diego were a third-party beneficiary of the OTCs’ contracts with hotels, the cases the City cites make clear that any cause ofaction as such a beneficiary would be for breach of contract, not a basis for imposing tax obligations andliability under the Ordinance. (See Prouty, supra, 121 Cal.App.4th at p. 1233; Hess v. Ford Motor Co. (2002) 27 Cal.4th 516,524.) The City never asserted such a cause ofaction against the OTCs (JA8:3 14-327), and cannot now doso. 3. Indemnity Provisions In The OTCs’ Contracts With Hotels Are Not A Basis For Imposing Liability On The OTCs Under The Ordinance. San Diegoalso seeks to imposetax liability on the OTCs under the Ordinance based on indemnification provisions in the OTCs’ contracts with hotels. (Op. Br. 51.) Again, the contracts are no help to the City. An indemnity provision is an agreementto pay a loss of anotherif later incurred.. (See Oxford Dict. Online (2014) [an “indemnity”is “security or protection against a loss or other financial burden’’].) That is precisely what the indemnification provisions are here. For example, in one contract the City cites, the OTC agrees to reimbursethe hotel against “liabilities, costs, damages, and expenses”incurred from the failure to pay 36 tax if owed on the additional amounts the OTC charges customers.!” In another, the OTC agrees to reimburse the hotel against “losses, liabilities, costs, damages, and expenses” incurred from the failure to pay any tax determined to be owedon those additional amounts.'® In a third, the OTC agrees to reimbursethe hotelif it is required to pay tax assessed on those additional amounts.'? The remaining contracts San Diegocites are the same in substance. (Op.Br. 51 fn. 28.) Under these provisions, the OTC agrees to reimburse the hotel if the hotel is required to pay tax on the additional amounts the OTC charges a customer. These provisions provide no basis for San Diego to assess and impose TOTliability on the OTCs under the Ordinance. San Diego contends California Civil Code section 2777 provides such basis, again an argumentnot raised below. But that section is not implicated by the indemnity provisions here. Section 2777 states “[o]ne who indemnifies another against an act to _ be done bythelatter, is liable jointly with the person indemnified, and separately, to every person injured by such act.” (Op. Br. 51.) Thus, that section applies only where the indemnitor agreed to indemnify the indemnitee for an act to be done by the indemnitee. Accordingly, in Bryan v. Banks (1929) 98 Cal.App.748, 755-56, cited by San Diego,a third-party beneficiary had a claim against indemnitors that had agreed to perform an act to be done by the indemnitee — make payments on the indemnitee’s promissory note to a third party, and failed to do so. Here, the OTC hasnot agreed to pay TOTto any tax authority on a '” 16AR,T.52, p. 865. '8 16AR,T.60,p. 967. 9 18AR,T.85,p. 1380. 37 hotel’s behalf, or indemnify the hotel if the OTC fails to do so. Rather, the OTC merely has agreed to reimbursethe hotel, if the hotel is later required by a taxing authority to pay tax on the OTC’sadditional amounts. B. California Civil Code Section 2344 Is Not A Basis For Imposing Liability On The OTCs Under The Ordinance. San Diegolast argues that, if additional tax is owed, section 2344 is a “statutory basis” for imposing obligations and liability on the OTCs under the Ordinanceas limited purpose “agents” of hotels. (Op. Br. 52.) But the Ordinance’s express terms impose TOT obligationsandliability only on three types of designeesofthe hotel “proprietor” — a “managing agent,” “resident manager,” or “resident agent.” (§ 35.0102.) The City has never asserted the OTCsare “resident managers”or “resident agents,” and concedes they are not “managing agents.” (Op. Br. 53 fn. 29.) Nothing in the Ordinance imposes tax obligations and liability on non-managing “agents.” Nothing prohibits a hotel Operator from contracting with a third party to collect rent or taxes on its behalf; again, the Ordinance contemplates an Operator doing so. (See p. 17, ante.) But as the Court of Appeal recognized, “{t]here is no provision imposing any tax liability on any entity other than the hotel operator or the transient.” (TOT Cases, supra, 225 Cal.App.4th at p. 64.) Nothing in section 2344 empowers San Diego to look outside the Ordinance to imposeliability under the Ordinance. Moreover, under section 2344 an agent’s liability is limited to only amounts it received for the benefit of its principal: If an agent receives anythingfor the benefit ofhis principal, to the possession of which anotherperson is entitled, he must, on demand,surrenderit to such person, or so muchofit as he has underhis control at the time of demand .... (Civ. Code, § 2344.) 38 Again, underthe hearing officer’s factual findings, the only amounts the OTC collects for the hotel are the amount the hotel charges for providing Occupancyto a Transient, plus the tax on that amount. (See p. 10, ante.) San Diego already receives that tax from hotels. (Op. Br. 2.) Thus, the OTC hasnot received any money, i.e., tax, for the hotel’s benefit to which the City is entitled. For this reason too, section 2344is inapplicable. 99 66San Diego asserts the OTCs’ service “fees” “can be characterized as unpaid room taxes” owed to the City. (Op. Br. 53.) But that assertion conflicts with the hearing officer’s factual finding that the OTCs only charge and collect tax on the rent charged by the hotel for providing occupancy, and not on the additional amounts (the margin and service fee) the OTC chargesfor its services. (See p. 10, ante.) And again, the OTC sets, charges, and receives those additional amounts on its own behalf, not the hotel’s. (See p. 10, ante.) VI. EVEN IF THE ORDINANCE WERE AMBIGUOUS, THE OTCS’ CONSTRUCTIONS MUST BE ADOPTED Asthe Court of Appeal recognized, this Court has made clearthatif there is any “doubt”as to the plain meaning ofa tax statute’s express terms, the statute must be “construed most strongly against the government, and in favor of the citizen.” (TOT Cases, supra, 225 Cal.App.4th at p. 63.) Therefore, even if the Ordinance also were reasonably susceptible to the City’s contrary constructions, the OTCs wouldstill be entitled to judgment, because any ambiguity in a tax statute resulting from two competing reasonable constructions must be construedstrictly against the taxing authority, and in favor of the citizen. (See pp. 15-16, ante, citing cases.) The OTCs’ constructions, adopted by the Superior Court and 39 affirmed by the Court of Appeal, are compelled by the plain meaning of the Ordinance’s express terms. At minimum,they certainly are reasonable, and, therefore, must be adopted: “If the interpretation ... sought by the [taxpayer] is reasonable, it must ... be adopted. It is of no momentthat... a contrary construction might also be reasonably permissible.” (Hospital Service ofCal. v. City ofOakland (1972) 25 Cal.App.3d 402, 406 (hereafter Hospital Service).Thus, either way, plain meaning or ambiguity rule, judgment for the OTCs should be affirmed.”! San Diego’s contrary constructions though are not reasonable. That the City has continuously shifted its constructions of the Ordinance’s express terms merely underscores that they do not unambiguously impose tax obligations andliability on the OTCs. Rather, as shown, those constructions do violence to the Ordinance’s express terms andits entire scheme. Indeed, the City’s current constructions would require this Court to effectively rewrite the eighty-five provisions that are expressly limited to 20 “Taxpayer” wasinserted in the above quotation because Hospital Service was applying the exact converse rule that an exemption “must be construed liberally in favorofthe taxing authority, strictly against the claimed exemption.” (Hospital Service, supra, 25 Cal.App.3d at p. 405.) The rule for exemptions simply flips the ambiguity rule that appliesto all other provisions in a tax statute against the taxing authority; both rules are applied in the same manner. (See Alpha Therapeutic Corp. v. County of L.A. (1986) 179 Cal.App.3d 265, 270 [“While taxing statutes are to be construed in favor of the taxpayer, exemptions are to be narrowly construed in favor of the state.”’].) 71 Even absent the tax ambiguity rule, where, as here, “a statute is susceptible of several interpretations, one of whichraises serious constitutional problems, [courts] will construe the statute, if possible, to avoid those problems.” (Conway v. Pasadena Humane Society (1996) 45 Cal.App.4th 163, 177.) The Court of Appeal recognized that Anaheim’s attempt to impose TOTliability on OTCs raised constitutional issues, including “the applicability of Proposition 218” and “significant due process concernsthat arise from the fact that [Anaheim] seeks to impose the TOT for a seven-year period in which the OTCs had nonotice that [Anaheim] considered them subject to the tax.” (City ofAnaheim v. Superior Court (2009) 179 Cal.App.4th 825, 832.) 40 the hotel “Operator.” San Diego asserts this Court should do so because it “makes no sense” to tax only the amount the Operator charges to the Transient for providing Occupancy. (Op. Br. 41.) Indeed, the City goes so far as to assert there is “no possible justification” for not taxing the entire amount charged to a customer. (/d. at pp. 3, 29.) Butit is reasonable for a legislative body to enact a local tax based on the amountthe local business (the hotel) that provides the local amenity taxed (occupancy of a room), charges the person whoreceivesit for doing so. (See Pomonav. State Bd. ofEqualization (1959) 53 Cal.2d 305, 311 [affirming imposition of tax based on businessactivity “in the city’’].) As Judge Kuhl explained when construing Anaheim’s substantively identical TOT ordinance: The purpose andstructure ofthe [TOT][is] a privilege tax based on commercial activity taking place in the City .... The hotel transaction is taxed ... because the hotel’s physical location is in the City. The revenue gainedbythe entity that provides the physical location (hotel) for occupancy within the City ... is the amountpaid to the hotel. It 1s not unreasonable to base a local tax on the revenue of the commercial businessthat provides the local amenity. (2JA10:437-38.) The City complains that the Court of Appeal’s plain meaning constructions ofthe Ordinance would producea different tax outcome under the OTCs’ “merchant model”than under the OTCs’ agency model; the City asserts the total amount charged to the customer must be the tax base to achieve a uniform tax outcome under both models. (Op. Br. 11-12.) However, as San Diego concedes(id. at p. 12), in a merchant model transaction, the hotel charges a lower amount for occupancyof a room. Because the Ordinance’s express terms impose tax only on the At consideration “charged by the Operator” for Occupancy,in a transaction where the hotel chargesless, the tax is less. Asthe Court of Appeal recognized, “[i]t makes sense that the tax is lower on a transaction where the hotel charges and receivesless rent.” (TOT Cases, supra, 225 Cal.App.4th at p. 71.) There is consistency across all booking channels. Whether the customerobtains a reservation through the merchant model, the agency model, or directly from the hotel, the hotel is liable for TOT on the amountit charges and receives for providing Occupancy. San Diegois left to assert the total amount charged to the Transient regardless ofby whom or for what“should” be the tax base. (Op. Br. 41.) That San Diego now disagrees with the legislative choices expressed in the Ordinance as enacted is of no moment. Nor, of course, is its desire for more tax revenue. Vil. IF SAN DIEGO WANTS TO IMPOSE TAX LIABILITY AND OBLIGATIONS ON NON-OPERATORS, OR TAX ON AMOUNTS THAT ARE NOT “RENT CHARGED BY THE OPERATOR,” IT MUST AMEND ITS ORDINANCE WITH VOTER APPROVAL . If San Diegodesires to impose TOTobligations andliability on persons other than Transients or Operators, or impose tax on amounts not “charged by the Operator” for Occupancy,it must convinceits electorate to enact amendments that explicitly do so, as required by Proposition 218. (See p. 16, ante.) Asthis Court held, Proposition 218 should be liberally construed to “effectuate its purpose of limiting local government revenue and enhancing taxpayer consent.” (Silicon Valley Taxpayers’ Assn., Inc. v. Santa Clara County Open Space Authority (2008) 44 Cal.4th 431, 448.) “It is not an onerous requirementthat local governments seek taxpayers’ consent before 42 subjecting them to new and increased taxes. And evenif it were,that is whatthe California Constitution requires. If cities find this burden too great, their recourse is to convince the voters of the need for constitutional change.” (Jacks v. City ofSanta Barbara (Feb. 26, 2015, No. B253474) 2015 Cal.App.LEXIS 178, *20-21.) San Diego cannot, as it seeks to do here, bypass the electorate and amend its Ordinance by administrative fiat or through judicial action. Indeed, a proscribed tax “increase” includes any agency decision that “[rJevises the methodology by whichthe tax, assessment, fee or charge _ is calculated, if that revision results in an increased amount being levied on any person or parcel.” (Gov. Code § 53750(h)(1)(B); see AB Cellular LA, LLC v. City ofL.A. (2007) 150 Cal.App.4th 757, 761-63 [striking down agency’s attempt to introduce a new “variable”into its tax calculation method without voter approval: “A taxing methodology mustbe frozen in time until the electorate approves higher taxes”]; 81 Ops.Cal.Atty.Gen. 104, 1998 Cal. AG LEXIS 38, at *1 (Mar. 5, 1998) [flood district must obtain voter approval before imposing storm drain tax on new tax base].) Through its new, expanded constructions, the City seeks to “Increase”its tax by changing its calculation methodology to include new entities and revenue amounts. After years of collecting TOT only on the “Rent charged by the Operator” for“Occupancy,” the City now reinterprets its Ordinance to expand those express terms to capture new revenue — the amount OTCs charge a customer and retain as compensation for their services. Instead of submitting to the voters amendments to expand the Ordinance’s reach to OTCs and othertravel intermediaries, the City purports to imposeliability on the OTCs by changingits long-standing constructions of the Ordinance. This it cannot do. 43 VII. THE COURT OF APPEAL PROPERLY CONSIDEREDITS PRIOR DECISIONS IN THIS COORDINATED PROCEEDING In affirming judgmentfor the OTCs, the Court of Appeal considered its prior Anaheim decision in this coordinated action. The court would have been remiss not to. A fundamental purpose of coordination is to avoid inconsistent rulings and decisions in actions that share questions of law and fact. (See Code Civ. Proc., §§ 404.1, 404.2; McGhan Medical Corp. v. Superior Court (1992) 11 Cal.App.4th 804, 814.) That is why the coordination judge is required to specify “the court having appellate jurisdiction of the coordinated actions.” (Cal. Rules of Court, rule 3.505(a).) It is imperative that the same appellate panel considerits prior decisions in the coordinated proceeding that involve commonissuesof fact or law to ensure inconsistent rulings are avoided. The court closely examined the Ordinance’s express terms and concludedit “us[es] language similar to that found in the Anaheim ordinance,” which also imposesliability only on “operators” (defined as the hotel “proprietor” or its “managing agent’’), and imposes tax only on the “consideration charged by an operator.” (TOT Cases, supra, 225 Cal.App.4th at pp. 64-65.) The court examinedthe facts regarding the OTCs’ merchant model, and determined they too are substantively identical to those in Anaheim. (Id. at p. 70.) Having determined A (the ordinance) and B (the relevant facts) are substantively identical in two actions in this coordinated proceeding, the court held that its result - C — must be the same. (Id. at p. 65.) The court did not suggest it was constrained by Anaheim, but rather reiterated the soundness and persuasiveness of the logic expressed there, and, thus, the “same logic applies here.” (TOT Cases, supra, 225 44 Cal.App.4th at p. 65.) The court, citing Kowis v. Howard (1992) 3 Cal.4th 888, 892-93, explained that the logic of its Anaheim decision (A + B =C) would apply throughout the coordinated proceeding, “both in the lower court and upon subsequent appeal.” (TOT Cases, supra, 225 Cal.App.4th at p. 60 fn.4.) That the court’s Anaheim decision is unpublished does not change the imperative that it be considered in subsequent cases in the coordinated proceeding. The court did not certify its Anaheim decision for publication because it apparently determined it would only be relevant within the coordinated proceeding, and not of continuing public interest. (Cal. Rules of Court, rule 8.1105(c).) San Diego does not contend the Court of Appeal should have turned a blind eye to its Anaheim decision; rather, the City too recognized the imperative that the court considerit. Indeed, in the very first two sentences of the City’s argumentto that court, the City discussed Anaheim and Santa Monica’s ordinances and the court’s decisions construing them. (App. Br. 15.) The City argued its Ordinance — A — was different from Anaheim’s in a waythat dictated a different result —C — here. Ud. at p. 37.) As shown, the court correctly disagreed. But the City cannot complain that the court considered the Anaheim decision and undertook the same analysis; the City invited it to do so.” Rather, San Diego complainsthat, in doing so, the court cited its Anaheim decision. But, again, the City repeatedly did so in its Opening Brief to that court. (See App. Br. 15, 16, 37.) The City cannot complain *2 The court also mentioned its Santa Monica decisionin the coordinated action (see p. 9, ante), but only in passing,as that city’s ordinance does not use the “operator” language. 45 that the court did so too. Whether underthe statute and rules governing coordinated proceedings, or the “law of the case” doctrine, a Court of Appeal panel in a coordinated proceeding must be able to considerits prior decisions in the coordinated proceeding that involved commonissuesof fact or law, whether published or not. San Diego’s proposed blanketrule to prohibit the citation of an unpublished decision within a coordinated proceeding would effectively require the Court of Appeal to publish every decision in such a proceeding, regardless of whether the court believed the decision meets the standard for publication set forth in Rule 8.1105(c). Such a construction would ill serve the coordination process or that Rule.” In the end, San Diego’s complaint about the Court ofAppealciting its prior Anaheim decision (after San Diego did) is much ado aboutnothing. Evenifthe court erred in citing to its Anaheim decision, doing so resulted in no harm to San Diego, muchless reversible error. The City does not assert the court would have reacheda different result here had it not done so. The court expressly reaffirmed the soundnessofits logic in its Anaheim decision, and, thus, clearly would have reached the samedecision hereif it had not cited that decision. Moreover, the points for which the court considered that decision — the meaning of “Operator” and the effect of the “charged by the Operator” limitation — are not challenged by San Diego before this Court. In any event, the hearing officer’s factual findings were not *3 San Diego cites a numberofcases addressing the law ofthe case doctrine in “consolidated” actions. (Op. Br. 56-58.) But as it concedes, coordination and consolidation are “not the same.” (/d. at p. 56 fn. 31.) These cases do not address application of the doctrine in coordinated actions. 46 challenged below,andthe legal issues are now before this Court for de novo review.” CONCLUSION Forall the above reasons, judgment for the OTCs should be affirmed. *4 Tf this Court nevertheless chooses to address the issue and concludes the Court of Appeal’sciting of its prior decision waserror, the proper remedy would be to order that court to modify its published opinion to omitits reference, not reversal on the merits. 47 Dated: March 17, 2015 Dated: March 17, 2015 Dated: March 17, 2015 Dated: March 17, 2015 758391-LACSRO2A - MSW SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP By: Von Mubeda ne Darrel J. Hieber Attorneys for PRICELINE.COM INC. and TRAVELWEB LLC JONES DAY By: Bein Dflablh ame Brian D. Hershman Attorneys for EXPEDIA, INC., HOTWIRE, INC., HOTELS.COM,L.P., and HOTELS.COM G.P., LLC McDERMOTT WILL & EMERY LLP efirey A. Rossman Attorneys for ORBITZ, LLC, TRIP NETWORK,INC. (D/B/A CHEAPTICKETS.COM), and INTERNETWORK PUBLISHING CORP.(D/B/A LODGING.COM) K&L GATES LLP By: Ulan S. Conall A Te Nathaniel S. Curfall Attorneys for TRAVELOCITY.COM, L.P. and SITES59.COM, LLC 48 CERTIFICATE OF WORD COUNT Pursuant to California Rules of Court, Rule 8.204(c)(1), the text of Respondents’ Answer Brief on the Merits in Case Number S218400, excluding tables and attachments, consists of 13,961 words as counted by the Microsoft Word word-processing program used to generatethe brief. Dated: March 17, 2015 SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP »fy Daniel M. Rygorsky—~ PROOF OF SERVICE I am employed in the county of Los Angeles, State of California. I am over the age of 18 and nota party to the within action; my business address is 300 South Grand Avenue, Suite 3400, Los Angeles, California 90071. On March18, 2015, I served the foregoing document described as: RESPONDENTS’ ANSWERBRIEF ON THE MERITS on the interested parties in this action addressed as follows: SEE ATTACHED SERVICE LIST -X] (BY US MAIL)I am readily familiar with the firms' practice for the collection and processing of correspondence for mailing with the United States Postal Service and the fact that the correspondence would be deposited with the United States Postal Service that same day in the ordinary course of business; on this date, the above-referenced correspondence wasplaced for deposit at Los Angeles, California and placed for collection and mailing following ordinary business practices. I declare under penalty of perjury under the laws of the State of California that the aboveis true and correct. Executed on March 18, 2015, at Los Angeles, California. Nandi Berglund WManraeAdd Type or Print Name Signature Daniel F. Bamberg Jon E. Taylor City of San Diego Office of the City Attorney 1200 Third Avenue, Suite 1100 San Diego, CA 92101 Tel.: (619) 533-5800 Fax: (619) 533-5856 Irving H. Greines, Esq. Kent L. Richland Cynthia E. Tobisman, Esq. David E. Hackett, Esq. Greines, Martin, Stein & Richland LLP 5900 Wilshire Blvd., 12" FI. Los Angeles, CA 90036 Tel.: (310) 859-7811 Fax: (310) 276-5261 Email: ctobisman@gmsr.com William L. Larson, Esq. Paul R. Kiesel, Esq. Kiesel, Boucher & Larson, LLP 8648 Wilshire Boulevard Beverly Hills, CA 90211 Tel.: (310) 854-4444 Fax: (310) 854-0812 Email: larson@kbla.com Laura J. Baughman Thomas M.Sims,Esq. Baron & Budd, PC 3102 Oak Lawn Avenue,Suite 1100 Dallas, TX 75219 Tel: (214) 521-3605 Fax: (214) 520-1181 Email: lbaughman@baronbudd.com Steven D. Wolens, Esq. Gary Cruciani, Esq. McKool Smith Hennigan 300 Cresecent Court, Ste. 1500 Dallas, TX 75201 Tel: 214-978-4000 Fax: 214-978-4044 Counsel for City of San Diego Brian D. Hershman, Esq. Erica L. Reilley, Esq. Jones Day 555 South FlowerStreet Fiftieth Floor Los Angeles, CA 90071-2300 Tel.: (213) 489-3939 Fax: (213) 243-2539 Email: bhershman@jonesday.com Expedia, Inc., Hotwire, Inc., Hotels.com, L.P., and Hotels.com GP, LLC Brian S. Stagner, Esq. Chad Arnette Kelly Hart & Hallman LLP 201 Main Street, Suite 2500 Fort Worth, TX 76102 Tel.: (817) 332-2500 Fax.: (817) 878-9280 Email: brian.stagner@khh.com chad.arnette@khh.com Nathaniel S. Currall K&L Gates. 1 Park Plaza, 12" Floor Irvine, CA 92614 Email: nathaniel.currall@klgates.com Travelocity.com LP and SiteS9.com, LLC Jeffrey Rossman, Esq. McDermott Will & Emery LLP 227 West Monroe Street Chicago, IL 60606 Tel.: (312) 372-2000 Fax.: (312) 984-7700 Email:jrossman@mwe.com Orbitz, LLC, Trip Network,Inc. (d/b/a Cheaptickets.com), and Internetwork Publishing Corp. (d/b/a Lodging.com) The Hon. Elihu M.BerleLos Angeles Superior CourtCentral Civil West Division600 South Commonwealth Ave., Dept.323Los Angeles, CA 90005 California Courts of AppealSecond Appellate District300 S. Spring St.Los Angeles, CA 90013