Hotwire Suit Close to Takeoff

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. October 14, 2008

FEBRUARY 13, 2007. Internet travel companies such as Expedia have made a fortune pulling in small amounts of cash from lots and lots of consumers. But plaintiff lawyers might get the last laugh by dinging them with lots and lots of small damages in class actions.

Attorneys suing several online hotel brokers believe they're on the brink of a breakthrough in litigation over minor charges on customers' bills. San Francisco firm Gutride Safier expects to get a class certification order any day now in one such case against the company that operates Hotwire, a travel booking Web site.

San Francisco Superior Court Judge Richard Kramer indicated from the bench last month that he would grant certification. His anticipated order has struck some lawyers as a first among many similar class actions across the country. (In a consumer suit against Expedia, a federal judge in Washington state has set a class certification hearing for March.)

Gutride Safier, the lead plaintiff firm before Kramer in Deaton v. Hotwire, 437631, has about a half-dozen other class actions pending against online travel agencies such as Orbitz, Travelocity and Expedia, which is run by the same company that owns Hotwire. Those suits claim the hotel booking sites bill customers for taxes and fees without making clear how those charges were calculated. For instance, they say the sites don't spell out whether they're billing taxes on a full room price or a discounted rate.

"When you buy a ticket from an airline, they tell you exactly what you're paying in taxes and fees. We kind of feel if you can do it with the airlines, why can't you do it here?" said Michael Reese, a partner at Gutride Safier. Partner Seth Safier noted that Hotwire changed its billing practices in May 2005, the cutoff point for that proposed class.

James Karen, a Dallas partner at Jones Day who is lead national counsel for Hotwire, Expedia and other defendant Web sites, said he would not comment on pending litigation, adding, "The comments have to come from the client."

Expedia spokesman David Dennis followed up with a one-line statement. "We are confident in our position, and we will continue to defend ourselves vigorously."

Online travel booking sites hold a big piece of the lucrative hotel business.

At the end of 2006, online bookings accounted for about 40 percent of all hotel reservations, said James Butler Jr., a Los Angeles-based attorney who chairs the global hospitality group at Jeffer, Mangels, Butler & Marmaro but is not involved in the litigation. (Butler noted that industry data doesn't differentiate between reservations made through third-party Web sites, such as Hotwire, and sites operated directly by hotel chains.)

"The stakes could be huge," Butler said. "We're talking about billions of dollars of bookings."

In addition to the consumer complaints, there's another group of suits going after the same companies, but alleging an alternative theory that the online hotel brokers have been ripping off not consumers but local taxing authorities.

Some lawyers involved in those cases say the two groups of suits cannot succeed in tandem. In other words, good news for the consumer plaintiffs would spell trouble for the municipal government plaintiffs, and vice-versa.