Monday, March 10, 2014

resort fees not included in "total" may violate consumer protection law

Soule v. Hilton Worldwide, Inc., 2014 WL 794801, No. 13-00652 (D. Hawai’i Feb. 26, 2014)

Soule sued Hilton for violation of Hawaii’s consumer protection law and for unjust enrichment based on an allegedly insufficiently disclosed resort fee charged on top of the “total” displayed by and other third-party websites.  This mandatory fee is charged at some of Hilton’s Hawaiian hotels, and Hilton says it represents “amenities” such as phone calls and internet access. (Not soap and conditioner?  Fresh towels?  Wake-up calls?)  At and elsewhere, booking pages display room options and prices, and Hilton typically sends consumers a confirmation email after they book breaking down the “Rate Per Night” to give a “Total for Stay.”

Soule made a reservation at a quoted rate of $237.15 per night, plus taxes of $66.21, for a total of $540.51, as stated in her confirmation email. (“Total for Stay: 540.51 USD Includes estimated taxes and service charges. (Gratuities not included.).” The email continued, breaking down the tax, then said that there was a “Daily Resort Charge of $25.00 plus tax per room per night that would be added to the room rate,” as well as parking fees.)  As stated in the email, the reservation was nonrefundable and her credit card was charged $540.41 immediately. 

And it’s this tiny detail that to me shows Hilton’s attempts to take advantage of ordinary consumer behavior—yes, the $25 + tax/night/room fee is mentioned, but it’s not included in the “Total” and, though it is mandatory, it’s not charged immediately like the other mandatory charges.  This prevents consumers from noticing—say, on their credit card statements—that they’ve been charged a not inconsiderable chunk of change more than the stated “Total,” until it’s too late.  Whether this is “deceptive” (and I think it is, because the disclosure is unlikely to work because of the more salient and understandable “Total” listed), it seems quite unfair.  Hilton imposed the fee when Soule checked out, and Soule sued.

In late 2012, the FTC sent a warning letter to 22 hotel operators warning that their sites might be violating the law by providing misleading estimates. The letter noted consumer complaints about mandatory resort fees.  As a result, the FTC cautioned, online hotel reservation sites should include in the quoted total price any mandatory resort fees. Though this wasn’t an agency decision or definitive statement of position, it did go to the plausibility of Soule’s claim that a reasonable consumer was likely to be misled.

Hilton argued that Soule’s consumer protection claim failed because Hilton explicitly disclosed the existence and amount of the resort fee before Soule’s stay.  Under Hawaii’s law, failure to disclose relevant information can be actionable if the failure to disclose is likely to mislead or deceive a reasonable consumer.  Soule didn’t plead unfair methods of competition, because that’s a competitive/antitrust issue and Soule didn’t plead enough to plausibly allege a negative effect on competition that harmed consumers like her.

But Hawaii also bars unfair or deceptive practices, and whether a practice is unfair or deceptive is generally a question of fact.  Because Soule couldn’t cancel her reservation after she provided her credit card info and Hilton charged her, any disclosure would have to have been made before or at the time of booking.

Hilton pointed to three purported disclosures: (1) its Global Terms and Conditions, set forth on a separate website.  These said, in part: “Unless otherwise stated, quoted rates are per room per night, based on double occupancy and do not include taxes, gratuities, resort fees or incidental charges.”  But there was nothing in the record that Soule was able to read the full terms or was otherwise directed to this website.  Though Hilton’s declarant asserted that the terms could be accessed via hyperlinks on various pages on, that wasn’t an appropriate consideration on a motion to dismiss.  (2) The email confirmation, but that came too late, after her credit card had been charged. (3) The bill at the time Soule checked out, which clearly listed the charges.  But that’s also too late. 

Hilton relied on similar cases about resort fee complaints: Ford v. Hotwire, 2007 WL 6235779 (S.D. Cal. Nov. 19, 2007), and Harris v. Las Vegas Sands L.L.C., 2013 WL 5291142 (C.D.Cal. Aug.16, 2013).  Ford granted a motion to dismiss because Hotwire adequately disclosed that resort fees might be imposed, using a similar hyperlink to the terms of service that generally disclosed that Hotwire’s rates didn’t include resort fees.  Las Vegas Sands was similar, though there before the plaintiff clicked his acceptance the fee was at least disclosed on the same page, though still not part of the asterisked “grand total.”

The court found these factually distinguishable, because the courts had complete records, while here Soule and Hilton still disputed what information Soule could access or did see on Hilton’s website when she booked her stay. Plus, the defendants in those cases “clearly disclosed the existence of mandatory resort fees to hotel guests prior to booking.”  (This is a silly thing to say about Hotwire’s vague and conditional disclosure in hyperlinked terms of service; reasonable consumers don’t read these, but whatever; the court says that Hotwire consumers were required to click a box agreeing to the terms of service before paying, as if that mattered to what they understood.)

Here, the allegations were that Hilton’s booking page didn’t include a clear statement that the resort fee wasn’t included in the total. That was enough.

Hilton argued that reasonable consumers read terms and conditions before making purchases.  (I would love to ask counsel for Hilton about their own personal compliance with this principle.) In Davis v. HSBC Bank Nevada, 691 F.3d 1152 (9th Cir. 2012), the court of appeals affirmed the dismissal of a fraudulent concealment claim because “the existence of the annual fee was within Plaintiff’s observation because he concedes that he was able to discover the annual fee when he revisited Best Buy’s website and scrolled through the Important Terms & Disclosure Statement.”  The relevant credit card ad contained a “legible disclaimer that other restrictions may apply” and, therefore, “no reasonable consumer could have believed that if an annual fee was not mentioned, it must not exist.” The advertisement’s disclaimer would thus “motivate[ ] a reasonable consumer to consult the terms and conditions.”

But Soule didn’t concede that she was ever notified of the existence of the terms and conditions or that the information was available through Hilton’s website.  (Plus, the existence of an annual fee when a fee isn’t mentioned at all in the ad, and thus no representation has been made about a fee or its absence, is noticeably different in its effects on a reasonable consumer’s perceived need to inquire further than the existence of an extra charge when a “total” has already been presented to the consumer.)

Hilton then argued that Soule failed to allege materiality. But $25 per night was “a significant amount that could affect a hotel guest’s purchasing decision.”

Finally, the court found that Soule adequately pled unfairness as well as deceptiveness.  She alleged that Hilton’s practices worked substantial injury on consumers, as required for unfairness.  However, her unjust enrichment failed because she had an adequate remedy at law under the Hawaii Unfair and Deceptive Trade Practices Act.

The court then rejected Hilton’s argument that Soule’s claims were barred by the voluntary payment rule, since she knew the facts when she paid.  This is an equitable estoppel-type doctrine, and it didn’t apply, because Soule didn’t support or endorse Hilton’s practice and then change her position.  Plus, this theory requires a showing that the plaintiff had full knowledge of the facts, which was precisely at issue. The court also had some doubt that the rule would even apply to a UDTPA claim, since that statute is remedial in nature and worded broadly “in order to constitute a flexible tool to stop and prevent fraudulent, unfair or deceptive business practices for the protection of both consumers and honest business persons.”  Several other jurisdictions have found that the voluntary payment rule doesn’t apply to similar statutes.

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