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 Hilton.com 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 Hilton.com 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
Hilton.com, 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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