IN THE SUPREME COURT OF FLORIDA PETITIONERS BRIEF ON JURISDICTION

Transcription

1 IN THE SUPREME COURT OF FLORIDA EXPEDIA, INC., ORBITZ, LLC and ORBITZ, INC., v. Petitioners, Case No. SC L.T. Case No. 5D ORANGE COUNTY and MARTHA O. HAYNIE, ORANGE COUNTY COMPTROLLER, Respondents. / PETITIONERS BRIEF ON JURISDICTION MATTHEW J. CONIGLIARO Florida Bar Number CARLTON FIELDS, P.A. 200 Central Avenue, Suite 2300 St. Petersburg, FL Telephone: Facsimile: Counsel for Petitioners DAVID E. CANNELLA Florida Bar Number CARLTON FIELDS, P.A. P.O. Box 1171 Orlando, FL Telephone: Facsimile: Counsel for Petitioners

2 TABLE OF CONTENTS PAGE TABLE OF AUTHORITIES... ii STATEMENT OF THE CASE AND FACTS... 1 SUMMARY OF ARGUMENT... 2 ARGUMENT... 3 I. THE COURT HAS JURISDICTION TO REVIEW THE DECISION BELOW A. THE DECISION EXPRESSLY AFFECTS A CLASS OF CONSTITUTIONAL OR STATE OFFICERS... 3 B. THE DECISION EXPRESSLY AND DIRECTLY CONFLICTS WITH DEPARTMENT OF REVENUE v. MARKHAM... 4 C. THE DECISION EXPRESSLY AND DIRECTLY CONFLICTS WITH ODHAM, GULF PINES, AND THEIR PROGENY... 6 II. THE COURT SHOULD EXERCISE ITS DISCRETION TO REVIEW THE DECISION BELOW... 9 CONCLUSION CERTIFICATE OF SERVICE CERTIFICATE OF COMPLIANCE i

3 TABLE OF AUTHORITIES CASES PAGE Dep t of Revenue v. Markham, 396 So. 2d 1120 (Fla. 1981) , 9-10 Dep t of Rev. v. Markham, 381 So. 2d 1101, 1102 (Fla. 1st DCA 1979), quashed, 396 So. 2d 1120 (Fla. 1981) Gulf Pines Memorial Park, Inc. v. Oaklawn Memorial Park, 361 So. 2d 695 (Fla. 1978) Odham v. Foremost Diaries, Inc., 128 So. 2d 586 (Fla. 1961)... 6, 7 Orange County v. Expedia, Inc., 33 Fla. L. Weekly D1549 (Fla. 5th DCA June 13, 2008) (A. at 1)... 2 Smithers v. Smithers, 743 So. 2d 605 (Fla. 4th DCA 1999)... 8 STATUTES AND RULES Art. V, 3(b)(3), Fla. Const.... 3, , Fla. Stat ii

4 STATEMENT OF THE CASE AND FACTS The Fifth District, taking the allegations of Respondents as true, stated that Petitioners Expedia, Inc., Orbitz, LLC, and Orbitz, Inc., are Internet-based travel companies that purchase room nights from hotels in Orange County. A. 2. The Fifth District further stated that Petitioners offer those rooms to their clients, who use the rooms and pay Petitioners for their travel services. A. 2. Respondents Orange County and the Orange County Comptroller (collectively, Orange County ) characterize the amount hotels charge Petitioners as the rooms wholesale price and the amount Petitioners charge their clients as the retail price. A. 2. Orange County asserts Petitioners are improperly paying hotel accommodation taxes based only on the former, rather than the latter. A. 2. The tax at issue is part of Florida s Tourist Development Tax ( TDT ), which enables counties to choose to impose and self-administer a local TDT. A The County admits that, when it enforces the TDT, it steps into the shoes of the Florida Department of Revenue ( DOR ). A. 3-4, 9. If a county does not choose to impose and self-administer a local TDT, then administration of the TDT for that county lies exclusively with DOR. Id. When DOR (or a county that steps into its shoes) believes TDT is owed, statutory law governing TDT assessments sets forth an administrative framework that includes, among other things, notice, audit, assessments, and protest. A

5 Orange County has adopted local TDT ordinances and elected to administer the TDT. A But rather than comply with the statutorily-prescribed mechanism for assessing unpaid TDT on the supposed retail price for Petitioners hotel rooms and addressing any taxpayer challenges, the County sued Petitioners in court. A. 2-3, 5, 7, 9. The County sought a declaration that the supposed retail price is subject to the TDT and that Petitioners should remit additional TDT to the County. Id. Petitioners moved to dismiss on grounds that the County had not exhausted the administrative process and lacked standing to question how to apply a law it is required to enforce. A. 2. The trial court granted Petitioners motion and dismissed the case. On appeal, the Fifth District reversed, holding the trial court abused its discretion, the County is entitled to a declaration on whether Petitioners owe additional TDT, and the County may pursue administrative remedies (and collect any TDT owed) after obtaining a declaration. Orange County v. Expedia, Inc., 33 Fla. L. Weekly D1549 (Fla. 5th DCA June 13, 2008) (A. at 1). Petitioners now seek review in this Court. SUMMARY OF ARGUMENT The Court has jurisdiction to review the decision below because it affects a class of constitutional or state officers DOR, as well as counties that selfadminister a local TDT and thus step into DOR s shoes. The decision also conflicts with this Court s authorities holding that a public official may seek a 2

6 declaratory judgment questioning a law only when the official is willing to perform his or her duties but is prevented from doing so by someone else and holding that a party must exhaust administrative remedies before seeking declaratory relief. The Court should exercise its jurisdiction because the Fifth District s decision conflicts with settled law and fundamentally alters Florida s tax and administrative law. It deprives Petitioners of the process they are due and authorizes a dangerous statewide mechanism for all taxpayers, or perhaps any citizen or entity, to be haled into court by the government in advance of, or in lieu of, administrative proceedings. Whether taxing authorities, or any government entity, should have such power is a matter of statewide importance that calls for the attention of this state s highest court. ARGUMENT I. THE COURT HAS JURISDICTION TO REVIEW THE DECISION BELOW. Three aspects of the Fifth District s decision trigger this Court s review jurisdiction. Each is independently sufficient to support jurisdiction. A. THE DECISION EXPRESSLY AFFECTS A CLASS OF CONSTITUTIONAL OR STATE OFFICERS. The Court is authorized to review decisions of a district court that expressly affect a class of constitutional or state officers. Art. V, 3(b)(3), Fla. Const. The Fifth District s decision expressly affects such a class the Florida Department of 3

7 Revenue, as well as counties that choose to impose and self-administer a local TDT and thus step into DOR s shoes for purposes of administering that tax. See (3)(b), (g), (10)(a), Fla. Stat. Under the Fifth District s decision, DOR and counties standing in DOR s shoes may now bring declaratory judgment actions against taxpayers to determine if they owe TDT under their business models. B. THE DECISION EXPRESSLY AND DIRECTLY CONFLICTS WITH DEPARTMENT OF REVENUE v. MARKHAM. The Court is also authorized to review district court decisions that expressly and directly conflict with a decision of this Court or another district on the same question of law. Art. V, 3(b)(3), Fla. Const. The decision below conflicts with Dep t of Revenue v. Markham, 396 So. 2d 1120 (Fla. 1981). In Markham, a property appraiser claimed to be in doubt as to the law, or unable to apply it, with respect to taxation of household goods. Id. at The Court held: For important policy reasons, courts have developed special rules concerning the standing of governmental officials to bring a declaratory judgment action questioning a law those officials are duty-bound to apply. As a general rule, a public official may only seek a declaratory judgment when he is willing to perform his duties, but... prevented from doing so by others. Reid v. Kirk, 257 So. 2d 3, 4 (Fla. 1972). Id. (emphasis added). The Fifth District attempted to distinguish Markham: In the instant case, the County is not bringing this action to challenge the laws governing TDT. Instead, the County alleges that it is attempting to enforce the law.... Unlike the plaintiff in Markham, the plaintiffs here are seeking to collect the TDT and have expressed their willingness to 4

8 perform their duties though they believe an audit should be conducted after they receive a declaration that they are indeed entitled to assess and recover the TDT on the retail charge collected by the defendants. A. at 9. Markham s rule, however, is not limited to where an official challenges a law. No decision so holds, other than the conflicting decision below. Indeed, Markham did not even involve a challenge. The tax appraiser filed suit seeking a declaratory judgment as to whether or not household goods and personal effects of nonresidents are subject to ad valorem taxation. Dep t of Rev. v. Markham, 381 So. 2d 1101, 1102 (Fla. 1st DCA 1979), quashed, 396 So. 2d 1120 (Fla. 1981). This Court s decision explained that the appraiser did not attack the constitutionality of the taxing statutes in question. 396 So. 2d at This Court very recently explained that, in Markham, this Court was asked to decide whether property appraisers had standing to file a declaratory action alleging uncertainty about how to apply various advisory opinions by the Attorney General. The Crossings v. Echeverri, 2008 WL , at *8 (Fla. July 3, 2008) (emphasis added). The Crossings explained that subsequent decisions have relied on the reasoning in Markham to hold that property appraisers do not have standing to file declaratory actions challenging the constitutionality of a taxing statute. Id. (emphasis added). The Crossings thus confirms that Markham did not announce a rule limited to challenges in fact, subsequent decisions had to rely on Markham s reasoning just to apply the case to challenges. 5

9 Simply put, Markham and the decision below cannot be distinguished. The appraiser in Markham sought a declaratory judgment as to whether or not household goods and personal effects of nonresidents are subject to ad valorem taxation. 381 So. 2d at This Court held the appraiser could not seek the requested declaration. Here, the County seeks a declaratory judgment as to whether the difference between the supposed retail and wholesale prices for hotel rooms is subject to taxation under the TDT. The Fifth District held the County can seek the requested declaration, in direct conflict with Markham. Nor can Markham s rule be distinguished. Markham s rule is that a public official may bring a declaratory judgment action questioning a law the official is duty-bound to apply only when the official is willing to perform the duty but is prevented from doing so by others. Here, the County questions the taxation laws it is duty-bound to apply, alleging uncertainty about how to apply the TDT, but no one is preventing the County from performing its duties. If the County had no question, it would need no answer in the form of a declaration. Conflict exists. C. THE DECISION EXPRESSLY AND DIRECTLY CONFLICTS WITH ODHAM, GULF PINES, AND THEIR PROGENY. Finally, the Fifth District s decision conflicts with numerous decisions, including Odham v. Foremost Diaries, Inc., 128 So. 2d 586 (Fla. 1961), Gulf Pines Memorial Park, Inc. v. Oaklawn Memorial Park, 361 So. 2d 695 (Fla. 1978), and their progeny, on the fundamental principle that a party must exhaust 6

10 administrative remedies before seeking declaratory relief. The district court refused to apply that principle here. This Court has consistently held that where an administrative remedy is provided by statute, relief must be sought by exhausting this remedy before the courts will act. The doctrine has been referred to as the exhaustion of administrative remedies. Odham, 128 So. 2d at 593. Gulf Pines explained, [A]s a general proposition, the circuit court should refrain from entertaining declaratory suits except in the most extraordinary cases, where the party seeking to bypass usual administrative channels can demonstrate that no adequate remedy remains available under Chapter So. 2d at 699 (emphasis added). While case law recognizes exceptions to the general rule, they all encompass situations where no adequate administrative remedy is available, as Gulf Pines provides. The Fifth District never held that the statutorily-required administrative process to assess and levy the TDT was in any way inadequate. Rather, the court held the exhaustion analysis inapplicable because administrative procedures could come later, if the County obtains the declaration it seeks: The present dispute presents a threshold legal question, the answer to which may render such collection proceedings moot. Thus, in the present context, it is illogical to require the parties to submit to the cumbersome, expensive process associated with a tax collection action when such process may prove to be entirely unnecessary. A. at 12. Thus, the court found nothing inadequate about the administrative 7

11 procedures that the County is required to undertake to assess and collect TDT except that undertaking this required process may cost the County more money than would a declaratory judgment action. By allowing the County to bypass the required administrative process, the Fifth District s decision improperly allows the County to spread its costs among Petitioners and the court system. Florida courts, however, do not recognize cost savings as a basis to depart from mandatory procedures. For instance, the costs of litigation do not constitute irreparable harm that would allow a party to circumvent the traditional appellate process. E.g., Smithers v. Smithers, 743 So. 2d 605 (Fla. 4th DCA 1999) (holding time and trouble of proceeding to trial not irreparable harm permitting certiorari review of non-final order, even where the requested relief would serve judicial economy and dramatically limit litigation costs). Indeed, a chief purpose of the exhaustion doctrine is to conserve judicial resources. No Florida court has previously held that the exhaustion doctrine is inapplicable where bringing a declaratory judgment action may be less expensive for one party. In stark contrast, if the County had begun investigating Petitioners to assess them with supposedly unpaid TDT and Petitioners had sought a declaratory judgment that the tax is inapplicable, or if Petitioners brought suit to declare the tax inapplicable without pending administrative action, the complaint would have been dismissed under the exhaustion doctrine. The Fifth District s decision to allow the 8

12 County to do what taxpayers cannot do is grossly inequitable, bad policy for Florida, and a dangerous precedent that allows counties and the Department of Revenue (and, perhaps by extension, administrative agencies in general) to wield the mighty and costly sword of a lawsuit against Florida s citizens and run roughshod over their rights to an administrative process. The Fifth District erroneously acceded to the County s request to put the proverbial cart before the horse and allow the County to sue prospective taxpayers in court over whether their activities trigger a particular tax, without first requiring exhaustion of the administrative process. By doing so the Fifth District reallocated many costs for such inquiries to the prospective taxpayers and the judicial system. The result is no different than pursuing an appellate court s decision before obtaining an appealable order, even though fact issues must be resolved to reach any conclusion, on grounds doing so would be cheaper and may obviate the appellant s desire to pursue the lower tribunal s order at all. Conflict exists. II. THE COURT SHOULD EXERCISE ITS DISCRETION TO REVIEW THE DECISION BELOW. Since Markham, no Florida court has allowed a government official to sue someone to obtain a judicial declaration regarding how the official should apply the law to that person, and no Florida decision has ever allowed a government official to seek a declaratory judgment on whether the defendant s activities will support a successful administrative proceeding. No such authority is found in the 9

13 decision below, and the County will cite no such decision in its response to this jurisdictional brief. The decision below is the administrative equivalent of allowing the police to sue a citizen to determine if his actions violate the law, so that he may later be arrested if the answer is yes. The decision below represents a dramatic shift in Florida law. Allowing officials to bring declaratory judgment suits regarding how they should apply laws they are obligated to enforce invites expensive lawsuits against citizens and improper advisory opinions for government officials. It is this Court s duty to safeguard Florida s citizens from overreaching governmental actions. For whatever reason, the Fifth District was blinded by the County s plea to save it the trouble of the traditional tax assessment process, so the Fifth District limited Markham to challenges and effectively shifted much of the County s administrative costs onto Petitioners and the judiciary. If that decision is to remain the law of Florida, it should do so only with the informed approval of this Court, upon full briefing and argument in this case. Petitioners are confident full briefing and participation by all interested persons will demonstrate the error of the Fifth District s decision, not just for themselves but for all Florida citizens. CONCLUSION For each of the foregoing reasons, this Court should exercise its discretion to review the Fifth District s decision below. 10

14 Respectfully submitted, MATTHEW J. CONIGLIARO Florida Bar Number CARLTON FIELDS, P.A. 200 Central Avenue, Suite 2300 St. Petersburg, FL Telephone: Facsimile: DAVID E. CANNELLA Florida Bar Number CARLTON FIELDS, P.A. P.O. Box 1171 Orlando, FL Telephone: Facsimile: Counsel for Petitioners CERTIFICATE OF SERVICE I hereby certify that on August 21, 2008, a copy of the foregoing was served by United States mail, first-class postage prepaid upon the following: Usher L. Brown, Esquire Erin O Leary, Esquire 111 North Orange Avenue, Suite 2000 P.O. Box 2873 Orlando, Florida

15 Thomas B. Drage, Jr., Esquire Orange County Attorney Orange County Attorney s Office 201 South Rosalind Avenue, 3 rd Floor Orlando, Florida Kaye Collie, Esquire General Counsel Office of the Comptroller P.O. Box 38 Orlando, Florida Matthew J. Conigliaro Florida Bar No CERTIFICATE OF COMPLIANCE I hereby certify that this brief complies with the typeface requirements set forth in Florida Rule of Appellate Procedure Matthew J. Conigliaro Florida Bar No