13.D.
City Council Meeting - FINAL (AMENDED)
- Meeting Date:
- 12/07/2021
- Co-Submitter:
- Sterling Solomon
Information
TITLE:
Consideration and Adoption of Resolution No. 2021-59 and Resolution No. 2021-60 to Settle Pending Litigation: Proposed Settlements of Pending Litigation in two separate cases, City of Phoenix v. Orbitz Worldwide Inc., 247 Ariz. 234 (2019) and Terry v. City of Flagstaff, et. al., CV2018-00150 are before the Council for Consideration.
STAFF RECOMMENDED ACTION:
1) Read Resolution No. 2021-59 by title only
2) City Clerk Reads Resolution No. 2021-59 by title only (if approved above)
3) Adopt Resolution No. 2021-59
4) Read Resolution No. 2021-60 by title only
5) City Clerk Reads Resolution No. 2021-60 by title only (if approved above)
6) Adopt Resolution No. 2021-60
2) City Clerk Reads Resolution No. 2021-59 by title only (if approved above)
3) Adopt Resolution No. 2021-59
4) Read Resolution No. 2021-60 by title only
5) City Clerk Reads Resolution No. 2021-60 by title only (if approved above)
6) Adopt Resolution No. 2021-60
Executive Summary:
With regard to City of Phoenix v. Orbitz Worldwide Inc., 247 Ariz. 234 (2019):
City staff is requesting City Council authorize the partial settlement of the lawsuit, City of Phoenix v. Orbitz Worldwide Inc., 247 Ariz. 234 (2019), which continues to be litigated on remand in the trial court. This tax litigation was filed in order to collect local transaction privilege taxes, penalties and interest from online travel companies ("OTCs").
The City has reached a tentative partial settlement of this particular litigation subject to the approval of the City Council. The tentative settlement and legal advice related thereto were discussed with the City Council in executive session on November 30, 2021.
With regard to Terry v City of Flagstaff, et. al., CV2018-00150:
This litigation was filed against the City of Flagstaff, the Police Department and Terros, after Police responded to check the welfare of a suicidal subject and Called Terros to conduct a mental health assessment.
The City has reached a tentative partial settlement of this particular litigation subject to the approval of the City Council. The tentative settlement and legal advice related thereto will be discussed with the City Council in executive session on December 7, 2021.
City staff is requesting City Council authorize the partial settlement of the lawsuit, City of Phoenix v. Orbitz Worldwide Inc., 247 Ariz. 234 (2019), which continues to be litigated on remand in the trial court. This tax litigation was filed in order to collect local transaction privilege taxes, penalties and interest from online travel companies ("OTCs").
The City has reached a tentative partial settlement of this particular litigation subject to the approval of the City Council. The tentative settlement and legal advice related thereto were discussed with the City Council in executive session on November 30, 2021.
With regard to Terry v City of Flagstaff, et. al., CV2018-00150:
This litigation was filed against the City of Flagstaff, the Police Department and Terros, after Police responded to check the welfare of a suicidal subject and Called Terros to conduct a mental health assessment.
The City has reached a tentative partial settlement of this particular litigation subject to the approval of the City Council. The tentative settlement and legal advice related thereto will be discussed with the City Council in executive session on December 7, 2021.
Financial Impact:
With regard to City Of Phoenix v. Orbitz Worldwide Inc., financial impact is confidential. State law prohibits disclosure of taxpayer information without consent of the taxpayer.
With regard to Terry v City of Flagstaff, et. al., funding for this settlement is available through the City's applicable insurance.
With regard to Terry v City of Flagstaff, et. al., funding for this settlement is available through the City's applicable insurance.
Policy Impact:
None.
Connection to PBB Priorities/Objectives, Carbon Neutrality Plan & Regional Plan:
N/A
Has There Been Previous Council Decision on This:
With Regard to City of Phoenix v. Orbitz Worldwide Inc.:
In 1987, the City Council adopted the Model City Tax Code, which includes authority to pursue collection of local transaction privilege taxes.
In 2013 the City Council approved an agreement with outside legal counsel for collection of local taxes from the online travel companies. The Cities are being represented by an Arizona firm, Wright Welker & Pauole PLC, and a law firm based in Atlanta, Georgia. As consideration for legal services, outside legal counsel is entitled to payment of a 27% contingency fee from any amount recovered plus its costs.
City Council has received legal advice and litigation updates regarding this lawsuit on several occasions. In September 2021 the City Council received legal advice and provided direction to City staff regarding this lawsuit. October 5, 2021 the City Council approved a partial settlement of this lawsuit with one of the online travel companies.
With regard to Terry v. City of Flagstaff, et. al.:
City Council has received legal advice and litigation updates regarding this lawsuit on several occasions, the last being on November 8, 2021, in anticipation of the mediation on this matter which took place on November 15, 2021.
In 1987, the City Council adopted the Model City Tax Code, which includes authority to pursue collection of local transaction privilege taxes.
In 2013 the City Council approved an agreement with outside legal counsel for collection of local taxes from the online travel companies. The Cities are being represented by an Arizona firm, Wright Welker & Pauole PLC, and a law firm based in Atlanta, Georgia. As consideration for legal services, outside legal counsel is entitled to payment of a 27% contingency fee from any amount recovered plus its costs.
City Council has received legal advice and litigation updates regarding this lawsuit on several occasions. In September 2021 the City Council received legal advice and provided direction to City staff regarding this lawsuit. October 5, 2021 the City Council approved a partial settlement of this lawsuit with one of the online travel companies.
With regard to Terry v. City of Flagstaff, et. al.:
City Council has received legal advice and litigation updates regarding this lawsuit on several occasions, the last being on November 8, 2021, in anticipation of the mediation on this matter which took place on November 15, 2021.
Background and History:
With regard to City of Phoenix v. Orbitz Worldwide Inc., 247 Ariz. 234 (2019):
This lawsuit arose because the Cities conducted a multi-jurisdictional audit of the OTCs for the audit period of 2000-2009. As a result of the audit, in 2013 an assessment was issued against the OTCs. However, the OTCs asserted they are not legally obligated to pay taxes, and appealed through all levels of the courts.
In November 2019 the Arizona Supreme Court ruled that OTCs are liable for payment of tax on gross income under Section -444 Hotels of the Model City Tax Code, but not under Section -447 Transient Lodging. City of Phoenix v. Orbitz Worldwide Inc., 247 Ariz. 234 (2019) Taxes are due from and after the court's decision. However, the case was remanded to the trial court to determine whether or not the taxpayers are liable for payment of taxes prior to the court's decision. The parties have continued to litigate the case to reach such a determination.
All of the above information is a matter of public record.
This lawsuit arose because the Cities conducted a multi-jurisdictional audit of the OTCs for the audit period of 2000-2009. As a result of the audit, in 2013 an assessment was issued against the OTCs. However, the OTCs asserted they are not legally obligated to pay taxes, and appealed through all levels of the courts.
In November 2019 the Arizona Supreme Court ruled that OTCs are liable for payment of tax on gross income under Section -444 Hotels of the Model City Tax Code, but not under Section -447 Transient Lodging. City of Phoenix v. Orbitz Worldwide Inc., 247 Ariz. 234 (2019) Taxes are due from and after the court's decision. However, the case was remanded to the trial court to determine whether or not the taxpayers are liable for payment of taxes prior to the court's decision. The parties have continued to litigate the case to reach such a determination.
All of the above information is a matter of public record.