In the
United States Court of Appeals
For the Seventh Circuit
____________________
Nos. 16‐3932 & 16‐3944
VILLAGE OF BEDFORD PARK, et al.,
Plaintiffs‐Appellants,
and
VILLAGE OF LOMBARD,
Plaintiff‐Cross‐Appellee,
v.
EXPEDIA, INC., et al.,
Defendants‐Appellees, Cross‐Appellants.
____________________
Appeals from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 13‐05633 — Matthew F. Kennelly, Judge.
____________________
ARGUED OCTOBER 23, 2017 — DECIDED NOVEMBER 22, 2017
____________________
Before BAUER and HAMILTON, Circuit Judges, and DARROW,
District Judge.
Of the Central District of Illinois, sitting by designation.
2 Nos. 16‐3932 & 16‐3944
DARROW, District Judge. Thirteen Illinois municipalities
(“the municipalities”) assert that the Appellees‐Cross‐Appel‐
lants, which are online travel agencies (“OTAs”), have with‐
held money owed to them under their local hotel tax ordi‐
nances. The OTAs operate their online travel websites under
the “merchant model”; customers pay an OTA directly to re‐
serve rooms at hotels the OTA has contracted with. The par‐
ticipating hotels set a room rental rate. The OTA charges the
customer a price that includes that rate, the estimated tax
owed to the municipality, and additional charges for the
OTA’s services. After the customer’s stay, the hotel invoices
the OTA for the room rate and taxes, and remits the taxes col‐
lected to the municipality. The municipalities argue that they
have been shorted tax revenue over the years because the
OTAs do not remit taxes on the full price that customers pay.
To illustrate, assume a 5 percent tax. If a customer books a
room directly with a hotel for $100 a night, the hotel collects
$5 for taxes and remits that to the municipality. But if a cus‐
tomer books a room through an OTA for $100 and the hotel’s
room rental rate is only $60, the OTA pays the hotel $63 and
the hotel remits $3 to the municipality. The municipalities
seek to collect the additional $2 from the OTAs. But none of
the municipal ordinances place a duty on the OTAs to collect
or remit the taxes, so the municipalities have no recourse
against the OTAs. The OTAs are entitled to summary judg‐
ment against all of the municipalities.
Nos. 16‐3932 & 16‐3944 3
I. Factual Background
The facts of this case are not highly disputed, but their le‐
gal significance is. At issue is how the OTAs in this case—Ex‐
pedia, Priceline, Travelocity, and Orbitz1—function and the
thirteen municipal tax ordinances.
a. Online Travel Agencies’ Practices
The OTAs enter into contracts with hotels, under which
the hotels agree to make rooms available for the OTAs. The
OTAs then market those rooms and allow customers to re‐
serve them through their websites. The OTAs do not pre‐pay
for rooms and re‐rent them to customers and they do not bear
any loss if the rooms are not reserved. And the hotels can
cease offering rooms through the OTAs at any time.
When a customer reserves a room through an OTA, he
pays the OTA directly—the OTA serves as the merchant of
record on the customer’s credit card bill. The OTAs present
the price in two line items: first, a charge for the room and
second, a charge for taxes and fees. The charge for the room
includes the room rate as set by the hotel, plus additional
charges set by the OTAs. The customer never sees the hotel’s
room rate, but must agree to the OTA’s terms and conditions,
1 For ease, the Court uses these four OTAs specifically to refer to the
four groups of Appellees‐Cross‐Appellants: the Expedia group (including
Hotels.com, L.P., Hotwire, Inc., Expedia, Inc., and Egencia, LLC); the
Priceline group (including priceline.com Inc. (n/k/a The Priceline Group
Inc.), priceline.com LLC, and Travelweb LLC); the Travelocity group (in‐
cluding TVL LP (f/k/a Travelocity.com LP) and Site59.com LLC); and the
Orbitz group (including Orbitz, LLC, Trip Network, Inc., and Internet‐
work Publishing Corp. (d/b/a Lodging.com)).
4 Nos. 16‐3932 & 16‐3944
which state that the price charged includes the cost of the ho‐
tel plus consideration for the OTA’s services. The taxes and
fees charge includes the estimated taxes the hotel will owe on
the rental plus additional fees as set by the OTA. If the cus‐
tomer incurs additional charges during his stay, he pays those
to the hotel directly. After the customer checks out, the hotel
invoices the OTA—or charges a virtual credit card provided
by the OTA—for the room rate plus applicable taxes.
Although representatives from the OTAs, and statements
made to the Securities and Exchange Commission, indicate
that the OTAs “sell” hotel rooms to customers, the OTAs as‐
sert that this is merely industry jargon. See, e.g., Priceline Rep.
Dep. 231:3–9, Pls.’s Statement of Undisputed Facts Ex. 19, ECF
No. 256‐52 (“I want to be careful to point out that [the terms
purchase and sale are] commonly used in the context of cus‐
tomers making reservations with hotels whose rates and in‐
ventory were made available to us … . We are not in the busi‐
ness of buying and selling hotel rooms.”). Contracts between
hotels and the OTAs confirm that the OTAs do not actually
buy, and never acquire the right to enter or grant possession
of, hotel rooms. Instead, the OTAs take reservation requests
from customers and transmit those to the hotels. The contracts
require the hotels to honor those requests, but the customer
does not obtain the right to occupy the room until he checks
in at the hotel.
The OTAs do provide additional services to customers be‐
tween payment and check in at the hotel. In fact, a customer
will likely only deal with the OTA prior to checking in because
2 This ECF number refers to the district court’s docket.
Nos. 16‐3932 & 16‐3944 5
OTAs handle reservation modifications, cancellations, and re‐
funds. The OTAs generally enforce a hotel’s cancellation poli‐
cies, but sometimes set their own policies and charge their
own cancellation fees. The OTAs also often provide customer
service support, but some contracts specify that the OTAs will
refer hotel‐specific questions to the hotels.
b. Municipal Ordinances
Though each of the thirteen ordinances has unique as‐
pects, all fall into one of three general categories: those that
place the duty to collect and remit the tax on owners, opera‐
tors, and managers of hotels or hotel rooms; those that apply
to all persons engaged in the business of renting hotel rooms;
and those that incorporate elements of both.3
i. Owners, Operators, and Managers
Seven municipalities—Arlington Heights, Bedford Park,
Oak Lawn, Orland Park, Orland Hills, Schaumburg, and Tin‐
ley Park—have ordinances that impose a tax on the use and
privilege of renting, leasing, or letting hotel and motel rooms.
While a hotel guest ultimately bears responsibility for the tax,
the ordinances generally place the duty of collecting the tax
from the renter and paying it to the municipality on the
owner, operator, or manager of hotels. Some of the ordinances
place the duty on owners, operators, and managers of hotel
accommodations, which are defined as “[a] room or rooms in
any building or structure kept, used or maintained as or ad‐
vertised or held out to the public to be an inn, motel, hotel” or
3 Most of the ordinances have been amended over time—for example,
the tax rates have been increased or enforcement mechanisms have been
altered—but, unless otherwise noted, the amendments have not changed
the ordinances in aspects relevant to this case.
6 Nos. 16‐3932 & 16‐3944
a similar facility. Orland Hills Ordinance, Br. Appellants Sep.
App. 170; Orland Park Ordinance, id. at 355–56 (same); Tinley
Park Ordinance, id. at 369 (same).
ii. Engaged in Renting Hotel Rooms
Three of the municipalities—Rockford,4 Willowbrook, and
Lombard—impose a tax on persons engaged in the business
of renting, leasing, or letting rooms in a hotel. In Willowbrook
and Rockford, the tax rate is a percentage of gross rental re‐
ceipts from renting, leasing, or letting rooms in a hotel. Lom‐
bard’s ordinance requires the tax “to be stated separately as
an additional charge on individual billings,” id. at 338, but
does not specify what amount the tax rate applies to.
iii. Hybrids
The last three municipalities have ordinances encompass‐
ing elements of both types of taxes. For example, Des Plaines
taxes all “persons engaged in the business of renting, leasing
or letting rooms in a hotel or motel.” Id. at 302. But the tax
ordinance places a duty on operators of hotels or motels to
keep records and on owners of hotels to file monthly tax re‐
turns reflecting the tax received. The ordinance also requires
the owner to pay the taxes due at the time of filing. Warren‐
ville’s ordinance is similar in relevant respects. Burr Ridge
4 Rockford has two ordinances. One imposes a 1 percent tax on “the
charge for renting a hotel or motel room.” Br. Appellants Sep. App. 190.
“Any person engaged in renting hotel or motel rooms” must include the
tax in the rental price and remit the amount collected to the city. Id. This
ordinance, like the ones described above, taxes a consumer, but places the
duty to collect the tax on those “engaged in renting.” The other is a tax on
“all persons engaged in the City of Rockford in the business of renting,
leasing, or letting rooms in a hotel.” Id. at 204.
Nos. 16‐3932 & 16‐3944 7
taxes “the use and privilege of engaging in the business of
renting, leasing or letting of room(s) in a motel or hotel.” Id.
at 274. But the ordinance places the duty to pay the tax on
“[t]he owner, manager or operator of each hotel or motel.” Id.
at 275.
c. Procedural History
The municipalities filed a putative class action against the
OTAs in state court alleging that they had failed to remit taxes
owed to the named municipalities and others similarly situ‐
ated in Illinois. Vill. of Bedford Park v. Expedia, Inc. (WA), 193 F.
Supp. 3d 911, 917 (N.D. Ill. 2016). It was removed to the North‐
ern District of Illinois under the removal provision of the
Class Action Fairness Act of 2005, 28 U.S.C. § 1453(b). Id. The
district court denied class certification, but retained jurisdic‐
tion. Id. After discovery, both sets of parties moved for sum‐
mary judgment. Id. The district court granted the OTAs sum‐
mary judgment against all but one municipality, Lombard. Id.
at 939. In turn, the court granted Lombard summary judg‐
ment against the OTAs. Id. Both the municipalities and the
OTAs appeal the grant of summary judgment against them.
II. Discussion
We review the district court’s decision to grant summary
judgment de novo. United Cent. Bank v. KMWC 845, LLC, 800
F.3d 307, 310 (7th Cir. 2015). Summary judgment is appropri‐
ate if “there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(a). “Where, as here, the district court was faced with
cross‐motions for summary judgment, we must construe all
facts and inferences in favor of the party against whom the
8 Nos. 16‐3932 & 16‐3944
motion under consideration is made … .” United Cent. Bank,
800 F.3d at 310–11.
This case involves construction of municipal ordinances,
which are interpreted in the same manner as Illinois statutes.
Landis v. Marc Realty, L.L.C., 919 N.E.2d 300, 303 (Ill. 2009). The
Court’s “primary objective is to ascertain and give effect to the
intent of the legislature.” In re Consol. Objections to Tax Levies
of Sch. Dist. No. 205, 739 N.E.2d 508, 512 (Ill. 2000). “The lan‐
guage of the statute provides the best indication of the legis‐
lature’s intent.” Id. Where a phrase or word is undefined, “[i]t
is appropriate to employ a dictionary to ascertain [its] mean‐
ing.” Landis, 919 N.E.2d at 304. “A statute is ambiguous when
it is capable of being understood by reasonably well‐informed
persons in two or more different senses.” People v. Beachem,
890 N.E.2d 515, 520 (Ill. 2008) (quoting In re J.W., 787 N.E.2d
747, 767 (Ill. 2003)). If a statute imposing a tax is ambiguous,
it must be “strictly construed against the government and in
favor of the taxpayer.” In re Consol., 739 N.E.2d at 512.
a. Certification of State Law Issues
First, the municipalities ask the Court to certify, pursuant
to Circuit Rule 52(a), four questions to the Illinois Supreme
Court: 1) whether the OTAs are “operators” of hotels or hotel
rooms; 2) whether the OTAs “own” hotel rooms; 3) whether
the OTAs are “managers” of hotel rooms; and 4) whether
“gross rental receipts” refers to the room rate negotiated be‐
tween the OTA and the hotel or the full amount the customer
pays to the OTA.
“Certification is a useful tool of cooperative federalism.”
State Farm Mut. Auto. Ins. Co. v. Pate, 275 F.3d 666, 671 (7th Cir.
2001). But it is costly and burdensome, so “we approach the
Nos. 16‐3932 & 16‐3944 9
decision to certify with circumspection.” Id. We have found
certification appropriate:
when the case concerns a matter of vital public
concern, where the issue will likely recur in
other cases, where resolution of the question to
be certified is outcome determinative of the
case, and where the state supreme court has yet
to have an opportunity to illuminate a clear path
on the issue.
Id. at 672 (quoting In re Badger Lines, Inc., 140 F.3d 691, 698 (7th
Cir. 1998)). We will not certify questions when what is re‐
quired is “the exercise of a court’s judgment.” Id. The most
important consideration is whether we find ourselves “genu‐
inely uncertain about a question of state law.” Id. at 671.
We recognize that the Illinois Supreme Court has not ruled
on these issues yet, but find that this is not a proper case for
certification. This case involves routine questions of statutory
interpretation that this Court is well‐equipped to handle. Af‐
ter interpreting the meaning of the thirteen ordinances, this
case merely requires the Court to exercise judgment as to
whether the undisputed facts show that the ordinances apply
to the OTAs. And although similar issues are likely to recur as
other municipalities bring similar suits, the Illinois Supreme
Court can correct our interpretations if it finds them errone‐
ous. Cf. Chi. Teachers Union, Local No. 1, Am. Fed’n Teachers v.
Bd. of Educ. of Chicago, 662 F.3d 761, 764 (7th Cir. 2011) (“The
federal injunction means that there will be no opportunity for
a state court to correct our interpretation of state law if it is
erroneous … .”). The motion to certify is DENIED.
10 Nos. 16‐3932 & 16‐3944
b. Owners, Operators, and Managers
Seven of the ordinances place on owners, operators, and
managers of hotels or hotel rooms the duty to collect the tax
from a renter and remit it to the municipality. Thus, if the
OTAs are not owners, operators, or managers, they have no
obligations under these ordinances. The district court granted
the OTAs summary judgment against the municipalities with
these ordinances—Arlington Heights, Bedford Park, Oak
Lawn, Orland Hills, Orland Park, Schaumburg, and Tinley
Park—because it found that the OTAs were not owners, oper‐
ators, or managers. We agree.
The ordinances do not define owner, operator, or manager.
The Court presumes that these words have their plain mean‐
ing. An owner is “[s]omeone who has the right to possess, use,
and convey something” or “a person in whom one or more
interests are vested.” Owner, BLACK’S LAW DICTIONARY (10th
ed. 2014); accord Bd. of Educ. of Glen Ellyn Cmty. Consol. Sch.
Dist. No. 89 v. Dep’t of Revenue, 825 N.E.2d 746, 754 (Ill. App.
Ct. 2005) (“The primary incidents of ownership include the
right to possession, the use and enjoyment of the property, the
right to change or improve the property, and the right to al‐
ienate the property at will.”). Clearly, the OTAs do not own
hotels. They have no right to possess or use the hotels they
contract with or to convey them to others.
At least four of the ordinances (Bedford Park, Orland
Hills, Orland Park, and Tinley Park) appear to place the duty
of collecting and remitting taxes on owners of hotel rooms in
addition to owners of hotels. But the OTAs do not own hotel
rooms either. They have no right to use or possess hotel rooms
and they have no independent right to convey hotel rooms to
consumers—they contract with hotels for the ability to make
Nos. 16‐3932 & 16‐3944 11
reservations for customers. Reservations are sent to the hotels
and the customers can only take temporary possession upon
checking in at the hotel. Under any plain understanding of the
word “own,” OTAs do not own hotels or hotel rooms.
A manager is “[s]omeone who administers or supervises
the affairs of a business, office, or other organization.” Man‐
ager, BLACK’S LAW DICTIONARY (10th ed. 2014). Clearly the
OTAs are not managers of hotels—they do not supervise the
affairs of hotels. The municipalities seem to argue only that
the OTAs are managers of hotel rooms for purposes of three of
the ordinances (Orland Park, Orland Hills, and Tinley Park).
To be a manager of a hotel room, the OTAs would need to
supervise the affairs of the room. But a hotel room is not a
business separate from the hotel it is located in. The munici‐
palities argue that “the OTAs are unquestionably in charge of
the affairs of businesses that step into the shoes of hotels and
assume many day‐to‐day hotel functions.” Br. Appellants 26.
Of course the OTAs are in charge of their own businesses, but
that does not make them managers of hotels or hotel rooms.
The municipalities decry most forcefully the district
court’s interpretation of the term operator. The district court
defined operator as one “who uses and controls something.”
Expedia, 193 F. Supp. 3d at 922 (quoting Operator, Merriam‐
Webster Dictionary, https://www.merriam‐webster.com/dic‐
tionary/operator (last visited June 20, 2016)). But even under
an arguably more on‐point definition of operator, the OTAs
are not operators of hotels or hotel rooms. The municipalities
suggest that an operator is “one who operates or runs a busi‐
ness.” Br. Appellants 21; see also Operator, Merriam‐Webster
Dictionary, https://www.merriam‐webster.com/diction‐
ary/operator (last visited Oct. 13, 2017) (“one that operates a
12 Nos. 16‐3932 & 16‐3944
business”). An operator could also be one who operates; or
one who “perform[s] a function” or “exert[s] power or influ‐
ence.” Operate, Merriam‐Webster Dictionary,
https://www.merriam‐webster.com/dictionary/operate (last
visited Oct. 12, 2017).
But the OTAs do not perform the function of running a
hotel. They perform one set of functions that a hotel does—
making room reservations, processing financial transactions,
and handling customer service with respect to those transac‐
tions. But that the OTAs engage in one hotel function does not
transform them into operators of hotels. We would not say
that when a hotel contracts with a cleaning service that orders
supplies and hires, schedules, and pays workers, the cleaning
service becomes an operator of the hotel. Cf. Pitt Cty. v. Ho‐
tels.com, L.P., 553 F.3d 308, 313 (4th Cir. 2009) (“The online
companies … have no role in the day‐to‐day operation or
management of the hotels. Thus, they cannot be said to oper‐
ate the hotels.”); City of Goodlettsville v. Priceline.com, Inc., 844
F. Supp. 2d 897, 912 (M.D. Tenn. 2012) (“As concerns hotels,
those [definitions of operate] strongly suggest day‐to‐day
management of the hotel property itself.”); Hamilton Cty. v.
Hotels.com, L.P., No. 3:11 CV 15, 2011 WL 3289274, at *2 (N.D.
Ohio July 29, 2011) (holding that OTAs were neither owners
nor operators of hotels and that they did not furnish lodging
to guests); Mont. Dep’t of Revenue v. Priceline.com, Inc., 354 P.3d
631, 635 (Mont. 2015) (“The OTCs do not fit within the dic‐
tionary definition of ‘owners or operators.’ They do not pos‐
sess, run, control, manage, or direct the functioning of a hotel
or rental agency.”). But see City of Chicago v. Hotels.com, L.P.,
No. 2005 L 051003, Br. Appellants App. 69 (“Being an operator
of hotel accommodations does not require ownership of hotel
Nos. 16‐3932 & 16‐3944 13
accommodations. An operator only has to exert power or in‐
fluence over hotel accommodations, which Defendants do.”).
Additionally, most of the ordinances list those with the
duty to collect the tax as owners, operators, or managers of
hotels.5 Under the principle of noscitur a sociis, “which coun‐
sels that a word is given more precise content by the neigh‐
boring words with which it is associated,” United States v. Wil‐
liams, 553 U.S. 285, 294 (2008), the meaning of operator should
be informed by its inclusion on a list with owner and man‐
ager. This suggests that an operator is, like an owner or a man‐
ager, someone who generally oversees the business of run‐
ning a hotel.
Three of the ordinances (Orland Hills, Orland Park, and
Tinley Park) cover operators of hotel rooms in addition to op‐
erators of hotels. But the same principles apply. To have a duty
to collect and remit taxes under the ordinances, the OTAs
would need to essentially “run” hotel rooms. While the OTAs
engage in one aspect of running hotel rooms—reserving those
rooms for customers—that does not mean they operate hotel
rooms.
The district court granted summary judgment to the OTAs
against the municipalities with this type of ordinance because
the OTAs had no duty to collect or remit hotel occupancy
taxes. That portion of the decision is affirmed.
5 Bedford Park places the duty of collection and remittance solely on
the owner of hotel or motel rooms. Arlington Heights and Schaumburg
place the duty on owners, operators, and those with licenses to operate
hotels.
14 Nos. 16‐3932 & 16‐3944
c. Engaged in the Business of Renting Hotel Rooms
Three of the ordinances—Rockford, Willowbrook, and
Lombard—impose a tax squarely on those engaged in renting
hotel rooms or engaged in the business of renting hotel rooms.
The district court found that the OTAs were engaged in rent‐
ing hotel rooms. But because Rockford and Willowbrook’s or‐
dinances only tax gross rental receipts, it granted summary
judgment to the OTAs with respect to those municipalities.
According to the district court, because the municipalities al‐
ready received taxes on the rental rate, as set by the hotel, the
OTAs were not required to collect and remit taxes on the extra
fees they charge consumers. But as Lombard’s ordinance did
not specify that the tax was only on gross rental receipts, the
district court granted it summary judgment.
None of the ordinances define “engaged in the business of
renting” or “engaged in renting.” To rent is “[t]o pay for the
use of another’s property.” Rent, BLACK’S LAW DICTIONARY
(10th ed. 2014); see also Lease, BLACK’S LAW DICTIONARY (10th
ed. 2014) (“To grant the possession and use of (land, build‐
ings, rooms, movable property, etc.) to another in return for
rent or other consideration … .”). Thus, renting implies own‐
ership and granting possession of property—here, hotel
rooms. As discussed, the OTAs do not own hotels or hotel
rooms and they cannot independently grant consumers ac‐
cess to hotel rooms. Therefore, they cannot rent hotel rooms
to customers.
The question here is whether “engaged in the business”
has the same meaning under these tax ordinances as it does
in other contexts, like the products liability context, in which
sellers are not held strictly liable unless they are engaged in
the business of selling the defective product. See Carollo v. Al
Nos. 16‐3932 & 16‐3944 15
Warren Oil Co., Inc., 820 N.E.2d 994, 1002 (Ill. App. Ct. 2004).
In that context, a seller is only engaged in the business of sell‐
ing if he does it routinely or commercially. The OTAs do not
rent hotel rooms, so of course they do not do so routinely or
commercially. Thus, the OTAs are not engaged in the business
of renting rooms and are not subject to these three ordinances.
We affirm the grant of summary judgment to the OTAs
against Rockford and Willowbrook. We reverse the district
court’s grant of summary judgment to Lombard and grant
summary judgment to the OTAs.
d. Hybrids
The last three ordinances are slightly more complicated,
but the OTAs are not required to pay taxes to the municipali‐
ties under any of them. Des Plaines appears to tax all “persons
engaged in the business of renting, leasing or letting rooms in
a hotel or motel.” Br. Appellants Sep. App. 302 But it also
places the duty of keeping records on operators and the duty
of filing returns and paying taxes to the city on owners. War‐
renville’s ordinance similarly imposes a tax on those engaged
in the business of renting, but places a duty to pay on owners.
Burr Ridge’s ordinance includes language about both engag‐
ing in the business of renting and owners, operators, and
managers. But as the OTAs are neither engaged in the busi‐
ness of renting nor owners or operators of hotels, they have
no obligations regardless of how these ordinances are inter‐
preted. The grant of summary judgment to the OTAs against
Des Plaines, Warrenville, and Burr Ridge is affirmed.
16 Nos. 16‐3932 & 16‐3944
III. Conclusion
The district court’s grant of summary judgment to the
OTAs against all but one municipality is AFFIRMED. The dis‐
trict court’s grant of summary judgment to the Village of Lom‐
bard is REVERSED and summary judgment shall be entered
in favor of the OTAs.