Loading...
HomeMy WebLinkAboutItem A1* BOCC SPECIAL MEETING 6/29/10 * * TIME CERTAIN 11:00 A.M.* (Or as soon thereafter as may be heard) BOARD OF COUNTY COMMISSIONERS AGENDA ITEM SUMMARY Meeting Date: 6/29/10 - MAR Division: County Attomey Bulk Item: Yes _ No X Staff Contact Person: Bob Shillinger, #3470 AGENDA ITEM WORDING: An Attorney -Client Closed Session of the Board of County Commissioners in the matter of Monroe County v. Priceline. com, et al, 09-10004CV. ITEM BACKGROUND: The County filed suit in U.S. District Court against internet travel service providers to collect the full amount of tourist development tax on rooms booked through their services. The Court has certified the case as a class action so Monroe County is the class representative of all Florida counties which have adopted tourist development taxes but which have not opted out of the plaintiff. Mediation was conducted on. June 16`h. A closed session is needed to discuss a settlement proposal that resulted from the mediation. Per F. S. 286.011(8), the subject matter of the meeting shall be confined to settlement negotiations or strategy sessions related to litigation expenditures. Present at the meeting will be the Commissioners, County Administrator Roman Gastesi, County Attorney Suzanne Hutton, Chief Assistant County Attorney Bob Shillinger, Assistant County Attorney Cynthia Hall, special litigation counsel Jay Shapiro and Tod Aronovitz as well as a certified Court Reporter. PREVIOUS RELEVANT BOCC ACTION: 5/19/10 BOCC approved Closed Session for 6/16/10 at 1:30 p.m. in Marathon, FL 6/16/10 BOCC continued Closed Session to 6/29/10 at 11:00 a.m. in Marathon, FL (or as soon thereafter as may be heard following public hearings beginning at 10:00 a.m.) CONTRACT/AGREEMENT CHANGES: N/A STAFF RECOMMENDATIONS: Approval. TOTAL COST: Est. 200 INDIRECT COST: COST TO COUNTY: Est. $200 BUDGETED: Yes X No SOURCE OF FUNDS: REVENUE PRODUCING: Yes No X AMOUNT PER MONTH Year APPROVED BY: County Atty X OMB/Purchasing Risk Management DOCUMENTATION: Included Not Required X DISPOSITION Revised 2/05 AGENDA ITEM # County of Monroe The Florida Keys Robert B. Shillinger, County Attorney" Pedro J. Mercado, Assistant County Attorney ** Cynthia L. Hall, Assistant County Attorney ** Christine Li mbert-B arrows, Assistant County Attorney ** Derek V. Howard, Assistant County Attorney** Steven T. Williams, Assistant County Attorney** Peter H. Morris, Assistant County Attorney Patricia Eables, Assistant County Attorney Chris Ambrosio, Assistant County Attorney ** Board Certified in City, County & Local Govt. Law May 25, 2017 Kevin Madok, Clerk of the Circuit Court Sixteenth Judicial Circuit, State of Florida Monroe County Courthouse 500 Whitehead Street Key West, FL 33040 r BOARD OF COUNTY COMMISSIONERS Mayor George Neugent, District 2 Mayor Pro Tern David Rice, District 4 Danny L. Kolhage, District 1 Heather Carruthers, District 3 Sylvia J. Murphy, District 5 Office of the County Attorney 1111 121h Street, Suite 408 Key West, FL 33040 (305) 292-3470 — Phone (305) 292-3516 — Fax In Re: Monroe County v. Priceline.com, et al., Case No.: 09-cv-10004 U.S. District Court, Southern District of Florida Dear Mr. Madok: Please find enclosed herewith the transcript of the following closed attorney/client sessions of the Monroe County Board of County Commissioners regarding the above -referenced matter: June 29, 2010; and, July 13, 2010. Under F.S. 286.011(8), the transcript may be part of the public record because the litigation has concluded. Thank you for your assistance with this matter. Please contact me should you have any questions. Sincerely, Robert B. Shillinger Monroe County Attorney Enclosures 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 IL 25 'ORIGINAL 1 MEETING OF THE MONROE COUNTY BOARD OF COUNTY COMMISSIONERS ATTORNEY -CLIENT CLOSED SESSION RE: Monroe County versus Priceline.com, et al. 09-10004CV HELD AT THE COMMISSION CHAMBERS 2798 OVERSEAS HIGHWAY MARATHON, FLORIDA 33050 Tuesday, June 29, 2010 11:25 A.M. - 12:03 P.M. Commissioners Present: COMMISSIONER KIM WORTHINGTON MAYOR PRO TEM HEATHER CARRUTHERS MAYOR SYLVIA J. MURPHY COUNTY ATTORNEY SUZANNE HUTTON, ESQ. CHIEF ASSISTANT COUNTY ATTORNEY BOB SHILLINGER, ESQ. COUNTY ADMINISTRATOR ROMAN GASTESI JAY SHAPIRO, ESQ. (by phone) ALL KEYS REPORTING Olde Towne Centre 600 Whitehead Street 9701 Overseas Highway Suite 206, 2nd Floor Marathon, Florida Key West, Florida 305-289-1201 305-294-2601 All Keys Reporting — Court Reporters — (305) 289-1201 Locations in Key Largo, Marathon & Key West 1 2 3 4 5 0 7 8 9 10 14 15 16 17 18 19 20 21 22 23 24 25 MS. HUTTON: The meeting is being held upon the request of County Attorney, Suzanne Hutton, who announced at a prior public meeting held on June 16th, 2010, that I needed advice concerning the pending matter of Monroe County versus Priceline.com, et al. 09-1004CV. At that meeting the board approved holding a closed session at 11 o'clock or as soon thereafter as may be heard on the date of June the 29th. And we have published notice of this special meeting through the Web site and through -- okay. For the record, and the benefit of the court reporter each of us will state our name and position starting with the commission. COMMISSIONER CARRUTHERS: Heather Carruthers, commissioner, district three. MAYOR MURPHY: Sylvia Murphy, commissioner, district five. COMMISSIONER WIGINGTON: Kim Wigington, commissioner, district one. MS. HUTTON: Suzanne Hutton, county attorney. MR. GASTESI: Roman Gastesi, county administrator. MR. SHILLINGER: Bob Shillinger, chief assistant county attorney. And by telephone. MR. SHAPIRO: This is Jay Shapiro, Sterns Weaver law firm in Miami, Florida. All Keys Reporting - Court Reporters - (305) 289-1201 Locations in Key Largo, Marathon & Key West 21 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MAYOR MURPHY: Good morning. MS. HUTTON: As a reminder, we will only be discussing settlement negotiations and strategy relating to litigation expenditures. You cannot take any decisive action at this meeting. We can provide information and you can provide direction to the attorneys. Any decisions this board makes concerning the case, must be done in a meeting open to the public and which is on the agenda, so we can reopen it. I'm going to turn this over to Mr. Shillinger. MR. SHILLINGER: Morning, commissioners. This case that we're here on today is Monroe County versus Priceline.com, et al. We've sued several online travel companies for collection of the bed tax. The commission authorized this action back in 2007. The case went through a couple of iterations. This actual suit was filed in January of 2009. We have progressed rapidly through the discovery. We went to mediation on June 16th, while you were meeting here at -- wherever you were meeting. I think it was here in Marathon. I was in Miami during mediation for this case. We have a trial date of June 19th, in Key West, in front of Judge Moore. Mr. Shapiro is going to explain a little bit about where we are in the negotiations. But we have a tentative deal with three of the four All Keys Reporting — Court Reporters — (305) 289-1201 Locations in Key Largo, Marathon & Key West 31 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 defendants, which we want to talk to you about today. And then, assuming that there is an indication that you want to go forward, when we come back into open session, we're going to ask to vote on -- give us authority to enter into those deals based on the numbers, that we have reached a principal, subject to us working on the language in the settlement agreements. So having said that, let me turn it over to Jay Shapiro, from the law firm of Stearns, Weaver. Jay, take it away. MR. SHAPIRO: Yes. Good morning everyone. As Mr. Shillinger mentioned, we have a proposed settlement on the table from three of the four defendant groups. And I explained to you who those are, and actually represent seven of the nine total defendants, in the case. But we grouped them into four separate groups. We have the Priceline defendants. We have the Expedia defendants. We have the Travelosity defendants, and we have the Orbitz defendants. Each of those, in those four defendant groups, are separate subsidiaries of those parent companies which we've also named as a defendant, in the case. And so we're clear that the -- all of the defendants in the case, there are nine of them. There is Priceline, Travelweb, Travelosity. There's Site59. There is Expedia. There is Hotels.com. There is Hotwire. There's Trip network and Orbitz. And, again, 41 All Keys Reporting — Court Reporters — (305) 289-1201 Locations in Key Largo, Marathon & Key West 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 WE 20 21 22 23 24 25 we have proposed settlements with seven of the nine defendants. This includes all, except two other defendants, which are Orbitz and Trip network. We have on the table what we believe are very, very good proposed settlements with these defendants. Before I explain what we have on the table, I thought I would take a few minutes and just review the background of the litigation. Bob touched on it briefly. I will be going into it in a little bit more detail with you all and talk about how we got to where we are right now. And I do understand, having covered enough hearings, that I appeared by court telephone. And I listened to lawyers appear by telephone, that I understand the difficulties of telephone communications. I can't see your faces. I can't see whether I'm getting through to you all or whether I'm saying things that are bewildering to you all. So I just want to please, invite anyone at anytime, if there is anything I'm saying that's not coming across clear, or you can't understand me, please feel free and interrupt me and we are going to go over it in enough detail that you understand what we have on the table. As Mr. Shillinger mentioned, the case has been pending for about a year and a half. We filed the lawsuit against these nine online travel companies, which they call OTCs, to collect tourist development tax, not All Keys Reporting — Court Reporters — (305) 289-1201 Locations in Key Largo, Marathon & Key West 51 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 only on behalf of Monroe County, but also on behalf of the other Florida counties that have TDT ordinances which are substantially similar to Monroe's. In a nutshell, the theory of the case is that these online travel companies, sell hotel rooms at a marked up price. That is, they sell the hotels, the rooms to the consumers at a price which is higher than they themselves paid for the hotel -- they paid the hotels themselves, for that room. We say that they're liable for the amount of TDTs that aren't paid on their markup. And I will give you an example. When an online customer books a hotel reservation through, let's say Expedia, and it pays Expedia a total room rate of $150 through the Web site. In that transaction, Expedia is only paying the hotel, let's say $120, for that room. Along with a separate tax recovery fee that they are charging the customer. But that base, that tax recovery fee is only at $120 net rate, that pays the hotel, and not the $150 that it charges the customer. Expedia never collects or remits the tourist development taxes on the additional $30 they charge the defendant, for the $140 and $150, that is charged the customer for the room. And what we've sued on is to collect the tourist development taxes that we said are owed on the additional $30. Is everybody with me so far? All Keys Reporting — Court Reporters — (305) 289-1201 Locations in Key Largo, Marathon & Key West 61 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 COMMISSIONER CARRUTHERS: Yes. COMMISSIONER WIGINGTON: Yes. MR. SHILLINGER: Yes. MR. SHAPIRO: Again, we sued for what I call the difference between what they pay the hotel, and what the customer's charged. As Mr. Shillinger mentioned, we've been vigorously litigating the case for a little over a year and a half now. A lot of things happened during that time. The court has certified the case, that it proceed as a class action, not only on behalf of Monroe County, but also on behalf of the class, at the time, of 59 counties in Florida that had a tourist development tax ordinance that's similar to Monroe's. As Mr. Shillinger pointed out, that is a very hard thought issue, very defensive, that the court could adopt any by-product of the defendant's argument, that the case should not proceed as a class action and accept our argument. And he wrote a very comprehensive order appointing Monroe County as the lead class representative to lead the case, not only on behalf of itself, but on behalf of the other -- other counties who have substantial TDT ordinances like Monroe has. After the certification order was entered and notice went out to the class members, approximately, 27 or 28 counties, it's just a little under half of the counties All Keys Reporting — Court Reporters — (305) 289-1201 Locations in Key Largo, Marathon & Key West 71 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 out there, decided to opt out of the case and elected to pursue their own individual cases against these defendants, on their own. That is a decision, by the way, that I predict they're going to regret. And as soon as word of the settlement that we've achieved gets out, I think a lot of them are going to be asking their outside lawyers, why they opted out of this case, and coming to us and asking us whether we can get them the same deal. But that, of course, remains to be seen. But, in any event, again, since it's been filed, the case has been very heavily litigated. We have forced the defendants to produce hundreds of thousands of documents, in the case. Not all of them voluntarily. We were required to go to the court numerous times to get orders compelling them to produce discovery, which they ultimately did. And we studied their documents very, very carefully, and used them strategically, as we've gone along. We've also taken close to 20 separate depositions of the defendants or their representatives, and employees. And on top of that, we've also subpoenaed and obtained hundreds of other depositions that these defendants have given, in other hotel occupancy tax cases which are pending around the country. So we've gotten all the testimony they've ever given, in any of these cases. All Keys Reporting — Court Reporters — (305) 289-1201 Locations in Key Largo, Marathon & Key West 81 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 We've also forced the defendants to produce reams of transactional data which reflects every single hotel reservation they've ever booked, in each of the counties that are members of our class. And this transactional data goes back to the beginning of time when they first started conducting their online businesses, and began booking rooms here in the state of Florida. So this goes back to 1999 and earlier, when these companies first started their businesses here. And we've taken that transactional data, and there is literally, millions and millions of transactions that are reflected in there. And we've retained an extremely talented expert. I mean, this guy is really, really good. And he's analyzed each and every one of the transactions to calculate what the gross rate was that was charged to the consumer, what the net rate was, which was paid to the hotels. We've calculated the markup and the fees that they charged, in connection with each of these transactions, in order to calculate what the aggregate taxes, interest and penalties that would be owed to the class, based on the defendants transactions throughout those counties that are members of the class. And based on that very expensive and detailed analysis and Mr. Shillinger has seen the expert's report, it's probably 60 pages long, with a number of tables and charts and summaries, where All Keys Reporting — Court Reporters — (305) 289-1201 Locations in Key Largo, Marathon & Key West 91 1 2 3 0 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 10 1 it summarizes all the potential damages that we could possible collect, in the case. Based on that analysis, we've calculated that the total taxes and interest owed by these defendants, and I'm talking right now about the settling defendants. I'm not including the other defendants in this calculation, at the moment. But I'm just talking about exposure of these defendants that want to settle the case right now. The total taxes and interest owed by the federal defendants, collectively, and this is not just the Monroe County, but this is for the entire class, as presently situated. Here are the numbers -- you may want to write these down. The total taxes that we've calculated that are owed for the class we represent is $5.9 million. We originally, the number was $6.1 million by Mr. Shillinger, in the scope, in the course of deposition some of the Hotwire defendants, we recognize that there were some anomalies in their transaction where there were some car rental charges and airfare bookings that were mixed in, inappropriately. And those were properly excluded. So we've agreed it's $5.1 million total in taxes. The interest on those taxes, we calculate it at, approximately, $2.1 million. And then we've also calculated the potential range of penalties we can seek on top of the taxes and interest are, approximately, $2.9 All Keys Reporting — Court Reporters — (305) 289-1201 Locations in Key Largo, Marathon & Key West I 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 million. And that number could go higher. It could be doubled if we win, to provide a very high standard of willful tax evasion. We think that that's probably unlikely, but obviously, we would seek to have a willful evasion standard applied. But if we have most of the penalties, we could probably recover $2.9 million. Now, again, that's not the proposed settlement, that's what we would get if we were to win the entire case, get everything that we asked for under the sun, in the case. But now that we've litigated the case very extensively, we've taken all the depositions, and we've examined all the documents and testimony that we have and we've done the damage calculations, we think we're in a pretty good position to intelligently assess what the settlement value of the case is. And in that respect, as Mr. Shillinger mentioned, we have been able to negotiate a proposed settlement with seven of these nine defendants. All of which, of course, are subject to final commission approval, but this is what we have on the table so far. With those seven of nine defendants, which represent three of the four defendant groups, the proposed collective settlement on the table for those defendants is $6.175 million. COMMISSIONER CARRUTHERS: Okay. MR. GASTESI: 6.175? All Keys Reporting — Court Reporters — (305) 289-1201 Locations in Key Largo, Marathon & Key West 1 2 3 4 5 6 7 8 9 10 14 15 16 17 19 20 21 22 23 24 25 12 I MR. SHILLINGER: 6.175. MR. SHAPIRO: 6,175,000. COMMISSIONER CARRUTHERS: How much of that comes to Monroe County? MR. SHAPIRO: Monroe County has, approximately, 30.7 percent of the damages. So we've calculated that the number for Monroe would be right around $1.9 million. COMMISSIONER CARRUTHERS: As part of the settlement, are they required now to collect and remit sales taxes on the total? MR. SHAPIRO: No. We were not able to get any agreement going forward. In fact, there is another component of the settlement that we need to talk about. But just so the commission is aware, when we initially filed this case, one of the counts that we included in the case was a count for a permanent injunction requiring them to pay taxes on a go forward basis. And the court dismissed that count from the case. Saying it was not going to decide what was going to happen going forward or exercise supervisory authority in the form of an injunction, but was only going to provide the amount of damages that were due up to the point of trial. COMMISSIONER WIGINGTON: But this would not release them from any damages to us from not collecting the taxes, from this day forward? Would they be able to All Keys Reporting - Court Reporters - (305) 289-1201 Locations in Key Largo, Marathon & Key West Elm 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 collect the taxes and we not be able to get any of it because of this settlement? MR. SHILLINGER: There's a -- there is another component of it, buy forward. If they want to buy forward a couple of years, Jay. MR. SHAPIRO: Yes. As you can note from the numbers that I just threw out, the amount of the settlement that was proposed from these three defendants is, in fact, over and above 100 percent of the actual taxes that are owed by these groups, about $275,000 over the actual amount. And part of the proposed settlement that the defendants have insisted on, in order to get this done, they want an agreement from the counties that are in the class, to not seek or collect, or assess TDTs from these defendants for a period of two years going forward. And that was a critical part of the deal for them, for a number of reasons. First and foremost, they absolutely do not want to be put in the position of having to register as dealers in each of the counties that are members of the class. That is an administrative nightmare for them that have to file returns in all of these counties. And what they would rather do is try to buy some time to try to lobby the legislature for an exception. And see if they can win this case in the All Keys Reporting — Court Reporters — (305) 289-1201 Locations in Key Largo, Marathon & Key West 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 14 1 legislature. And having reflected on that, I propose that our view on that ought to be, let them. We can't say who's going to win that battle in the legislature. But it seems to me that we would rather fight that battle with 100 percent of the back taxes, that they owe, already paid up in our possession, and let them go fight that battle in the legislature. I don't think they're going to win it. They may, or they may not. There is nothing, at the end of the day, we can do other than lobby heavily, if they do fight that battle. But seems to me that they ought to be fighting that battle with all of this money in the county's pocket right now, instead of having it in this litigation. And the other trade-off, or the going forward, that the county -- that the commission needs to appreciate, is that when we originally filed this action, we did not believe that we could go back more than three to five years, on the statute of limitations, come up with a legal theory that we believe allows us to go back beyond five year statute of limitations. Getting taxes back to the beginning of time for these folks. And the settlement that we have on the table from these folks represents payment of moneys going back even beyond what we think the statute of limitations might prevent us from going to get. All Keys Reporting — Court Reporters — (305) 289-1201 Locations in Key Largo, Marathon & Key West A I 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 15 1 So there is -- there clearly is some horse trading going on here. And there is some trade-offs. But at the end of the day, we think that the commission should seriously consider the settlement, given that it represents 100 percent of the back taxes that are owed then -- plus some money on top of that, representing consideration for the going forward exception. COMMISSIONER CARRUTHERS: Which -- MR. SHAPIRO: Go ahead. I'm sorry. COMMISSIONER CARRUTHERS: Which two years is it that the counties cannot request to collect taxes? MR. SHAPIRO: It would be two years from the date you signed the -- two years, basically, from -- from now going forward. COMMISSIONER CARRUTHERS: I was trying -- MR. SHAPIRO: They're not going to be required, if the commission decides to approve the settlement, for two years going forward -- actually, from Priceline, I think because they paid extra money for this. COMMISSIONER CARRUTHERS: The only reason that, just because we've had two really crummy years. And I would rather not pay taxes on two really crummy years then looks like a good year coming forward. MR. SHILLINGER: I think someone having dealt with the oil spill -- All Keys Reporting - Court Reporters - (305) 289-1201 Locations in Key Largo, Marathon & Key West 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 16 1 COMMISSIONER CARRUTHERS: Yeah. MR. SHILLINGER: We don't know what the future -- COMMISSIONER CARRUTHERS: Right. MR. SHILLINGER: -- is of online travel. COMMISSIONER CARRUTHERS: We do know that last year we had a recession. So I was -- MR. SHILLINGER: Right. COMMISSIONER CARRUTHERS: -- wondering if it started from the day the suit was filed. MR. SHILLINGER: No. No. No. It's going forward. COMMISSIONER CARRUTHERS: Going forward. So -- so, does this -- MR. SHAPIRO: Two years going forward and Mr. Shillinger pointed out in the negotiation as to what they would pay going forward to get this -- this free pass going forward. Clearly, that is a huge part of the discussion was, nobody knows what's going to happen to the tourist development taxes over the next year, given the oil that could be approaching our shores right now. There is no way to come up with any kind of benchmark, based on past, you know, bookings because it's a new book. It could, potentially, be a new world out there for tourists. Which, by the way, is part of the reason why we are recommending the settlement now because what the case is All Keys Reporting - Court Reporters - (305) 289-1201 Locations in Key Largo, Marathon & Key West 1 2 3 4 5 6 7 A 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 17 1 clearly giving up, you know, interest and penalties, and some going through money for two years. The only issue you're not getting everything that we could possibly get, if you win the case. But what we get, among other things, you would get money in the county's pockets now. COMMISSIONER WIGINGTON: I have two questions. MR. SHAPIRO: It seems to me that if Charlie Crist, Bill McCullum, Alex Martinez, it doesn't matter what your politics are, everybody is out there begging BP to fund tourist development initiative. Give them dollars to promote tourism. Seems to me that getting this money now in the county, most of the counties that are in the class are coastal counties. And many of them are on the west coast, are going to be affected by this. That's a trade-off that certainly, reasonably made, to get the money now, as opposed to fighting this thing. Which will be years on appeal. By the way, what I want to talk about -- MR. SHILLINGER: Jay, real quick. Jay, we have a couple of quick question. COMMISSIONER WIGINGTON: One question that you touched is if we end up in any type of suit over the oil and lost revenue, will this affect that at all? MR. SHAPIRO: Well, in fact, it may. It may positively because one of the things that Bob and I All Keys Reporting - Court Reporters - (305) 289-1201 Locations in Key Largo, Marathon & Key West 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 18 talked about, by agreeing to take a small amount of money up front, in exchange for the going forward, it's clear, and we can document it to provide further proof on this, if necessary. That the primary reason for doing that is because of the uncertainty of the impact on tourism and expected negative hit on tourism that the oil is going to bring. I think that that could be part of a claim submitted to BP, at a later date, which could be pursued against them. MR. SHILLINGER: In other words, the reduction in tourism and the loss of bed tax would be measurable against BP, as well. So we might -- MR. SHAPIRO: Yes. MR. SHILLINGER: -- be able to make up for some of the discount that we're giving in this settlement. MAYOR MURPHY: Instead of them going forward -- MR. SHILLINGER: Yes. MAYOR MURPHY: -- through BP would be? MR. SHILLINGER: Right. COMMISSIONER WIGINGTON: And are these TDC funds that we're suing for, and this would be -- this would be TDC funds? MS. HUTTON: Yes, but it wouldn't be solely TDC money. MR. SHILLINGER: Yes. This is a tourist development All Keys Reporting - Court Reporters - (305) 289-1201 Locations in Key Largo, Marathon & Key West 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 tax. COMMISSIONER WIGINGTON: That's what I thought. MR. SHILLINGER: It would be the first four pennies of the first three, plus one -- MS. HUTTON: Three -- well, now the fourth one that's MR. SHILLINGER: It's not the tourist impact tax which goes to the land authority and to the general fund. COMMISSIONER WIGINGTON: Okay. MR. SHILLINGER: They're just TDC funds. COMMISSIONER WIGINGTON: That was my question. MR. SHILLINGER: Because we're the only county with -- MS. HUTTON: A land authority and a tourist impact tax. M MR. SHILLINGER: Tourist impact tax. Because that's based on an area of critical state concern. So we couldn't bring a class action and include that tax in there. MAYOR MURPHY: Okay. MR. SHILLINGER: There is nothing that precludes us, and more specifically, not released from pursuing that. COMMISSIONER WIGINGTON: That was my next question. MR. SHILLINGER: Yes. COMMISSIONER WIGINGTON: Thank you. All Keys Reporting — Court Reporters — (305) 289-1201 Locations in Key Largo, Marathon & Key West 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 20 MS. HUTTON: I have a couple of questions on -- MR. SHAPIRO: The tourist impact tax, similar to Dade's convention development tax, is taxable or not depending on the lawsuit, are not being commenced at this point. MR. SHILLINGER: We have another question, Jay. MS. HUTTON: I actual have two questions. One is if the county commission for Monroe approves the settlement, do you still have to go to each of the other what, 29, 30 counties to get approval from them? MR. SHAPIRO: Yes. The way it would work is that assuming that Monroe County is the lead plaintiff authorized the settlements, we would then have to present the settlements to the court, who is called primary approval. Once we go to the court, and assuming the court would preliminarily approve the settlement, which we believe the court, giving that 100 percent of the taxes, we think the court would approve in a nano second. Then the process is that, until this goes out to the counties, goes out to the class of the proposed settlement, and then they have an opportunity to object to the settlement or to do nothing and just accept it. But it will be going to the other counties so that, ultimately, they can express any of their views on it. COMMISSIONER CARRUTHERS: And should they object All Keys Reporting - Court Reporters - (305) 289-1201 Locations in Key Largo, Marathon & Key West 1 2 3 M 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 (W 21 then, what happens to our share? MR. SHAPIRO: If -- if the county -- if some counties object to it, it's going to really depend which counties they are. If there's a county that has a relatively tiny amount that's at stake or some interior counties where it looks like there are, the damages are very, very small, I think that the court would not -- would not hold up a settlement benefit in a county like Monroe and Dade, and Collier, who has a substantial skin in the game. I think the court will approve the settlement, not withstanding those minor objections. If some major counties objected and -- and the 30 class member counties that we have, there is really five or six counties that make up the bulk of the damages. If they were all to approve the settlement, then I think it would go forward without a hitch. And one of the things that we plan to do is, assuming that -- that Monroe County authorized this to go forward on the settlement, is that Mr. Shillinger and I, and Mr. Duval from Miami -Dade County, would be getting on the phone in advance with those counties, previewing the settlement with them. Making sure they were aware of what was going on. And my guess is that they would pass it. MS. HUTTON: One more -- All Keys Reporting — Court Reporters — (305) 289-1201 Locations in Key Largo, Marathon & Key West 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 22 MR. SHAPIRO: That would be the process. The court would have to enter a preliminary approval order. Notice would go out to the counties, or members of the class and they would have the opportunity to be heard. And the court would decide at the final hearing later on. MR. SHILLINGER: Another question. MR. SHAPIRO: Sure. MS. HUTTON: One more question. The contingency, fee, does that come out of only Monroe County's share or out of each of the class district shares? MR. SHAPIRO: It comes out of the county's share. MS. HUTTON: Thank you. MR. SHAPIRO: Not bore solely by Monroe. MR. SHILLINGER. Understand that since we are the lead plaintiff, we are the one that bears the risk of an adverse judgment, a defense judgment, defense verdict at trial. So if -- if per chance we went to trial, and the jury sided with the online companies, Monroe County could be taxed with a cost of defense for all the online companies. So that's -- you know, that's the downside, if we don't take something. MR. GASTESI: Before we leave this room -- this is Roman speaking, Mr. Shapiro. We're going to have kind of a media plan, to open up to the public, after we're going to accept this settlement, or what are we doing here? All Keys Reporting - Court Reporters - (305) 289-1201 Locations in Key Largo, Marathon & Key West 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 23 1 MR. SHILLINGER: Right. There's some specific negotiations that we've had with respect to media considerations. And what we've -- Jay, correct me if I'm wrong, but what we've agreeing to do is, we're not going to issue any press releases? MR. SHAPIRO: That's correct. MR. SHILLINGER: We will, obviously, provide any documents that are requested, pursuant to the Public Records Act. But we're not going to aggressively go out and promote the story. MR. SHAPIRO: Yes. And we can't promote it as an agreement by the OTC that they've agreed that they owe these taxes. There is no admission of liability. We can describe the development in terms of the amount of money we're getting, in relationship to the total amount of money that's potentially at stake, in the case. But we can't go out and say, they've agreed to pay. And they admit that they're liable for 100 percent of the taxes that they owe. We can't say that. COMMISSIONER CARRUTHERS: We can't -- MR. SHAPIRO: But that's the practical reality, that they are paying 100 percent of the taxes that are owed, plus a little on top of that, for the going forward. COMMISSIONER WIGINGTON: Can't take a picture of Roman taking a big check? No? All Keys Reporting - Court Reporters - (305) 289-1201 Locations in Key Largo, Marathon & Key West 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 24 1 MR. GASTESI: Well, I just -- my concern is that, you know, we're going to open this up later on, to the public, and they've already covered it. MR. SHILLINGER: Right. MR. GASTESI: And they're waiting to hear what the settlement is. MR. SHILLINGER: Right. And I think we can describe it, within the bounds of the agreement, we can describe it as we're accepting these sums of money. MR. GASTESI: Okay. MR. SHILLINGER: To settle the lawsuit. MS. HUTTON: We are not issuing a press release. It's just going to be the discussion in the commission chamber. MR. SHAPIRO: That's right. MR. GASTESI: Then we're going to start getting calls. MR. SHILLINGER: Right. MR. GASTESI: And my recommendation would be that Bob handles the calls. MAYOR MURPHY: I was going to make that suggestion. COMMISSIONER WIGINGTON: Yes. MR. SHILLINGER: Turn my phone off. MAYOR MURPHY: One person. MR. GASTESI: All right. So, Bob, you handle that. All Keys Reporting - Court Reporters - (305) 289-1201 Locations in Key Largo, Marathon & Key West 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 25 Here it is 6.7 -- 6.175, of which 1.9, that's not our net though? That -- the contingency fees, you think adds up to 1.9? MR. SHILLINGER: Jay, the question is, does the fee come out of the 1.9 or is the 1.9 our bottom line number? MR. SHAPIRO: No. The fees would come out of the 1.9. COMMISSIONER CARRUTHERS: What are the fees? MR. GASTESI: What is that? MR. SHILLINGER: The fee is under our retainer agreement, was MR. SHAPIRO: Was 33 percent. MR. SHILLINGER: Thirty-three percent. MR. SHAPIRO: Now, for the court, if we're going to have to apply -- COMMISSIONER CARRUTHERS: Ow. MR. SHAPIRO: -- fees, we will, obviously, not seek more than 33 percent. The court could award us less than 33, but under no circumstances will we be asking for and accept more than 33 percent. MR. SHILLINGER: And just so the commission has an idea of how much time you have in the case, Jay, if you were billing on an hourly rate, how much time have you spent on the case? MR. SHAPIRO: Yes. If it's any comfort to you all, All Keys Reporting - Court Reporters - (305) 289-1201 Locations in Key Largo, Marathon & Key West 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1 there will be no windfall for any of the attorneys here. The amount of fees and expenses that we have incurred will exceed, substantially, the amount of fees and expenses we will recover from the court -- from the court if we're given the full 33 percent. This case has been very, very, heavily litigated. They have made us work around the clock, spending much more money than any reasonable defendant would require to be fought about, in litigation. The total fees will be, I think, if they were paid on an hourly basis -- let me just do some quick math here. COMMISSIONER WIGINGTON: I was going to ask him -- MR. SHAPIRO: Close to $3 million, which will be substantially more than what we would recover from the court if he gives us 33 percent. MAYOR MURPHY: Well, I can -- my opinion is, we're two-thirds better off than we were when it started. MR. GASTESI: So, Bob, you got that number faster. MR. SHILLINGER: Yes. MR. GASTESI: So it ends up being met along 22-ish, for each? MR. SHILLINGER: Yes. All right. Any other questions? MR. GASTESI: Yes. What can we use that money for? MS. HUTTON: Only for what tourist development taxes All Keys Reporting - Court Reporters - (305) 289-1201 Locations in Key Largo, Marathon & Key West 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 27 I can be spent for. COMMISSIONER CARRUTHERS: But that means advertising, as well as capital? MS. HUTTON: Right. MR. GASTESI: Capital? MS. HUTTON: The only -- only under 125.0104, museums, fishing piers. MR. GASTESI: Higgs Beach? MS. HUTTON: Higgs Beach. COMMISSIONER CARRUTHERS: Exactly. MS. HUTTON: Beach Park. Yes. MR. GASTESI: There's a temporary policy. Focus an evaluation -- MS. HUTTON: Yes. MAYOR MURPHY: Shameless. MS. HUTTON: Wait. Wait. That's not under the scope of this discussion. MR. SHILLINGER: Yes. Right. Right. We have to limit this to the litigation. COMMISSIONER CARRUTHERS: We are spending the money, we don't have it yet. MR. SHILLINGER: Do we have any other questions for Jay, before we close the closed session? Anybody on the other staff? MS. HUTTON: No. All Keys Reporting - Court Reporters - (305) 289-1201 Locations in Key Largo, Marathon & Key West 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 28 1 MR. SHILLINGER: Jay, do you have anything additional for us? MR. SHAPIRO: No. I will just tell you that I think that it is a substantial settlement that really, I think, by accepting it, I think you're making the right decision here. There were all kinds of other risks in this case unrelated to the litigation. By the way, we think we can win the case. Although, we always, with all the anti -tax sentiments out there, you never know how a jury is going to react to a tax collection action. But we felt very good about the case. There's all kinds of risks in the case which extends beyond just the litigation risk. The risk of adverse legislative action, which they're trying to bring up in the legislature to try to get an exemption. We are eliminating that risk, going back getting the back taxes collected. You have the risk of time dragging it out on appeal. And just so you know, the OTCs have had some successes in these cases. They've won as many as they've lost around the country. And some of the ones that they've lost at the trial court, they've won on appeal. So there's appellate risks that you also have. So it seems to me when you look at all of those factors collectively, you assess where you are, the fact that these folks -- and by the way, this is the most All Keys Reporting — Court Reporters — (305) 289-1201 Locations in Key Largo, Marathon & Key West 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 29 1 substantial settlement they've ever agreed to pay in any other case. I would not pass that around publicly, because they'll get mad at us. But the issue that they have not been settling these cases anywhere else around and the amount of money they're putting forward, with respect to the total exposure, is higher than I'm aware of around the country. So that clearly factors into our analysis. And I think we've achieved a very good result for the county. MR. SHILLINGER: Okay. Jay, mechanically, we don't have a written settlement agreement, at this point; correct? MR. SHAPIRO: What we have with the Priceline group is, we have a signed memorandum of understanding which incorporates most of the material terms of the settlement, all of which has been subject to commission approval. We have the same kind of an agreement with Travelosity. We have been negotiating it with Expedia, which is clearly the biggest fish in this game. They have, you know, 80 percent of the damage exposure in the case. And we are very close to wrapping that up. In fact, there is, as I'm on the phone here, I got an E-mail from their counsel saying it looks like we're pretty good to go except for a few minor edits that they want to add on to the M.O.U., but will probably wrap up today. All Keys Reporting — Court Reporters — (305) 289-1201 Locations in Key Largo, Marathon & Key West A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 30 1 But after we have all of those signed, the process will be that we want them to enter a formal settlement agreement incorporating all of those terms and which would be presented to the court. So I assume part of what you're going to do in open session, you're going to delegate -- the commission is going to delegate to the county attorney's office the ability to enter into the agreement. MR. SHILLINGER: And that's what I wanted to discuss with you, while we're still here in closed session, is if you guys are thinking of voting for this when we go to the open session, what we would be asking you for is the authority to settle the litigation, with respect to Expedia, Travelosity, and Priceline, for a sum certain of $6,175,000, on behalf of the class. Subject to reducing that agreement to writing in the settlement agreement. Is that an accurate -- MR. SHAPIRO: And subject -- and subject to ultimate court approval. MR. SHILLINGER: And court approval. So -- COMMISSIONER CARRUTHERS: Subject to reducing? MR. SHILLINGER: Subject to -- reducing it to writing, but -- COMMISSIONER CARRUTHERS: Okay. MR. SHILLINGER: -- I don't have a document that I All Keys Reporting - Court Reporters - (305) 289-1201 Locations in Key Largo, Marathon & Key West 1 2 3 4 5 6 7 X, 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 31 can hand you here today and say, here's the settlement agreement. MAYOR MURPHY: It's in your face. MR. SHILLINGER: Which is what we normally do in these things, is I bring you a document -- COMMISSIONER CARRUTHERS: Right. MR. SHILLINGER: -- with us. MS. HUTTON: In other words, what he's saying is that you would be authorizing him or me -- COMMISSIONER CARRUTHERS: To write. MS. HUTTON: -- to actually sign whatever document is on -- MR. SHILLINGER: Material amounts. COMMISSIONER CARRUTHERS: Materially, what I just discussed? MS. HUTTON: Right. MR. GASTESI: And we're talking about 50 cents on the dollar, basically, are we? MR. SHILLINGER: Well, we're talking 100 percent on the dollar, in terms of the taxes, but it's not 50 cents on the dollar if you're including all of the potential interest and penalties. MR. GASTESI: Right. MR. SHILLINGER: Right. MR. GASTESI: That's a good point. All Keys Reporting - Court Reporters - (305) 289-1201 Locations in Key Largo, Marathon & Key West 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 32 1 COMMISSIONER CARRUTHERS: Talking about over 100 percent of the taxes? MR. SHILLINGER: Right. MR. GASTESI: Good job. MR. SHILLINGER: Thank you. MAYOR MURPHY: Good job. MR. SHILLINGER: All right. Any other questions for Mr. Shapiro? Any other comments, Jay? MR. SHAPIRO: The last thing I would leave you all with is that, at the appropriate time, assuming we get this all wrapped up and the court approves it and all the other counties sign off. At the appropriate time, I would just say that both Mr. Shillinger and Pam Sellers, who's in Danny Kolhage's office have done, they have gone above and beyond looking out for Monroe County and class' interest in the case. They have given tremendous amounts of effort and dedication to this case. And at the appropriate time, I think they ought to be recognized for that really great job they've done. MAYOR MURPHY: Mr. Shapiro, you probably have saved their jobs, at least for a year. MR. SHILLINGER: Thanks. COMMISSIONER CARRUTHERS: Backhanded praise. MR. GASTESI: Thanks for coming here today. MAYOR MURPHY: We thank you for the information. It All Keys Reporting - Court Reporters - (305) 289-1201 Locations in Key Largo, Marathon & Key West 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 33 1 was very concise, but well put. And thank you. MR. SHILLINGER: All right. MR. SHAPIRO: You're welcome. My pleasure. MS. HUTTON: Are we closing the closed session? MAYOR MURPHY: Is this the time, Bob? MR. SHILLINGER: Yes. MAYOR MURPHY: All right. The closed session is closed. (The attorney -client closed session was concluded at 12:03 All Keys Reporting — Court Reporters — (305) 289-1201 Locations in Key Largo, Marathon & Key West 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 W-1 19 20 21 22 23 24 25 34 CERTIFICATE STATE OF FLORIDA, COUNTY OF MONROE I, Patricia A. Zischka, certify that I was authorized to and did stenographically report the foregoing proceedings and the transcript is a true record. Dated this 8th day of July, 2010. Patricia A. Zischka All Keys Reporting — Court Reporters — (305) 289-1201 Locations in Key Largo, Marathon & Key West