A recent Law 360 story, “Travel Sites Say Their Attys Don’t Owe Texas Cities Info,” reports that a group of hotel booking sites fired back at a class of Texas municipalities seeking information from their lawyers in a $43 million fee fight, saying they have no bearing on the struggle over whether the fee request is “reasonable.”

The 10-year fight between online travel companies and Texas municipalities in a suit alleging the companies failed to pay the full amount of hotel occupancy taxes owed to the cities moved on to fees in July, with class counsel asking for $43 million, based on a $10.8 million lodestar.  As part of the dispute over fees, the municipalities asked the companies’ lawyers to pony up information about how much they had charged, but the companies objected.

The response is the latest layer in a procedural battle over subpoenas that were sent to firms representing the defendants, as the companies seek to convince the judge to place an emergency protective motion on the request.  The response said that discovery is not normally allowed in fee disputes, and the information the subpoenas seek is not relevant to resolving the dispute, anyway.

“The non-party law firms are not parties to this litigation, nor do those firms have any appearances on file in this case,” the response said.  “The mere fact that defendants are represented by individual attorneys who are affiliated with some (but not all) of the non-party law firms does not make the non-party law firms parties to this litigation.”

Lead plaintiff San Antonio, which according to the award application contracted to pay lead counsel a 30 percent contingent fee, initially filed the suit in 2006, alleging that online travel companies such as Hotels.com and Expedia Inc. failed to remit the full amount of hotel occupancy taxes owed to the cities under local ordinances.

The requested fee award of more than $43 million is reasonable in light of lead counsel’s 30 percent contingent fee agreement, counsel argued, saying “the simple mathematics of the fee counsel bargained for in light of the now-known magnitude of the recovery demonstrates the severe inadequacy of the base lodestar as a reasonable fee.”

Gary Cruciani, counsel for San Antonio, told Law360 that the procedural nature of the dispute over fees has become “the tail wagging the dog,” as Texas law allowed for them to seek the fee and it was reasonable to seek the amounts charged by the OTCs' attorneys when trying to establish an hourly rate.

U.S. District Judge Orlando L. Garcia entered the amended final judgment in the case in April, a decade after the city of San Antonio originally sued 11 companies.  The booking companies had argued they were essentially a conduit for consumers to compare and book rooms and were required to collect and pay tax only on the rates charged by hotels for the rooms, not the actual rates charged to consumers, according to court filings.

Judge Garcia had ordered the companies to pay $56 million in 2013, and the final judgment reflected further proceedings on the application of the Texas tax laws with respect to a 15 percent penalty for underpaid taxes as well as interest that had accrued in the meantime.  The class of municipalities on May 12 said they will appeal the calculation of penalties and interest to boost the $84 million win.

The case is City of San Antonio, Texas, et al. v. Hotels.com LP, case number 5:06-cv-00381, in the U.S. District Court for the Western District of Texas.