A setback in city's plan to sue online travel services

The city has delayed its plan to sue online travel services for hotel occupancy tax revenue because the law firm set to represent the city has backed out. City Attorney Arturo Michel said Gibbs & Bruns was concerned over an April 11 memo from City Conteoller Annise Parker asking whether a suit against the online travel agencies would work.

According to Michel, Gibbs & Bruns attorneys expressed concern over the effects that such a memo from a high-ranking city official like Parker could have on any potential litigation.

Officials with Gibbs & Bruns could not immediately be reached for comment.

Michel called the firm's decision an overreaction and pledged to work toward hiring another firm to take the case.

Parker isn't the only one with doubt — City Council argued for weeks about whether a suit against the travel companies would be successful. The suit would ask the companies to pay Houston's hotel occupancy taxes, which fall through the cracks in the online booking process when the travel services book large blocks of hotel rooms, then re-rent them to consumers. Basically, the companies pay taxes on the prices they pay for the rooms, but not on the marked up prices consumers end up paying. The hotel occupancy taxes help pay for Houston's stadiums, among other things.

Mayor Bill White has said he's confident the suit is viable. The city will now have to find another law firm to move forward with the legal action.