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Johnson et al. v. Priceline.com Incorporated

6/5/2013

 
Arguing That Reliance on the Expertise of an Intermediary Does Not Transform an Arms’ Length Business Transaction Into a Fiduciary Relationship

Priceline.com, Inc., (“Priceline”) operates a website that provides travel related services. In one of its hotel reservation services, “Name Your Own Price” (“NYOP”), consumers bid to obtain a room in a designated city at a discounted rate that would not ordinarily be available to them. Using NYOP, the consumer may only specify the dates when the room is wanted, the geographical area, and the desired quality of the hotel; the consumer gives up the right to choose the hotel by name. The consumer then enters a “bid price” in the amount that the consumer wishes to pay per night, and Priceline attempts to find a room that matches the consumer’s bid price and other criteria. The plaintiffs commenced an action against Priceline in the Connecticut federal district court, alleging that although Priceline provided rooms at the bid price, the rooms actually cost Priceline less than what the plaintiffs had agreed to pay, and that the difference between the bid price and the price paid to the hotel was a “secret profit” that Priceline retained in violation of a fiduciary duty that it owed to the plaintiffs as their “agent.” After the trial court granted Priceline’s motion for summary judgment on the ground that no agent-principal relationship had been created between the plaintiffs and Priceline, the plaintiffs appealed to the Second Circuit. 

In support of Priceline, NELF filed an amicus brief urging the Second Circuit to affirm the dismissal of the plaintiffs’ complaint. NELF argued, first, that under Priceline’s terms and conditions, Priceline agreed only to act as a self-interested service-provider functioning as an intermediary between the plaintiffs and the participating hotels, not as the plaintiff’s agent. NELF also noted that, contrary to the allegations in the complaint, Priceline never represented that all of its compensation would be captured in its “fees and services” charge, rather than in the bid price; in fact, Priceline specifically stated that only “part” of its compensation was found the services charge. Moreover, NELF contended that the elements of the principal-agent relationship simply cannot be found in the actual conduct of the parties. In particular, NELF explained why the conduct of Priceline was indistinguishable from the kinds of ordinary retail customer services one finds in any arms’ length transaction between a customer and a merchant. NELF cautioned against the huge expansion of liability that businesses would face if such services were recognized by the court as fiduciary in nature. Finally, NELF argued that because the plaintiffs chose to use the NYOP bidding method, they cannot now be heard to complain about the unremarkable fact that the bid price may exceed the undisclosed minimum price the seller may be willing to accept (i.e., the reserve price). 

In its decision affirming the dismissal of the complaint, the Second Circuit adopted NELF’s characterization of Priceline as a mere intermediary, not a fiduciary, and agreed that nothing in Priceline’s conduct went beyond ordinary customer service when Priceline used its expertise to check available hotel inventory against the plaintiffs’ requests for reservations. Finally, the court specifically cited NELF’s brief when adopting NELF’s argument about the significance of the reserve price to this case. After the decision issued, a request by the plaintiffs for a rehearing was summarily denied by the panel.

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