Federal judge gives initial backing to SF law that holds online rental platform companies accountable for illegal rentals

Judge rejects arguments from online rental platforms. Herrera applauds ruling

City Attorney Dennis Herrera applauded a federal judge's decision.
City Attorney Dennis Herrera applauded a federal judge’s decision rejecting the arguments of online rental platforms Airbnb and Homeaway.

SAN FRANCISCO (Nov. 8, 2016) — A federal judge today rejected the arguments of online rental platforms Airbnb and HomeAway, who had sued San Francisco to invalidate the city’s law regulating short term rentals.

In his ruling, Judge James Donato of the U.S. District Court for the Northern District of California rejected Airbnb and HomeAway’s argument that the city’s law violates the Communications Decency Act and the First Amendment.  Donato upheld the city’s law, which is designed to protect the available housing supply by holding rental platform companies accountable for violating San Francisco’s short-term rental rules.

Airbnb and HomeAway had sued the city and sought a preliminary injunction – a court order barring San Francisco from enforcing its short-term rental law while the case is decided.

Judge James Donato’s ruling today rejected the three main arguments that Airbnb and HomeAway had made:

  • that the city’s law violated the Communication Decency Act, which protects online intermediaries that host or republish speech
  • that is violated First Amendment free speech protections
  • that the government can’t threaten someone with jail time without a showing of intent

Here are some excerpts from Judge Donato’s ruling on:

The Communication Decency Act argument

“As the text and plain meaning of the Ordinance demonstrate, it in no way treats plaintiffs as the publishers or speakers of the rental listings provided by hosts. It does not regulate what can or cannot be said or posted in the listings. … The Ordinance holds plaintiffs liable only for their own conduct, namely for providing, and collecting a fee for, Booking Services in connection with an unregistered unit.”

The First Amendment argument

“A Booking Service as defined and targeted by the Ordinance is a business transaction to secure a rental, not conduct with a significant expressive element. … And plaintiffs have not established that the Ordinance was ‘motivated by a desire to suppress speech.’ ”

In an 18-page ruling, Judge Donato denied the companies’ request, finding that they “have not demonstrated a likelihood of success” in court on the primary grounds they put forth.

The judge noted, though, that the mechanism for “prompt and effective registration verification” is not yet in place for seamless enforcement of the law, and so he requested additional legal briefings on that point.

San Francisco has voluntarily agreed to not enforce the law pending Donato’s ruling, and will continue to do so as the final mechanisms for enforcement are ironed out.

“I am grateful for Judge Donato’s thoughtful ruling recognizing that just because Airbnb and HomeAway conduct their business online, they are not exempt from any regulation of their commercial transactions,” City Attorney Dennis Herrera said. “Online businesses don’t get a free pass from the types of regulations that apply to other businesses in San Francisco. They have to play by the rules, just like everybody else. These platforms have numerous options to verify whether hosts have registered with the City and comply with the law. In the midst of a housing crisis, it is imperative that San Francisco take the necessary steps to preserve our scarce housing stock. Effective and enforceable laws are vital, and today’s decision brings us one step closer to achieving that.”

A status conference is set for Thursday, Nov. 17 to prepare briefings on establishing an acceptable verification system to begin enforcement.

“Today’s decision is an important victory in our efforts to regulate companies like Airbnb and HomeAway to protect housing for residents,” said Supervisor David Campos, lead sponsor of amendments to the city’s short-term rental law that are at the center of the legal case. “Airbnb has had opportunity after opportunity to work with San Francisco’s city hall to craft regulations that actually protect our neighborhoods while still allowing these companies to make billions. But instead they’ve employed an all-or-nothing strategy that has wasted San Francisco’s time and money.  It’s getting a little hard to swallow all of Airbnb’s talk about ‘sharing’ and ‘community’ when they’re suing every city that passes common sense regulations. The truth is, while no one in San Francisco’s city government wants to see a homegrown company like Airbnb go out of business, it’s our job to protect the housing stock of our citizens. And while San Franciscans appreciate tech and innovation, they also appreciate not being evicted from their homes so landlords can Airbnb.”

Background

San Francisco requires those providing short-term rentals to register with the city, obtain a business license and comply with limits on the number of days per year the property can be rented.  The rules are designed to strike a balance, allowing residents to supplement their income through renting out a spare room or their home during vacation while preventing the city’s precious housing stock from being turned into de facto hotels. 

San Francisco’s short-term rental law provides for online hosting platforms like Airbnb and HomeAway to face penalties, including fines of up to $1,000 for each illegal booking transaction, if they provide booking services and receive a fee for an illegal short-term rental.  Airbnb and HomeAway sued to invalidate the parts of the law that make the hosting platforms responsible for their booking transactions, and they sought a preliminary injunction to prevent San Francisco from enforcing the law against them.

The case is Airbnb, Inc. v. City and County of San Francisco, U.S. District Court for the Northern District of California, Case No. 3:16-CV-03615, filed June 27, 2016.

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