Metropolitan News-Enterprise


Thursday, March 14, 2019


Page 1


Ninth Circuit:

Santa Monica’s Short-Term Rentals Law Doesn’t Breach CDA


By a MetNews Staff Writer


The Ninth U.S. Circuit Court of Appeals yesterday affirmed the dismissal of an action, brought by companies that arrange online for home rentals, challenging a Santa Monica ordinance that severely limits tenancies of 30 days or less.

Circuit Judge Jacqueline H. Nguyen wrote the opinion which spurns the contention by plaintiffs Airbnb Inc. and that Santa Monica Ordinance 2535 breaches the federal Communications Decency Act of 1996 (“CDA”) by requiring that they monitor third-party postings and remove those that are violative of the local law. Her opinion also rejects a First Amendment challenge to the ordinance.

The ordinance, as amended in 2017, forbids any homeowner—other than those licensed for “home sharing” and listed on a city registry—“to undertake, maintain, authorize, aid, facilitate or advertise any vacation rental activity or any home-sharing activity.”

‘Home-Sharing’ Defined

It defines “home-sharing” as “[a]n activity whereby the residents host visitors in their homes, for compensation, for periods of thirty consecutive days or less, while at least one of the dwelling unit’s primary residents lives on-site, in the dwelling unit, throughout the visitors’ stay.”

Companies providing online rental booking services are barred from collecting a booking fee where a unit that is required to be registered isn’t. They are also obliged, in connection with permissible transactions, to collect and remit to the city a transient occupancy tax, make listing and booking disclosures to the city, and make no charge for ancillary services.

Companies that violate the ordinance face the prospect of administrative fees and penalties.

The CDA provides that “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider” and specifies that “[n]o cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with this section.”

Plaintiffs’ Contentions

The plaintiffs—which Nguyen described as “Platforms”—argued that the ordinance violates the CDA because it mandates that they “monitor the content of a third-party listing and compare it against the City’s short-term rental registry before allowing any booking to proceed.”

Nguyen responded:

“Here, the Ordinance does not require the Platforms to monitor third-party content and thus falls outside of the CDA’s immunity. The Ordinance prohibits processing transactions for unregistered properties. It does not require the Platforms to review the content provided by the hosts of listings on their websites. Rather, the only monitoring that appears necessary in order to comply with the Ordinance relates to incoming requests to complete a booking transaction—content that, while resulting from the third- party listings, is distinct, internal, and nonpublic.”

She went on to say:

“Nor could a duty to cross-reference bookings against Santa Monica’s property registry give rise to CDA immunity. While keeping track of the city’s registry is ‘monitoring’ third-party content in the most basic sense, such conduct cannot be fairly classified as ‘publication’ of third-party content. The Platforms have no editorial control over the registry whatsoever. As with tax regulations or criminal statutes, the Ordinance can fairly charge parties with keeping abreast of the law without running afoul of the CDA.”

Removal of Postings

The plaintiffs contended that the ordinance requires them to remove third-party postings. There is no such express requirement, the jurist observed, but agreed that such action would be prudent.

She wrote:

“[W]e accept at face value the Platforms” assertion that they will choose to remove noncompliant third-party listings on their website as a consequence of the Ordinance.3 Nonetheless, their choice to remove listings is insufficient to implicate the CDA.”

In rejecting a First Amendment challenge, District Court Judge Otis Wright of the Central District of California said the ordinance “regulates conduct, not speech, and that the conduct banned...does not have such a ‘significant expressive element’ as to draw First Amendment protection.”

Agreeing, Nguyen declared:

“[T]he incidental impacts on speech cited by the Platforms raise minimal concerns. The Platforms argue that the Ordinance chills commercial speech, namely, advertisements for third-party rentals. But even accepting that the Platforms will need to engage in efforts to validate transactions before completing them, incidental burdens like these are not always sufficient to trigger First Amendment scrutiny.”

Background Provided

Providing background, Nguyen began her opinion by noting:

“Located on the coast of Southern California, the city of Santa Monica consists of only about eight square miles but serves 90,000 residents and as many as 500.000 visitors on weekends and holidays. Similar to other popular tourist destinations, Santa Monica is struggling to manage the disruptions brought about by the rise of short-term rentals facilitated by innovative startups such as Appellants Inc. and Airbnb Inc. (the ‘Platforms’). Websites like those operated by the Platforms are essentially online marketplaces that allow ‘guests’ seeking accommodations and “hosts” offering accommodations to connect and enter into rental agreements with one another.1 As of February 2018. Airbnb had approximately 1,400 listings in Santa Monica, of which about 30 percent are in The ‘coastal zone’ covered by the California Coastal Act while had approximately 300 live listings in Santa Monica, of which approximately 40 percent are in the coastal zone.

“Santa Monica’s council reported that the proliferation of short-term rentals had negatively impacted the quality and character of its neighborhoods by ‘bringing commercial activity and removing residential housing stock from the market’ at a time when California is already suffering from severe housing shortages.”

The ordinance was passed in 2015 and amended, after the plaintiffs brought their action, in 2017.

The case is Homeaway.Com v. City of Santa Monica, 18-55806.

Airbnb and brought an action in San Francisco challenging a similar ordinance there. That ordinance rendered it a misdemeanor to book the short-term rental of an unregistered unit.

District Court Judge James Donato of the Northern District of California, in denying a preliminary injunction on Nov. 8, 2016, said the ordinance does not treat the plaintiffs as publishers of third-party postings.

“To the contrary, as San Francisco has emphasized in its briefs and at oral argument, plaintiffs are perfectly free to publish any listing they get from a host and to collect fees for doing so — whether the unit is lawfully registered or not — without threat of prosecution or penalty under the Ordinance,” he said. “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.”

That case was settled after San Francisco amended its ordinance.


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