This week the 9th Circuit unanimously upheld the city of Santa Monica’s Home Sharing Ordinance against a legal challenge from Airbnb and HomeAway. HomeAway.com, Inc. v. City of Santa Monica, No. 18-55367 (9th Cir. Mar. 13, 2019).
For those unfamiliar with Santa Monica, California, as explained succinctly in the opening sentences of the 9th Circuit’s opinion, our home city is a coastal city that
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 AppellantsHomeAway.com, Inc. and Airbnb Inc. (the “Platforms”).
The disruptions included a negative impact on the “quality and character of its neighborhoods” and removing residential housing from the market during a severe housing shortage. In response, in 2015 the city passed its Home-Sharing Ordinance, which as amended in 2017 imposes obligations on two classes of parties – property owners and online platform operators.
| Owner Requirements for short-term rentals (31 days or less) |
Platform Obligations |
|---|---|
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Note: The original Santa Monica Ordinance was discussed on Cyber Law & Business Report (Episode 183) (second segment) starting at 32:25.
Airbnb and Homeaway.com challenged the Santa Monica statute in federal court, but the District rejected their argument that the statute violated Section 230 of the Communications Decency Act by interfering with federal policy protecting internet companies from liability for posting third-party content and refused to enjoin enforcement of the law.
CDA230
The Platforms argued that the Home Sharing Ordinance requires them to monitor third-party listings and compare them to the City’s short-term rental registry and, implicitly, remove non-licensed listings. Judge Jacqueline H. Nguyen stressed that the Ordinance did not require the Platforms to review the content provided by property owners or even remove non-complaint listings, but rather merely prohibited them from completing a booking for an unlicensed property.
We acknowledge that, as thePlatforms explain in Airbnb’s complaint and in the briefing on appeal, removal of these listings would be the best option “from a business standpoint.” But, as in Internet Brands, the underlying duty “could have been satisfied without changes to content posted by the website’s users.” See 824 F.3dat 851. Even assuming that removing certain listings may be the Platforms’ most practical compliance option, allowing internet companies to claim CDA immunity under these circumstances would risk exempting them from most local regulations and would, as this court feared in Roommates.com, 521 F.3d at 1164, “create a lawless no-man’s-land on the Internet.”
The Platforms also argued that the Ordinance frustrated the purpose of CDA230, whose goal is “to preserve the vibrant and competitive free market that presently exists for the Internet . . . unfettered by Federal or State regulation.” The court rejected such a broad reading of CDA230 that would
render unlawful conduct “magically . . . lawful when [conducted] online,” and therefore “giv[ing] online businesses an unfair advantage over their real-world counterparts.” See Roommates.com, 521 F.3d at 1164, 1164–65 n.15. For the same reasons, while we acknowledge the Platforms’concerns about the difficulties of complying with numerous state and local regulations, the CDA does not provide internet companies with a one-size-fits-all body of law. Like their brick-and-mortar counterparts, internet companies must also comply with any number of local regulations concerning, for example, employment, tax, or zoning.
First Amendment
The Platforms also argued that the Ordinance violated the First Amendment, which required the court to assess whether the Ordinance had the effect of “singling out those engaged in expressive activity.’” The Court found that the Ordinance “is plainly a housing and rental regulation” designed to regulate nonexpressive conduct.
Santa Monica Response
The Santa Monica City Attorney had the following statement in response to their victory:
This critical local law prevents residences in our community from being converted into de facto hotels; it protects affordable housing and it helps residents stay in their homes. As the Ninth Circuit itself has said, the Communications Decency Act does not ‘create a lawless no-man’s land on the internet.’ We look forward to collaborating and cooperating with technology companies to advance the community’s best interests, but the platforms’ broad assertions of immunity in this case simply go too far.”
The full opinion is below.
Cyber Report 