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Airbnb sues New York state

Airbnb sues New York state

New York Governor Cuomo recently signed new laws that impose high fines for advertising on Airbnb and other home-sharing services units.

On October 21, 2016, Governor Andrew Cuomo signed into law, New York Multiple Dwelling Law Section 121 and New York City Administrative Code Section 27-287.1 [the “Act”] which “imposes high fines for advertising on Airbnb and other home-sharing services units that cannot be legally rented under New York City and state law. Under the law, first-time offenders face civil penalties of up to $1,000; with fines increasing to as much as $5,000 for second violations and $7,500 for third and subsequent violations… As a general rule, New Yorkers are prohibited from renting out their apartments to others for more than 30 days within a 365-day period unless the hosts are staying on the premises. Sponsors of the bill…said the 30-day limit was established in 2010, but that the rise of Airbnb, Homeaway.com and other internet-based home-sharing services has made it clear that some New Yorkers are finding it more lucrative to improperly rent their units for short-term stays than to follow the law”.

“As of August, Airbnb had 45,000 city listings and another 13,000 across the state. The company says the 46,000 Airbnb hosts in New York City have generated more than $2 billion in economic activity” [Stashenko, Airbnb Files Lawsuit After Cuomo Signs Bill Imposing Fines for Ads, newyorklawjournal.com (10/21/2016)]. As a consequence, Airbnb filed a Complaint To Declare Invalid And Enjoin Enforcement {of the Act] on October 21, 2016 which will be reviewed below [Airbnb, Inc. v. Eric Schneiderman, 16 CV 8239, JB, S.D.N.Y.].

Travel Law Update

Stamping Out Negative Reviews

In Todd, Attorneys Accused of Filing Bogus Suits in Alleged Scheme to Stamp Out Negative Web Reviews, therecorder.com (10/23/2016) it was noted that “Two California lawyers have been accused of participating in a scheme that used sham lawsuits to suppress online reviews of businesses. Consumer Opinion LLC…claims in a suit filed Friday that attorneys (X and Y) manipulated California’s legal system to fraudulently obtain court orders that were used to persuade search engines such as google to de-index review pages-effectively putting them out of sight to consumers. The 27-page complaint filed in U.S. District Court for the Northern District of California claims the lawyers employed the ‘rather brilliant but incredibly unethical’ scheme on behalf of so-called reputation management companies that scrub negative information about businesses from the web”.


The Threat Of A Bad Review

In The threat of a bad TripAdvisor review, todayonline.com (10/13/2016) it was noted that “The threat of a bad online review on TripAdvisor, Travelocity or other consumer-advisory sites has become an increasingly common form of guest leverage, lodging executive say. ‘Even a single negative review can cause someone to choose a different hotel or restaurant, so the threat of a bad review is real’ said Sarah Tanford, an associate professor at the William H. Harrah College of Hotel Administration at the University of Nevada, Las Vegas. Her research has found that negative online reviews can outweigh other decision-making factors for prospective guests, including price, when they are selecting where to stay or eat”.

Tour Bus Crash In California

In McEvoy & Bromwich, At Least 13 Killed in Bus Crash on California Highways, nytimes.com (10/23/2016) it was noted that “At a news conference…Jim Abele, a chief with the California Highway Patrol, said that the tour bus was heading back to Los Angeles after a trip to a casino when it rammed into the back of the tractor-trailer shortly after 5 a.m. The driver of the bus was among those killed, he said. ‘The speed of the bus was so significant that when it hit the back of the big rig, the trailed itself entered 15 feet into the bus’…The majority of the people killed had been sitting in the front section of the bus”.

Uber Keeps On Growing

In Travel & the Sharing economy: Signing up for sharing the experience, etn.travel (10/21/2016) it was noted that “Like a tsunami, the sharing economy in some segments has caused a flood of competition, not to mention excess capacity. In London alone, 40,000 Uber cars are now operating alongside 50,000 taxis. One-to-one matches are increasingly common in major global cities. At time of writing, Uber, with over 8 million downloads of the Uber app in 2015 alone, today operates in 77 countries worldwide across 527 cities, and yields an average number of 1 billion daily trips. No doubt that number has grown, not to mention the numbers of other rideshare competitors, established and new (i.e., Lyft, Didi, Sidecar) and new, which represent more of an ‘on demand’ industry that ‘share economy’ noting the formalization of driver and vehicle dynamics that make these offering so ubiquitous today”.

Airbnb Fighting Back Worldwide

In Benner, Airbnb Sues Over New York Regulating New York Rentals, nytimes.com (10/21/2016) it was noted “The heightened battle in New York follows lawsuits that Airbnb has filed against its hometown San Francisco and in Santa Monica, Calif., which have both moved to fine the company for illegal listings. The company, which operates in a regulatory gray area around the globe, is also fighting tough battles in Amsterdam and Barcelona, Spain, which penalizes hosts who list illegal rentals, and in Berlin, which has banned most short-term rentals…Airbnb, which has tripled in value in just two years to $30 billion, is fighting hard against any regulation that would affect the number of hosts on its platform. The company cannot expand without a steadily increasing number of hosts and its rental revenue growth could slow as more cities around the world move to push potential providers off the platform”

Tourist Apartments In Madrid

It has been reported by an IFTTA member that the High Court of Justice at the Community of Madrid declared invalid the article that limits at a minimum five-day the stay in apartments for tourist use. See poderjudicial.es/search/doAction?action=contentpdf&databasematch=AN&reference=769481&links=%221165%2F2014%22&optimize=20160610&publicinterface=true

Travel Law Article: The Airbnb Lawsuit

The Introduction of Airbnb, Inc. v. Eric Schneiderman, 16 CV 8239, JB, S.D.N.Y. provides as follows:

“1. This is an action to enjoin and declare unlawful the enforcement against Airbnb by the State of New York (the ‘State’) and the City of New York (the ‘City’)(collectively, the ‘Government’) of New York Multiple Dwelling Law Sections 121 and New York City Administrative Code Section 27-287.1 (the ‘Act’). This action is brought pursuant to 42 U.S.C. 1983, 28 U.S.C. 1367, the Court’s equitable powers, and the Declaratory Judgment Act, 28 U.S.C. 2201″.



Communications Decency Act

“2. As applied to Airbnb, the Act directly conflicts with, and is preempted by, section 230 of the Communications Decency Act of 1996, 47 U.S.C. 230 (the ‘CDA’). Application of the Act to Airbnb would hold Airbnb liable for the content of rental listings created and posted by third-parties on Airbnb’s platform. As such, the Act unquestionably treats online platforms such as Airbnb as the publisher or speaker of third-party content and is completely preempted by the CDA”.

“3. The Act also suffers from several other defects: It is an unjustifiable content-based restriction on speech in violation of the First Amendment, its lack of a mens rea or scienter requirement violates both the First Amendment and the Due Process Clause; it impermissibly vague regarding whether it provisions apply to hosting platforms like Airbnb, and it violates the home rule clause of the New York State Constitution”.

“4. The Act makes it ‘unlawful to advertise occupancy or use’ of accommodations that cannot lawfully be rented out for than 30-day periods, whether or not the publisher of the advertisement knows or has reason to know the advertisement is for an unlawful rental. Violators face hefty civil penalties and the possibility of criminal prosecution”.

“5. The Act does not expressly state whether websites and other intermediaries, such as online platforms like Airbnb that host their-party listings, ‘advertise’ within the meaning of the law and thus are subject to liability. Given the ambiguity of the Act, Airbnb anticipates the government will argue that the Act applies to such online platforms, and will seek to enforce the Act against Airbnb and other such hosting platforms. Airbnb thus faces the real prospect of being the subject of an enforcement action under the Act. For the following reasons, any such enforcement would be unlawful and should be enjoined”.

Preemption

“6. First, the enforcement of the Act against Airbnb is preempted by the CDA, which aims ‘to promote the continued development of the Internet’ and ‘to preserve’ its ‘vibrant and competitive free market’. 47 U.S.C. 230(b)(1)-(2). In furtherance of these goals, the CDA expressly preempts state and local laws that treat a website ‘as the publisher or speaker of any information provided by another information content provider’ Id. 230(c)(1), (e)(3). The act does just that-by imposing hefty penalties on a website for displaying allegedly unlawful ads posted by users”.

First Amendment Rights

“7. Second, the Act also violates Airbnb’s and hosts’ First rights. It is a content-based restriction on advertisements-in the form of rental listings-which are protected speech under the First Amendment. The Act seeks to punish hosts for advertising short-term rentals and Airbnb for publishing hosts’ advertisements if the advertisement are for short-term rentals that do not comply with New York state or municipal law. To justify this content-based restriction on speech, the government bears the burden of showing that the Act is narrowly tailored to further a substantial government interest. The government cannot carry this burden because there is a less-restrictive means available to enforce the New York law. Instead of targeting the speech, the government instead could simply enforce its existing short-term rental law directly against hosts who violate it”.

Strict Liability Crime

“8. Third, the Act violates the First Amendment and the Due Process Clause of the Fourteenth Amendment insofar as it provides for the possibility of liability based on the creation or publication of advertisements in the absence of any mens rea or scienter requirement. The Act impermissibly creates a strict-liability crime for advertising short-term rentals that violate State law, even if hosts or hosting platforms like Airbnb have no knowledge of the violation”.

Lack Of Notice

“9. Fourth, the Act violates the First Amendment and the Due Process Clause of the Fourteenth Amendment on vagueness grounds because it fails to provide a reasonable person with notice regarding whether its operative prohibitions apply to hosting platforms like Airbnb”.

Violates Home Rule

“10. Fifth, the Act violates the home rule clause of the New York State Constitution, N.Y. Const. Art. IX 2(b)(2), because it is a legislative act relating to the affairs of New York City but was not enacted by the Legislature in response to a request from City officials, and it does not have any reasonable relationship to any substantial state concern”.

Impairing Free Speech

“11. If this Court does not enjoin enforcement of the Act, Airbnb (and its hosts) will be forced to choose between two outcomes, both of which impair free speech: either block most or all third-party listings or risk substantial criminal and civil penalties for allowing these advertisements to remain on their site. The Act will therefore cause irreparable harm to both online providers of third-party rental listings and the public at large in either scenario, by eliminating or significantly impairing free speech in online forums”.

Conclusion

As noted in Stashenko, Airbnb Files Lawsuit After Cuomo Signs Bill Imposing Fines for Ads, newyorklawjournal.com (10/21/2016) “Government officials, chiefly in New York and California, have challenged whether the services are allowing property owners or leaseholders to circumvent local apartment rental laws and also to avoid the payment of hotel taxes”. New York City is Airbnb’s largest market with 45,000 listings. The new legislation may severely restrict apartment sharing and impact upon the viability of Airbnb in New York State. Stay tuned.

Justice Dickerson has been writing about travel law for 39 years including his annually updated law books, Travel Law, Law Journal Press (2016) and Litigating International Torts in U.S. Courts, Thomson Reuters WestLaw (2016), and over 400 legal articles many of which are available at nycourts.gov/courts/9jd/taxcertatd.shtml. Justice Dickerson is also the author of Class Actions: The Law of 50 States, Law Journal Press (2016). For additional travel law news and developments, especially in the member states of the EU, see IFTTA.org.

This article may not be reproduced without the permission of Thomas A. Dickerson.

Read many of Justice Dickerson’s articles here.

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