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Homeaway.com, Inc. v. City of Santa Monica

United States District Court, C.D. California

March 9, 2018

HOMEAWAY.COM, INC. Plaintiff,
v.
CITY OF SANTA MONICA, Defendant. AIRBNB, INC., Plaintiff,
v.
CITY OF SANTA MONICA Defendant.

          ORDER DENYING PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION [57]; GRANTING MOTION TO FILE AMICUS BRIEF [68]

          OTIS D. WRIGHT, II UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         Plaintiffs Airbnb, Inc. and Homeaway.com, Inc. (collectively “Plaintiffs”) challenge the City of Santa Monica's (the “City”) Ordinance Number 2535 prohibiting short-term housing rentals (the “Ordinance”). Plaintiffs move the Court to preliminarily enjoin the City from enforcing the Ordinance, arguing that the Ordinance violates (1) the California Coastal Act, (2) the federal Communications Decency Act, 47 U.S.C. § 230 (“CDA”), and (3) the First Amendment of the U.S. Constitution. (Mot., ECF No. 57.) For the following reasons, the Court DENIES Plaintiffs' Motion. (ECF No. 57.)

         II. BACKGROUND

         A. Factual Background

         Plaintiffs operate websites that allow individuals seeking, and persons listing, accommodations (“ guests and “hosts, ” respectively) to find each other and enter into agreements to reserve and book accommodations (Decl. of David Owen (“Owen Decl”) ¶ 2, ECF No. 59; Decl. of Bill Furlong (“Furlong Decl”) ¶ 3, ECF No. 60.) Hosts provide the content of their listings, such as description, price, and availability. (Owen Decl. ¶¶ 7-8; Furlong Decl. ¶ 12.)

         Airbnb and HomeAway operate with different business models. Airbnb provides payment processing services that permit hosts to receive payments electronically. (Owen Decl. ¶ 3.) Airbnb receives a fee from the guest and host, which is a percentage of the booking fee. (Id. ¶ 4.) HomeAway hosts pay for services in one of two ways: a pay-per-booking option based on a percentage of the amount charged by the host, or buying a subscription to advertise properties for a set period. (Furlong Decl. ¶ 6.) HomeAway users may arrange for rentals through online booking and online payment services using a third-party payment processor. (Id. ¶ 9.)

         In May 2015, the City adopted Ordinance 2484CCS (the “Original Ordinance”), adding Chapter 6.20 to the Municipal Code. The Original Ordinance prohibited “Vacation Rentals, ” which were defined as rentals of residential property for thirty consecutive days or less, where residents do not remain within their units to host guests. Santa Monica Municipal Code (“SMMC”) §§ 6.20.010(a); 6.20.020(a). The Original Ordinance permitted residents to host visitors for compensation for a period of less than thirty-one days, so long as residents obtained a business license and remained on-site throughout the visitor's stay. SMMC § 6.20.010(a). The City claims that the Original Ordinance expressly adopted and reaffirmed the City's longstanding prohibition on short-term rentals.[1] (Opp'n 5.) Plaintiffs argue that that the Original Ordinance marked an abrupt change in the law, because before it was passed, the City never directly banned short-term rentals. (Reply 2, ECF No. 70.)

         The Original Ordinance also regulated “Housing Platforms” like Plaintiffs, by barring them from “advertis[ing]” or “facilitat[ing]” rentals that violated the City's short-term rental laws. It also required them to (1) collect and remit to the City applicable Transient Occupancy Tax revenue and (2) disclose certain information about listings to the City. SMMC §§ 6.20.030, 6.20.050. After the Original Ordinance passed, the City issued Plaintiffs several citations, which Plaintiffs paid under protest. (Owens Decl. Exs. G-M; Furlong Decl. ¶ 14 & Ex. D.)

         When the City increased its enforcement efforts, Plaintiffs filed the instant case on September 2, 2016. (Compl., ECF No. 1.) On September 21, 2016, the parties stipulated to stay the case to allow the City to prepare and consider amendments to the Original Ordinance to address the legal challenges Plaintiffs raised. (ECF No. 20.)

         On January 24, 2017, the City adopted the Ordinance, which amended the Original Ordinance to mirror aspects of a San Francisco ordinance, which was upheld by a district court in similar litigation brought by Plaintiffs in the Northern District of California. (Opp'n 6.) The Ordinance does not prohibit the publication, or require the removal of, content provided to Plaintiffs by hosts, nor does it require Plaintiffs to verify content provided by hosts to ensure that short-term rental hosts comply with the law. (Id.) Rather, the Ordinance states that “[h]osting platforms shall not complete any booking transaction for any residential property or unit unless it is listed on the City's registry [of licensed home-sharing hosts] at the time the hosting platform receives a fee for the booking transaction.” SMMC § 6.20.050(c). The Ordinance also includes a “Safe Harbor” provision stating that any online hosting platform that operates in compliance with hosting platform responsibilities as set out in the Ordinance will be presumed to be in compliance with the law. Id. § 6.20.050(e). Each violation is an infraction, punishable by a fine of up to $250, or a misdemeanor, punishable by a fine up to $500 imprisonment of up to six months, or both. Id. § 6.20.100(a). The Ordinance includes a provision that the duties on hosting platforms “will not apply if determined by the City to be in violation of, or preempted by” state or federal laws. Id. § 6.20.050(f).

         Because Plaintiffs facilitate “booking transactions” on their websites to facilitate short-term housing rentals, their conduct is covered by the Ordinance. As Plaintiffs point out, the Ordinance does not apply to websites like Craigslist, “which do not charge for booking services, and act solely as publishers of advertisements for short term rentals.” (Decl. of Jonathan H. Blavin (“Blavin Decl.”), Ex. E at 46, ECF No. 58.)

         Plaintiffs continue to facilitate short-term rentals in Santa Monica. There are 194 licensed hosts in the City, 90% of whom advertise on Plaintiffs' platforms. (Decl. of Denise Smith (“Smith Decl.”) ¶ 6, ECF No. 66.) The City estimates that during peak tourist months there are approximately 950 unlawful short-term rental listings for locations within the City on Plaintiffs' sites. (Id. ¶ 8.) The City argues that the short-term rental market reduces affordable housing supply by converting residential apartments to tourist use for the financial benefit of the unit owner. (Opp'n 4.) Additionally, the City argues that vacation rentals can threaten the character of a neighborhood, because the units are not occupied by permanent residents. (Id.) The purpose of the Ordinance, the City claims, is to keep housing prices down, to ensure the availability of affordable rental options for its residents, and to preserve the character of its communities. (Opp'n 4, 7.)

         B. Procedural Background

         On December 13, 2017, Plaintiffs filed a First Amended Complaint, alleging that the Ordinance violates the CDA, the First, Fourth, and Fourteenth Amendments of the U.S. Constitution, the Stored Communications Act, 18 U.S.C.§ 2701 et seq., and the California Coastal Act, Cal. Pub. Res. Code § 30500 et seq. (First Am. Compl. (“FAC”), ECF No. 55.) On the same day, Plaintiffs filed the instant motion for preliminary injunction, which is based solely on its alleged violations of the California Coastal Act, the CDA, and the First Amendment. The City opposes the motion. (Opp'n, ECF ...


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