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Ninth Circuit Upholds City of Santa Monica’s Strict Homesharing Rules Against Challenge by Transient Online Housing Organizations

The Ninth Circuit Court of Appeals affirmed a District Court decision that denied popular online home-rental platforms AirBnB and HomeAway.com’s challenge to an ordinance passed by the City of Santa Monica (City), which prohibits most types of short-term home rentals within the City. The Court of Appeals rejected arguments that the City’s ordinance violates the federal Communications Decency Act and the First Amendment. [Homeaway.com, Inc. v. City of Santa Monica, ____F.3d____, Case Nos. 18-55367, 18-55805, 18-55806 (9th Cir. Mar. 13, 2019).]

Background: The City of Santa Monica’s Ordinance

Increasingly popular online platforms like appellants Homeaway.com® and Airbnb® use websites that create online marketplaces that allow “guests” seeking accommodations and “hosts” offering accommodations to connect and enter into rental agreements. The City was unpleased—reporting that a proliferation of short-term rentals had negatively impacted the quality and character of the City’s 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.

This led the City to enact an ordinance regulating the short-term vacation rental market by prohibiting most types of short-term rentals, with the exception of “licensed” home-shares. The ordinance also imposed obligations directly on hosting platforms: 1) collecting and remitting transient occupancy taxes, 2) disclosing certain listing and booking information regularly, 3) refraining from completing any booking transaction for properties not licensed and listed on the City’s registry, and 4) refraining from collecting or receiving a fee for “facilitating or providing services ancillary to a vacation rental or unregistered home-share.” The ordinance includes a safe harbor provision if housing platforms operate in compliance with these obligations.

The Ninth Circuit’s Decision

The Communications Decency Act Claim

Airbnb and Homeaway.com challenged the City’s ordinance, arguing that it is preempted by the Communications Decency Act of 1996 (CDA; 47 U.S.C. § 230). The CDA provides internet companies with immunity from certain claims in furtherance of its stated policy “to promote the continued development of the Internet and other interactive computer services.” The Ninth Circuit has previously construed the provisions to extend immunity to:

“(1) a provider or user of an interactive computer service (2) whom a plaintiff seeks to treat, under a state law cause of action, as a publisher or speaker (3) of information provided by another information content provider.” (Barnes v. Yahoo!, Inc.(9th Cir. 2009) 570 F.3d 1096.)

The court determined that immunity under the CDA does not attach any time a legal duty may lead a provider or user of an interactive computer service to respond with monitoring or other publication activities; rather, the duty must necessarily require the provider or user to monitor third-party content. Here, the City’s ordinance prohibiting short-term housing rentals did not proscribe, mandate, or discuss the content of listings that online platforms displayed on their websites. Based on this, the Court concluded that the CDA did not preempt the City’s ordinance as applied to the online platforms.

The First Amendment Claim

Airbnb and Homeaway.com also challenged the City’s ordinance as a violation of their First Amendment rights. The threshold question in determining whether the First Amendment applies is whether conduct with a “significant expressive element” drew the legal remedy or has the inevitable effect of “singling out those engaged in expressive activity.” The court found that since the conduct at issue here—“completing booking transactions for unlawful rentals”—consists only of nonspeech, nonexpressive conduct, the City’s ordinance did not implicate the First Amendment. The court further determined that the City’s ordinance is “plainly a housing and rental regulation”—meaning that the “inevitable effect” of the ordinance on its face is to regulate nonexpressive conduct—namely, booking transactions (not speech). As such, any incidental impacts on speech cited by appellants raised minimal concerns according to the court.

Conclusion and Implications

Needless to say, the Ninth Circuit’s decision was a major success for the City. “We are thrilled to have confirmation from the Ninth Circuit that our balanced approach to home sharing is working at a time when housing and affordability continue to challenge the region,” Santa Monica Mayor Gleam Davis said. “This is a big win for Santa Monica residents and our residential neighborhoods.” Although this decision permits the City to resume enforcement of its local ordinance, it is a setback for online home-sharing platforms, especially if other jurisdictions follow Santa Monica’s lead by enacting their own rules to regulate short-term housing rentals. The opinion may be accessed online at:

http://cdn.ca9.uscourts.gov/datastore/opinions/2019/03/13/18-55367.pdf

(Nedda Mahrou)