Airbnb had a bad day too: court rejects 230, First Amendment challenges to SF rental ordinance

Airbnb, Inc. v. City and County of San Francisco,
16-cv-03615 (N.D. Cal. Nov. 8, 2016)
Airbnb and HomeAway sought to enjoin SF’s ordinance making
it a misdemeanor to provide booking services for unregistered rental
units.  The court denied a preliminary
injunction.
Airbnb and HomeAway make money by charging hosts and guests
a service fee based on the cost of the rental. 
Their posting process is automated and requires the host to fill in some
required fields, but the sites don’t verify, review or edit the information
provided by the host, and do not contribute content of their own to the
listing.
In 2015, San Francisco banned its effective ban on “tourist
or transient” rentals, but required that a host register a residence with San
Francisco before making it available as a short-term rental.  Registration has various prerequisites.  Plaintiffs agreed that a residential unit
must be lawfully registered before being rented on a short-term basis, but compliance
with the registration requirement has been spotty:
As of November 2015, for example,
San Francisco had received only 1,082 short-term rental registration
applications while Airbnb listed 5,378 unique short-term rental hosts in San
Francisco, which points to a registration rate of just 20% even without
including HomeAway and other similar services. 
By March 2016, the ratio was 1,647 registered out of 7,046 listed — a
registration rate of approximately 25%. 
Enforcement of the registration requirement was “hampered by
the City’s lack of information” because short-term rentals “operate in private
residences without any commercial signage posted” and because hosting platforms
“do not disclose addresses or booking information about their hosts.”  An August 2016 ordinance made it a
misdemeanor to collect a fee for providing booking services for the rental of
an unregistered unit.  A“Booking Service”
is defined in relevant part as “any reservation and/or payment service provided
by a person or entity that facilitates a short-term rental transaction between
an Owner . . . and a prospective tourist or transient user . . . for which the
person or entity collects or receives . . . a fee in connection with the
reservation and/or payment services.” A “Hosting Platform” is a “person or entity
that participates in the short-term rental business by providing, and
collecting or receiving a fee for, Booking Services,”  but doesn’t need to be “an online platform”
and encompasses non-Internet based services as well.  The Ordinance permits a Hosting Platform to
“provide, and collect a fee for, Booking Services in connection with short-term
rentals” only when the units rented are lawfully registered on the Short Term
Residential Rental Registry at the time of rental.  “Lawfully registered” means that a host has obtained
a registration number from the San Francisco’s administrative office, the OSTR.  A violation is a misdemeanor punishable by a
fine of up to $1,000 and imprisonment for up to six months.
Plaintiffs argued that the Ordinance was preempted by § 230
of the CDA.  Plaintiffs argued that the
threat of a criminal penalty for providing and receiving a fee for Booking
Services for an unregistered unit required them to actively monitor and police
listings by third parties to verify registration.  This was, they argued, tantamount to treating
them as a publisher because it involved the traditional publication functions of
“reviewing, editing, and deciding whether to publish or to withdraw from
publication third-party content.” 
But, the court concluded, the Ordinance didn’t treat them as
publishers or speakers of the rental listings. 
It didn’t regulate what the listings could or couldn’t say. It created
no monitoring or blocking obligation.  Plaintiffs
were perfectly free to publish any listing they get from a host and to collect fees
for doing so, whether the unit was lawfully registered or not. The only thing
that could create liability was plaintiffs’ own conduct: providing and
collecting a fee for booking services in connection with an unregistered unit.  This didn’t depend on who was the publisher or
who was the speaker.  Section 230(c) does
not create “a general immunity from liability deriving from third-party
content.”
 “[T]he challenged
Ordinance regulates plaintiffs’ own conduct as Booking Service providers and
cares not a whit about what is or is not featured on their websites.” Plaintiffs
argued that the ordinance would still have the practical effect of requiring
them to monitor listings and remove posts for unregistered rentals.  But the ordinance didn’t compel that
result.  Plaintiffs could post a notice
to users that they could provide Booking Services in San Francisco only for
units that are lawfully registered and verified as such. Or they could charge
fees for publishing listings, rather than for facilitating transactions, which
would be perfectly lawful.  [Interesting result, not entirely surprising.  If Airbnb provided its ISP services via a negative option billing plan and a state banned negative option billing, I would think 230 would not preclude that regulation either.]
Likewise, there was no First Amendment barrier to the
ordinance.  The First Amendment doesn’t
prevent restrictions directed at commerce or conduct from imposing incidental
burdens on speech.  The conduct at issue
doesn’t have a significant expressive element, nor did the ordinance have the
inevitable effect of “‘singling out those engaged in expressive
activity.’”   The law wasn’t limited to internet platforms
and there was no indication that there was any speech-suppressive
motivation.  The Ordinance was supposed
to help enforce compliance with the registration requirement: it was directed at
specific business transactions and practices, and “not to any message the
businesses express.”
Sorrell didn’t
require a different outcome, nor did Simon & Schuster, Inc. v. Members of
N.Y. State Crime Victims Bd., 502 U.S. 105 (1991).  Sorrell
on its face “disfavor[ed] marketing, that is, speech with a particular
content,” and “[m]ore than that, . . . disfavor[ed] specific speakers, namely pharmaceutical
manufacturers.”  Simon & Schuster also featured a “content-based statute”
because it singled out income derived from “expression[s] of [an] accused or
convicted person’s thoughts, feelings, opinions or emotions” about the crime.  That wasn’t similar to the ordinance, nor was
the ordinance in Reed v. Town of Gilbert.
 None of those laws were “restrictions
directed at commerce or conduct,” as the ordinance was here, with only an incidental
impact on speech. 
Even if the Ordinance was reviewed as a restriction on
commercial speech, it survived scrutiny. 
The speech affected was commercial speech.   A “threshold requirement” for protection for
such speech is that it must be related to lawful activity.  If it is related to unlawful activity, the
commercial speech at issue isn’t protected by the First Amendment and no
further analysis would be required.  And
such was the case here: the speech at issue proposed an illegal transaction,
because it is illegal in San Francisco to rent a unit that is not lawfully
registered. 
However, the court did accept SF’s concession that the
ordinance didn’t impose criminal liability without proof of scienter.  There was no reason to think that SF intended
to dispense with the standard mens rea requirement for criminal liability.  As for potential vagueness, SF bound itself
to the interpretations that “lawfully registered” meant having a registration
certificate (not necessarily complying with all the underlying requirements ranging
from insurance to tax reports) and that “at the time it is rented” meant when
the booking transaction occurred. 

Finally, plaintiffs pointed out that SF’s enforcement agency
OSTR wasn’t able to provide prompt and effective registration
verification.  SF wouldn’t enforce the
ordinance while this issue was being litigated. 

from Blogger http://tushnet.blogspot.com/2016/11/airbnb-had-bad-day-too-court-rejects.html

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