Thomas A. Dickerson and Sylvia O. Hinds-Radix
Thomas A. Dickerson and Sylvia O. Hinds-Radix ()

On Oct. 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 applies to a “class A” multiple dwelling which is defined “as a multiple dwelling that is occupied for permanent residence purposes.” It seeks to prohibit “advertising that promotes the use of dwelling units in a class A multiple dwelling for other than permanent residence purposes” and imposes stiff civil penalties for doing so, i.e., not more than $1,000 for the first violation, $5,000 for the second violation and $7,500 for the third and subsequent violations.

The act defines “advertise” to include “any form of communication for marketing that is used to encourage, persuade and manipulate viewers” and appears to apply to the hosts who advertise their units and the medium through which the advertisements are made known to the public, e.g., Airbnb and Homeaway.com.1

As reported in the New York Law Journal, Airbnb is popular in New York City, the number of hosts having grown from 15,000 in 2014 to 45,000 in New York City and 13,000 more upstate in 2016.2 However, the Attorney General investigated Airbnb from 2010 to 2014 and found that 72 percent of the units in New York City were illegal, with commercial operators constituting 6 percent of the hosts and supplying 36 percent of the rentals.3

The New York State Assembly Memorandum In Support Of Legislation states that “this legislation would clarify that it is also illegal to advertise units for occupancy that would violate New York law.”

Airbnb Sues

Airbnb, as it has in San Francisco and Santa Monica, Calif.,4 filed a lawsuit in federal court, this time against New York State [Airbnb, Inc. v. Eric Schneiderman, 16 CV 8239, JB, (S.D.N.Y.)] challenging the act. Airbnb has applied for a preliminary injunction to block enforcement of the act.5

California and Tennessee Cases. In Airbnb, Inc. v. City And County of San Francisco,6 Airbnb challenged San Francisco Ordinance 178-16 enacted on Aug. 2, 2016, which “makes it a misdemeanor to collect a fee for providing booking services for the rental of an unregistered (apartment)” on the grounds of “(1) ‘preemption’ under the Communications Decency Act…(2) content-based speech restriction under the First Amendment to the United States Constitution and (3) imposition of criminal strict liability.” The court denied Airbnb’s motion seeking a preliminary injunction “on the primary grounds urged by plaintiffs, but further proceedings are warranted on an issue relating to fair enforcement.”

In Airbnb, Inc. v. City of Santa Monica,7 Airbnb challenged a City of Santa Monica Ordinance set forth in Chapter 6.20 of Santa Monica Municipal Code. The action “seeks to hold Airbnb liable for content created by third-party users, but [punish] Airbnb for listings posted to its platform where those listings do not comply with the law.”8 The court denied Airbnb’s motion for a preliminary injunction on Sept. 22, 2016.

And in Nashville, Tennessee, the court on Oct. 28, 2016, ruled in Anderson v. The Metropolitan Government of Nashville and Davidson County9 that a city ordinance regulating short-term rentals such as those advertised by Airbnb is vague and unconstitu- tional.

Restriction on Speech?

To the extent that the act seeks to penalize Airbnb directly for illegal acts of its hosts, the Airbnb complaint in New York states, in part, that “the Act directly conflicts with, and is preempted by, section 230 of the Communications Decency Act of 1996, 47 U.S.C. 230 (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….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 its provisions apply to hosting platforms like Airbnb, and it violates the home rule clause of the New York State Constitution.”

The Airbnb complaint also states that “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 advertisement 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.”

Endnotes:

1. “Airbnb Files Lawsuit After Cuomo Signs Bill Imposing Fines for Ads,” NYLJ (Oct. 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”).

2. Stashenko, “Airbnb Files Lawsuit After Cuomo Signs Bill Imposing Fines for Ads,” NYLJ, Oct. 21, 2016.

3. The Attorney General’s report in October 2014 is titled “Airbnb in the City,” See also Streitfeld, “Airbnb Listings Mostly Illegal, New York State Contends,” www.­nytimes.com (Oct. 15, 2014).

4. Katie Benner, “Airbnb Sues Over New York Regulating New York Rentals,” http://nyti.ms/2ep3awr (Oct. 21, 2016) (reporting that the company is also fighting battles in Amsterdam and Barcelona, Spain, and in Berlin.)

5. Denney, “Injunction Sought By Airbnb Freezes New Law Targeting Ads,” NYLJ (Nov. 8, 2016), p. 1.

6. Airbnb, Inc. v. City and County of San Francisco, Case. No. 3:16-cv-03615-JD (N.D. Cal. Nov. 8, 2016).

7. Airbnb, Inc. v. City of Santa Monica, Case No. 2:16-cv-6645 (C.D. Cal. Sept. 22, 2016).

8. Id., Complaint at para. 2.

9. Anderson v. The Metropolitan Government of Nashville and Davidson County, Docket No. 15C3212 (8th Cir. Ct. For 20th Jud. Dist. At Nashville).