The City of New York v. Airbnb Inc.

ADDITIONAL CASES In the Matter of the Application of the City of New York, Petitioner, v. Airbnb, Inc., Respondent; 451582/2018 In the Matter of the Application of Airbnb, Inc., Petitioner, v. City of New York, Respondent; 157516/2018 In the Matter of the Application of Airbnb, Inc., Petitioner, v. City of New York, Respondent; 157517/2018 DECISION WITH RECOMMENDATIONS REGARDING AIRBNB, INC.’S IN CAMERA SUBMISSION UNDER SEAL   This matter is before the Special Master, Abbye Lawrence, Esq., pursuant to an order dated September 12, 2019, signed by the Honorable James E. d’Auguste, appointing her as Special Master for the purpose of aiding the Court and the parties in conducting discovery in an effective and impartial manner (the “Order of Reference”). Index No. 451409/2018, NYSCEF Doc. No. 77. Pursuant to the Order of Reference, the Special Master may review in camera user records submitted by Airbnb, Inc. (“Airbnb”) wherein the posted advertisement for an unlawful short-term tenancy did not result in a completed reservation in conjunction with the City of New York’s (the “City”) ex parte submission expressing the need and relevancy for said materials, as directed by the decision and order of the Court dated May 16, 2019 (NYSCEF Doc. No. 61), and issue a decision with recommendations. As set forth below, the City seeks user records of individuals whose postings on Airbnb’s website did not result in a completed reservation for an unlawful short-term tenancy in response to each of the respective subpoenas issued by the New York City Mayor’s Office of Special Enforcement (“OSE”) in the above-captioned special proceedings brought pursuant to Section 2308(b) of the New York Civil Practice Law and Rules (“CPLR”): a subpoena dated May 31, 2018, relating to seven buildings located on West 47th Street in Manhattan (at issue in Index No. 451409/2018); a subpoena dated June 14, 2018, relating to a building in Manhattan (at issue in Index No. 157516/2018); a subpoena dated June 26, 2018, relating to ten buildings in Manhattan and Queens (at issue in Index No. 157517/2018); and a subpoena dated July 16, 2018, relating to seven buildings in Manhattan, Brooklyn, and Queens (at issue in Index No. 451582/2018) (collectively, the “Subpoenas”). While Airbnb objects to producing the documents as an unwarranted invasion on its users’ individual privacy rights, the user records are material and relevant to the City’s ongoing investigation of alleged unlawful short-term tenancies in in permanent residential buildings in the multiple properties in Manhattan, Brooklyn, and Queens, supra (collectively, the “Subject Buildings”). For the reasons stated herein, the Special Master finds that the in camera records submitted for review by Airbnb should be produced to the City to aid the City in its ongoing investigations. Background and Procedural History Familiarity with the factual and procedural background of the four above-captioned special proceedings is presumed based upon the Court and the parties’ involvement in all four proceedings and the facts, as recited in the Court’s May 16, 2019 decision and order, and will not be repeated herein except as necessary for rendering this decision with recommendations. In accordance with the Court’s May 16, 2019 decision and order, on or about June 14, 2019, Airbnb submitted three USB drives containing user records to the Court for an in camera review in response to the City’s Subpoenas. On or about the same date, Airbnb produced responsive user records to the City relating to completed reservations. The City also submitted an ex parte submission detailing its “basis for the need and relevancy of said materials” to aid the Court “in balancing the City’s investigative and enforcement needs with individual privacy rights.” NYSCEF Doc. No. 61, at 13. In its ex parte submission, the City reiterates its legitimate need for the user records in order to maintain the safety of unwary tourists, as well as the safety of the first responders employed by the City, who may be put at the risk of unnecessary injury or death due to the deceptive advertisements for unlawful short-term tenancies in residential buildings that are not properly equipped with the more stringent fire and safety features required for short-term occupancy buildings. Such unlawful short-term tenancies also jeopardize the safety and disrupt the quiet peace and enjoyment of the permanent residents of the Subject Buildings. The City also restates the fact that the advertisements, although unsuccessful in procuring reservations, created liability for those users since they are violative, solely based upon their existence, of a whole host of advertising laws codified in the New York Multiple Dwelling Law (“MDL”) and the Administrative Code of the City of New York (“Administrative Code”). The City further argues that the existence of those advertisements that did not result in completed reservations is directly relevant to the question of what individual building owners and managers know, or should know, about the status of alleged ongoing unlawful short-term tenancies in their buildings, which has been an issue of concern in nuisance abatement litigation before the Court. The City asserts that these advertisements provide evidence of present or planned unlawful activity that requires attention and corrective action by said owners and managers. The City further claims that the identification of the individuals or entities that created and posted these no-reservation advertisements will assist OSE to identify additional potentially existing aliases of other illegal hosts, as well as other individuals or entities acting in concert with them, as part of larger unlawful transient occupancy operations in contravention of state and local laws. The City contends that OSE has found, in the course of investigating the rental of units in residential buildings for use as unlawful transient occupancies, the type of information submitted to the Court for an in camera review is “invaluable to establishing financial relationships and connections between hosts and their confederates in [said] operations.” NYSCEF Doc. No. 73. The City further claims that the user records submitted to the Court by Airbnb could exculpate those users from greater levels of responsibility in the grand scheme of the unlawful transient occupancy operations that OSE uncovers. Specifically, the user records at issue will inform OSE what enforcement action, if any, should be taken and against whom such action should be taken: in the two sealed proceedings (Index Nos. 157516/2018 and 157517/2018), this includes whether OSE will proceed against those individuals through nuisance abatement proceedings or consumer protection actions or through criminal prosecution for violations of the New York City Fire or Building Codes, or a combination thereof; in the two nuisance abatement proceedings (Index Nos. 451409/2018 and 451582/2018), this includes the identification of John and Jane Doe defendants, whether new defendants should be added to already pending litigation or charged separately, and what level of penalty should be sought from them. The City asserts that the user records at issue are material and relevant to OSE’s investigation into unlawful short-term tenancies in New York because OSE has been informed by Airbnb that Airbnb intends, in its own discretion, to deactivate or “take down” accounts in response to OSE’s Subpoenas and ongoing litigation, and OSE has seen this transpire in matters pending before the Court. While this may improve housing conditions, it hinders OSE’s access to user records that Airbnb decides to remove on its own accord. On June 11, 2019, the parties consented to the Court’s appointment of a volunteer Special Master to conduct the in camera review of the user records submitted by Airbnb. See NYSCEF Doc. No. 76. On June 17, 2019, the City moved for an order, pursuant to CPLR 2221(d), seeking leave to reargue the Court’s May 16, 2019 decision and order to the extent that it imposed preclearance requirements upon the use of certain business records received from Airbnb, specifically, the user records at issue herein and, upon granting leave to reargue, striking said preclearance procedure in all of the four above-captioned special proceedings (Mot. Seq. No. 002 in Index Nos. 451409/2018 and 451582/2018, and Mot. Seq. No. 003 in Index Nos. 157516/2018 and 157517/2018). On September 12, 2019, the Court issued the Order of Reference, appointing the undersigned as the Special Master to conduct the in camera review of the user records in the four above-captioned special proceedings. On December 11, 2019, after Airbnb indicated that it did not oppose the City’s request for leave to reargue the preclearance requirement, the Court issued a consolidated interim order in all four special proceedings granting the City leave to reargue the preclearance aspect of the Court’s May 16, 2019 decision and order and reserved decision upon whether to adhere to, reconsider, or modify its prior order, pursuant to CPLR 2221(f). NYSCEF Doc. No. 87. The Special Master will now address the user records submitted by Airbnb for the in camera review at issue herein. With respect to the in camera review, the three identical USB drives submitted by Airbnb contain folders with the following responsive information for each of the City’s Subpoenas issued in the four above-captioned special proceedings: 1. Listings: A spreadsheet containing listing information for each public listing meeting the criteria set forth in the City’s Subpoenas. The fields included in the spreadsheet are: Listing_ID (a number Airbnb assigns to each listing); Host_ID (a number Airbnb assigns to each host, also referred to as User_ID in other spreadsheets); created_at (date of listing creation); has_availability (whether the listing was available to be booked at the time the records were retrieved); name of listing, if provided; street address, including apartment, if provided; description information supplied by the host, if provided;¹ price_native (which appears to be price per night), if provided; native currency (the currency used for transactions); room_type (as supplied by the host); number of bedrooms; number of beds, if provided; bed_type; number of bathrooms, if provided; guests_included, person_capacity (the maximum number of people that may stay in a specific listing); house_rules (supplied by the host, if provided); and the minimum and maximum number of nights the host has specified the listing is available for a reservation (in two separate columns). 2. Hosts: A spreadsheet containing host account information for each of the hosts associated with the listings identified in item 1, supra. This spreadsheet contains the following categories of information: the User_ID (also known as Host_ID); the host’s name; email address associated with account; phone number associated with the account, if any; date of account creation; and the IP address of the device used to register the host, if any. 3. Activity: A spreadsheet containing information about actions that each host took on Airbnb’s website, including the associated time stamp and IP address. This spreadsheet contains the following categories of information: the User_ID; the time of the activity; and the IP address associated with the activity, if any. 4. Reservations: A log of cancelled or incomplete reservations for the listings identified in item 1, supra. This spreadsheet contains the following categories of information: ID; confirmation_code; Listing_ID; Guest_ID; Host_ID; start_date; number of nights; number_of_guests; base_price; host_fee; security_price, if any; extras_price, if any; host_currency; and reservation_status. All listings with completed reservations have previously been produced to the City. 5. Payouts: A log containing information on any payouts to hosts related to the cancelled or incomplete reservations identified in item 4, supra. This log only exists for one of the four Subpoenas. The payouts listed on that log reflect fees owed to the host under the relevant listing’s cancellation policy. This spreadsheet contains the following categories of information: User_ID; description of payout; amount_native (which appears to represent the amount of increase or decrease in payout to the Host); native_currency; date that the payout was reconciled at, if provided; payout_type; payout_address, including apartment, if provided; paypal_email, if provided; bank account routing number, if provided; bank account type, if provided; account holder name, if provided; envoy_payee, if provided; envoy_country; envoy_bank_name, if provided; envoy_bank_code, if provided; and envoy_branch_address, if provided. Payout information for listings with completed reservations has previously been produced to the City. 6. Reviews: A log of public-facing guest comments for the listings identified in item 1, supra.² This spreadsheet contains the following categories of information: Reservation_ID; created_at (date comment was created at); Guest_User_ID; Host_User_ID; role (of individual who wrote the comment); rating, if any; and the text of the comment provided, if any. Special Master’s Analysis and Ruling CPLR 3101(a) provides, in relevant part, that “[t]here shall be full disclosure of all matter material and necessary in the prosecution or defense of an action, regardless of the burden of proof.” It has been well established that the phrase “material and necessary” is “to be interpreted liberally to require disclosure, upon request, of any facts bearing on the controversy which will assist preparation for trial by sharpening the issues and reducing delay and prolixity.” Allen v. Crowell-Collier Publ’g Co., 21 N.Y.2d 403, 406 (1968); see also, e.g., Rivera v. NYP Holdings Inc., 63 A.D.3d 469 (1st Dep’t 2009) (same). This includes “disclosure [that] extends not only to admissible proof but also to testimony or documents which may lead to the disclosure of admissible proof.” Fell v. Presbyterian Hosp. in City of N.Y. at Columbia-Presbyterian Med. Ctr., 98 A.D.2d 624, 625 (1st Dep’t 1983) (“[I]f there is any possibility that the information is sought in good faith for possible use as evidence-in-chief or for cross-examination or in rebuttal, it should be considered evidence material in the action.” (alteration in original) (internal quotation marks omitted) (quoting Shutt v. Pooley, 43 A.D.2d 59, 60 (3d Dep’t 1973))). However, “unlimited disclosure is not permitted.” LaPierre v. Jewish Bd. of Family & Children Servs., Inc., 47 A.D.3d 896, 896 (2d Dep’t 2008) (internal quotation marks omitted) (quoting Silcox v. City of New York, 233 A.D.2d 494, 494 (2d Dep’t 1996)). The “inquiry, while couched in terms of materiality and relevancy, must always be grounded in the Fourth Amendment’s requirement of reasonableness.” Harlem Teams for Self-Help, Inc. v. Dep’t of Investigation of City of N.Y., 122 Misc. 2d 1066, 1077 (Sup. Ct. N.Y. County 1984). “It is ancient law that no agency of government may conduct an unlimited and general inquisition into the affairs of persons within its jurisdiction solely on the prospect of possible violations of law being discovered, especially with respect to subpoenas duces tecum.” A’Hearn v. Comm. on Unlawful Practice of Law of N.Y. Cty. Lawyers’ Ass’n, 23 N.Y.2d 916, 918 (1969). The government’s power is not limitless: “There must be authority, relevancy, and some basis for inquisitorial action.” Id. “The requirement that an agency subpoena be targeted in these ways and not an invitation to a fishing expedition…respects the Fourth Amendment interests of the subject entity.” Airbnb, Inc. v. City of New York, 373 F. Supp. 3d 467, 491 (S.D.N.Y. 2019) (analyzing a proposed amendment to the Administrative Code that would require Airbnb to turn over voluminous data pertaining to user records); see also Reuters Ltd. v. Dow Jones Telerate, Inc., 231 A.D.2d 337, 342 (1st Dep’t 1997) (“This is of special significance where the subpoena is issued in the context of a civil dispute between private parties, where the issues before the tribunal are necessarily limited to those affecting the specific dispute. A broader view of relevance may be applied when the subpoena is issued by an administrative or legislative investigatory body, since the relevance of such an ‘office subpoena’ depends on the authorized breadth of the investigation itself.”). Although the Court, in its May 16, 2019 decision and order, modified the City’s Subpoenas to limit the scope of Airbnb’s initial production, the Court permitted the Special Master to review a subset of the materials originally requested by the City. The Special Master, after having conducted said in camera review, finds that granting the City access to the additional user records permits the City access to information that is material and relevant to its investigations into alleged ongoing unlawful short-term tenancies in the Subject Buildings. The Special Master finds that the user records at issue are material and relevant to the City’s ongoing investigations into alleged unlawful short-term tenancies in the Subject Buildings because they may either aid the City in prosecuting the individuals already named in the four above-captioned special proceedings who have successfully booked reservations via Airbnb or may lead to the discovery of additional entities and individuals, other than the users named in these records, who have knowingly, or with willful blindness, permitted or participated in part of a larger unlawful transient occupancy operation. The Special Master recommends that the user records at issue should be exchanged because the existence of the advertisements that did not result in completed reservations is material and relevant to the level of knowledge that building owners and managers have about the status of alleged ongoing unlawful short-term tenancies in their buildings, as has been seen in prior litigation before the Court. See, e.g., City of New York v. NYC Midtown LLC, 2017 WL 3271059, 2017 N.Y. Slip Op. 31596(U) (Sup. Ct. N.Y. County July 31, 2017); Lavi v. Assa, 2017 WL 2494802, 2017 N.Y. Slip Op. 31241(U) (Sup. Ct. N.Y. County June 9, 2017). More specifically, these advertisements constitute evidence of potential past or future unlawful activity about which the building owners or managers either knew or should have known and, thus, require corrective action. See City of New York v. Baldeo, 2019 WL 993135, 2019 N.Y. Slip Op. 30485(U), at *5 (Sup. Ct. N.Y. County Mar. 1, 2019) (holding that the advertising violations of the MDL and Administrative Code committed by the individual defendant who was hired by the owner to manage the subject property were alone sufficient to sustain the City’s request for a preliminary injunction). This is true whether the knowledge is actual knowledge, constructive knowledge, or merely rises to the level of willful blindness, which is still actionable in nuisance abatement proceedings. See MDL §78 (stating that the owner, tenant, and any other person “who shall willfully violate or assist in violating any provision of this section” shall be jointly and severally subject to civil penalties “if a violation is caused by his own willful act, assistance or that of any member of his family or household or his guest”); see also NYC Midtown LLC, 2017 N.Y. Slip Op. 31596(U), at *19. The user records at issue may also assist OSE in identifying additional aliases of illegal hosts, as well as other individuals or entities acting in concert with them, by providing potential connections or financial links between such individuals and/or entities. See, e.g., City of New York v. Pavlenok, 2019 WL 2902159, 2019 N.Y. Slip Op. 31938(U) (Sup. Ct. N.Y. County July 5, 2019) (finding that the defendants repeatedly advertised short-term rentals via Airbnb using at least fourteen different “host” accounts in violation of the MDL and Administrative Code). A further reason to provide the City with the user records at issue is that, according to the City’s ex parte submission, Airbnb intends, in its own discretion, to deactivate or “take down” accounts in response to OSE’s subpoenas and ongoing litigation and has been doing so in currently pending litigation. See, e.g., Letter dated Feb. 26, 2019 from Jacob A. Sommer, Esq. to Douglas J. Pick, Esq. et al., filed in City of New York v. Metropolitan Property Group, Inc., Index No. 450040/2019 (Sup. Ct. N.Y. County), NYSCEF Doc. No. 210. Aside from the legitimate security risk that these unlawful short-term tenancies create (see, e.g., City of New York v. Big Apple Mgmt., LLC, 2019 WL 1744268, 2019 N.Y. Slip Op. 31046(U), at *5 (Sup. Ct. N.Y. County Apr. 18, 2019)), the City will be at a severe disadvantage in prosecuting these actions if Airbnb continues to deactivate or remove accounts as it deems fit (see, e.g., Romano v. Steelcase Inc, 2010 WL 3936366, 2010 N.Y. Slip Op. 32645(U) (Sup. Ct. Suffolk County Sept. 21, 2010) (granting access to the subpoenaed party’s “current and historical Facebook and MySpace pages and accounts, including all deleted pages and related information”)). Current case law suggests that Airbnb’s removal of these accounts may be tantamount to spoliation of evidence. See, e.g., VOOMHD Holdings LLC v. EchoStar Satellite L.L.C., 93 A.D.3d 33 (1st Dep’t 2012); Spring Hill Bioventures SDN BHD v. Tsai, 2015 WL 4885344, at *2-3 (Sup. Ct. N.Y. County Aug. 12, 2015). In conducting the instant in camera review, the Special Master is mindful of the Court’s statement in its May 16, 2019 decision and order: “[Though] OSE is empowered to investigate and bring enforcement actions against individuals that advertise unlawful transient use regardless of whether such advertisement resulted in any actual unlawful use or occupancy, the City has not made a factual showing that such offenses are the target of the Investigation.” Index No. 451409/2018, NYSCEF Doc. No. 61, at 12-13. Nonetheless, the undersigned accepts the City’s prior representations that the user records that are the subject of the in camera review are not being pretextually sought by the City in order to prosecute new individuals who unsuccessfully posted advertisements for unlawful short-term tenancies. However, if the City chooses to use these additional user records as a fishing expedition or to otherwise violate the Fourth Amendment rights of the individuals named therein — particularly by commencing separate proceedings against those individuals solely for posting unlawful advertisements — the City will potentially jeopardize any future access it has to these types of user records in investigating alleged unlawful short-term tenancies due to the delicate balance with users’ individual privacy rights. Conclusion For the reasons set forth above, the Special Master finds that the in camera records submitted for review by Airbnb should be produced to the City to aid the City in its ongoing investigations. Dated: March 13, 2020