January 9, 2019
On January 3, 2019, Judge Paul Engelmeyer of the U.S. District Court for the Southern District of New York granted a preliminary injunction staying enforcement of New York City Local Law 146 (the “Ordinance”), which was designed to address perceived problems arising from short-term rentals in residential buildings. Airbnb, Inc. v. City of New York, No. 18 CIV. 7712, 2019 WL 91990 (S.D.N.Y. Jan. 3, 2019).
Under the Ordinance, passed in July 2018, booking services such as plaintiffs Airbnb and HomeAway would be required to file reports with City officials detailing all rentals through the services, including the location and fees for the rental and contact information for the rental hosts. The Court enjoined the enforcement of the Ordinance on Fourth Amendment grounds, finding preliminarily that the Ordinance would lead to unreasonable gathering of personal information about renters without adequate protections for their rights. However, as discussed below, the Court also preliminarily concluded that the Ordinance would not violate federal Stored Communications Act (“SCA”) restrictions on the disclosure of information to governmental authorities. It is this aspect of the ruling which is discussed here.
The Ordinance is designed to support earlier legislation addressing short-term housing. In 2010 New York State prohibited the rental of most apartments for a period of fewer than 30 days in certain multiple dwellings unless a permanent resident remains on the premises. Moreover, New York City’s Building Code prohibits the short-term rentals of multiple dwelling units. The City justifies these regulations as necessary on the grounds that short-term rentals pose health and safety risks to permanent residents and guests; reduce the availability of permanent housing; drive up rents; and adversely impact the character of residential neighborhoods. Of course, it is this sort of short-term rental that forms a large part of the business model of Airbnb and HomeAway. In July 2018, in an effort to curb continued short-term rentals that violate State and City law, the City adopted the Ordinance, which would have provided detailed information about such short-term rentals.
In opposing the enforcement of the Ordinance, Plaintiffs contended that the Ordinance was preempted by the SCA, which, among other things, regulates the disclosure to governmental authorities of stored electronic communications. In pertinent part, the SCA states that “a provider of…electronic communication service to the public shall not knowingly divulge a record or other information pertaining to a subscriber to or customer of such service…to any governmental entity,” unless an enumerated exception applies. 18 U.S.C. § 2702(a)(3). Plaintiffs, citing Homeaway.com, Inc. v. City of Portland, No. 3:17-cv-00091, ECF No. 36 (D. Or. Mar. 27, 2017) contended that each Plaintiff was an “electronic communication service” governed by the statute because Plaintiffs provide electronic messaging systems to their users and because they store electronic communications on behalf of their users. The Court’s decision treated this proposition as having been established.
Instead, the Court focused on customer consent to the disclosures. Under the SCA, with a subpoena, the government may obtain a limited subset of records and information, such as a customer’s name, address, phone number, length of service, billing information, and call records. 18 U.S.C. § 2703(c)(2). To obtain additional records or subscriber information, the government must obtain a court order, a warrant, or, notably, customer consent. 18 U.S.C § 2703(c)(1).
Judge Engelmeyer determined that the Ordinance did provide for the required customer consent, and for this reason determined that it was unlikely that Plaintiffs could prevail on their challenge to the Ordinance based on the SCA. This is because the Ordinance specifically provides that booking services must obtain “from each host … lawful consent” to provide the information covered under the statute. The Court noted that “[t]he Ordinance does not specify the form such consent must take, but it does provide that consent may include ‘advising or providing notice to a user of the booking service that new or continuing use of such booking service as a host constitutes consent to such disclosure.’”
In so ruling, Judge Engelmeyer rejected Plaintiffs’ contention that forced consent of the type contemplated by the Ordinance was not meaningful or valid consent under the SCA. In particular, the Court held that “plaintiffs have not pled facts supporting their claim that hosts would feel coerced to consent to the disclosure of the information covered by the Ordinance,” noting that both Airbnb and HomeAway already condition use of their services on hosts’ acceptance of privacy policies that, among other things, notify hosts that the information they provide may be disclosed to governmental authorities. Accordingly, the Court rejected Plaintiff’s arguments under the SCA.
This article is intended only as a general discussion of these issues. It is not considered to be legal advice or relied upon. We would be pleased to consider providing additional details or advice about specific situations. For additional information on this topic, please feel free to contact Mark H. Moore, who regularly counsels and litigates for clients in connection with business disputes.