Airbnb, Inc. v. City & County of San Francisco
217 F. Supp. 3d 1066, 2016 U.S. Dist. LEXIS 155039, 2016 WL 6599821 (2016)
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Rule of Law:
The Communications Decency Act (CDA) Section 230 does not preempt local ordinances that regulate an interactive computer service's own conduct of collecting fees for facilitating transactions related to illegal activity, rather than treating the service as a publisher of third-party content. Additionally, the First Amendment does not protect commercial speech that proposes or facilitates an illegal transaction.
Facts:
- From 1981 to 2014, San Francisco effectively banned "tourist or transient" rentals to preserve affordable housing stock.
- In 2015, San Francisco enacted Ordinance 218-14, which lifted the ban and allowed permanent residents to offer short-term rentals under conditions, primarily requiring hosts to register their units with the Office of Short-Term Residential Rental Administration and Enforcement (OSTR).
- Airbnb and HomeAway operate internet websites where hosts post rental listings, and guests can book accommodations; these platforms collect service fees from both hosts and guests for facilitating these transactions.
- The content for rental listings on Airbnb and HomeAway is provided entirely by hosts, and the platforms do not verify, review, or edit this information.
- By early 2016, compliance with San Francisco's short-term rental registration requirement was low, with only 20-25% of units listed on platforms like Airbnb being registered.
- In June 2016, San Francisco enacted Ordinance 104-16 (the "Original Ordinance"), which would have held booking companies liable for publishing listings for unregistered units, effectively requiring them to monitor and verify content.
- On August 2, 2016, San Francisco passed Ordinance 178-16 (the "Ordinance"), which replaced the Original Ordinance and made it a misdemeanor to collect a fee for providing booking services for unregistered rental units.
- The OSTR interprets "lawfully registered" to mean a host has obtained a registration number from the OSTR, and "at the time it is rented" refers to when the booking transaction occurs.
Procedural Posture:
- San Francisco enacted Ordinance 104-16 (the "Original Ordinance") in June 2016.
- Airbnb, Inc. filed a lawsuit in federal district court and moved for a preliminary injunction against the Original Ordinance.
- HomeAway, Inc. was granted leave to intervene as a plaintiff in the federal district court action.
- San Francisco requested a stay in the district court proceedings to consider proposed amendments to its short-term rental laws.
- On August 2, 2016, the San Francisco Board of Supervisors passed Ordinance 178-16 (the "Ordinance"), which superseded the Original Ordinance.
- San Francisco filed a "Notice of Completion of Amendment Process" in the federal district court.
- San Francisco agreed to stay enforcement of the new Ordinance pending the District Court's disposition of the plaintiffs' renewed preliminary injunction motion.
- Plaintiffs Airbnb and HomeAway jointly filed a renewed motion for a preliminary injunction in the U.S. District Court, challenging Ordinance 178-16.
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Issue:
Does the Communications Decency Act (CDA) Section 230 preempt a San Francisco ordinance that makes it a misdemeanor for booking services to collect fees for rentals of unregistered units, and does this ordinance violate the First Amendment?
Opinions:
Majority - James Donato
No, the San Francisco ordinance is not preempted by the CDA Section 230, nor does it violate the First Amendment, because it regulates the booking services' own commercial conduct rather than treating them as publishers of third-party content, and commercial speech related to unlawful activity is unprotected. The court found that the Ordinance targets the plaintiffs' direct business activities of providing and collecting fees for booking services for unregistered units, not their role as publishers of user-generated content. The Ninth Circuit's test for CDA preemption requires the regulation to 'inherently require the court to treat' the interactive service as a publisher or speaker, which the Ordinance does not; it imposes no obligation to monitor or edit listings. The court distinguished precedents cited by plaintiffs, noting they involved laws that would have imposed liability based on the publication of third-party content. Furthermore, the court rejected the argument that the Ordinance's 'practical effect' was to compel monitoring, finding insufficient evidence and highlighting that CDA preemption is narrower than other federal preemption statutes like the FMIA. Regarding the First Amendment challenge, the court determined the Ordinance is an economic regulation directed at specific business transactions (booking unregistered rentals), not at speech or speakers, and therefore does not trigger First Amendment scrutiny. Even if considered commercial speech, the court applied the Central Hudson test, noting that the threshold requirement is that the speech must be related to lawful activity. Since renting unregistered units is illegal in San Francisco, any commercial speech facilitating such illegal transactions is unprotected by the First Amendment. Finally, the court addressed the criminal strict liability claim by construing the Ordinance to require scienter (knowledge/intent), as conceded by San Francisco, and found that San Francisco's clarifications of ambiguous terms (like 'lawfully registered') alleviated vagueness concerns at this stage.
Analysis:
This case is significant for clarifying the scope and limitations of immunity under CDA Section 230 for online platforms. It distinguishes between liability stemming from an online service's own conduct in facilitating illegal transactions and liability for publishing third-party content. The ruling enables local governments to regulate the economic activities of interactive computer services that facilitate illegal underlying transactions, even if such regulations have an incidental effect on user-generated content. It also reinforces the principle that commercial speech proposing or related to unlawful activity is outside the ambit of First Amendment protection, providing a strong precedent for cities seeking to regulate the 'sharing economy' platforms.
