City of Portland v. Homeaway.com, Inc.

191 F.Supp.3d 1157

CITY OF PORTLAND, Plaintiff,

v.HOMEAWAY.COM, INC. and Homeaway, Inc., Defendants.

No. 3:15–cv–01984–MO

United States District Court, D. Oregon, Portland Division.

Signed June 7, 2016

Denis M. Vannier, Kenneth A. McGair, Simon Whang, City Attorney's Office, J. Scott Moede, City of Portland, Portland, OR, for Plaintiff.

David C. Lawrence, Akin, Gump, Strauss, Hauer & Feld, LLP, Michael Simons, Vinson & Elkins, LLP, Austin, TX, Rachel C. Lee, Per A. Ramfjord, Stoel Rives, LLP, Portland, OR, for Defendants.

OPINION AND ORDER

MOSMAN, J.

When new technologies are developed, there is often a tension between those new technologies and efforts to regulate them within a framework built around older technologies. This case is an illustration of that tension. Plaintiff City of Portland sued Defendants HomeAway.com, Inc. and HomeAway, Inc. (collectively "HomeAway") for failure to comply with various provisions of the Portland City Code collectively known as the "Transient Lodgings Tax." HomeAway moves to dismiss the City's complaint. I GRANT HomeAway's Motion to Dismiss [7] and DENY injunctive relief.

I. BACKGROUND

HomeAway operates an online vacation rental marketplace where people interested in making their homes available for short-term rental may advertise their property. Travelers interested in renting a property can access HomeAway's websites to search for and find available properties. HomeAway puts the traveler in contact with the owner or lessee of the property to sort out the details of the lodging arrangement. HomeAway has property listings located all over the world, including in Portland.

In 1972, the City of Portland enacted a Transient Lodgings Tax Ordinance, Portland City Code ("PCC") § 6.04.010, et seq. ("the Ordinance"), providing in part that "[e]very [hotel] operator renting rooms or space for lodging or sleeping purposes in this City ... shall collect a tax from the transient" to be remitted to the City. PCC § 6.04.030(A). The Ordinance applies to hotel "Operators," defined by the Ordinance as "the person who is proprietor of the hotel in any capacity. Where the operator performs his/her functions through a managing agent of any type or character other than an employee, the managing agent shall also be deemed an operator ...." PCC § 6.04.010 (M). The Ordinance authorizes the City to levy fines against Operators that do not comply with the Ordinance. See, e.g. , PCC § 6.04.170.

On January 21, 2015, the Portland City Council passed amendments to the Ordinance that took effect on February 20, 2015. The apparent goal of the City Council in passing the amendments was to extend the Ordinance to cover "Booking Agents." The Ordinance defines "Booking Agent" as "an Operator or any person that provides a means through which a Host may offer a Short–Term Rental for transient lodging occupancy. This service is usually, though not necessarily, provided through an online platform and generally allows a Host to advertise the Short–Term Rental through a website ...." PCC § 6.04.010 (D). The Ordinance expressly lists "[o]nline travel booking sites" as examples of "Booking Agents." Id.

After the City Council passed the 2015 amendments to the Ordinance, the City sent HomeAway notices in which the City contended that HomeAway was in violation of various provisions of the Ordinance. (See Compl. [1], Exs. 3–8.) Included in these notices was an assessment of $2,540,106 in presumptive taxes, penalties, and interest. (See Compl. [1], Ex. 7.) HomeAway refused to pay the assessment, claiming it was not in violation of the Ordinance because it was not an Operator or Booking Agent and therefore did not fall under the Ordinance's terms. On October 21, 2015, the City filed this lawsuit against HomeAway seeking a declaratory judgment that HomeAway is an Operator or a Booking Agent, a reduction of fines to judgment, a reduction of presumptive taxes to judgment, and an injunction enjoining HomeAway's operations in Portland.

On May 17, 2016, I held oral argument. From the bench, I issued a ruling GRANTING HomeAway's Motion to Dismiss [7] and DENYING injunctive relief. The purpose of this Opinion and Order is to further clarify my rulings.

II. LEGAL STANDARD

When reviewing a motion to dismiss, the court must "accept all factual allegations in the complaint as true and construe the pleadings in the light most favorable to the nonmoving party." Knievel v. ESPN , 393 F.3d 1068, 1072 (9th Cir.2005). A court need not accept legal conclusions as true because "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). To survive a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Id. (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). A pleading that offers only "labels and conclusions" or " ‘naked assertion[s]’ devoid of ‘further factual enhancement’ " will not suffice. Id. (quoting Twombly , 550 U.S. at 555, 557, 127 S.Ct. 1955 ). While a plaintiff does not need to make detailed factual allegations at the pleading stage, the allegations must be sufficiently specific to give the defendant "fair notice" of the claim and the grounds on which it rests. See Erickson v. Pardus , 551 U.S. 89, 93, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (per curiam) (citing Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ).

III. DISCUSSION

The City's claims all depend on HomeAway being either an Operator or a Booking Agent as defined under the Ordinance. HomeAway contends that the City's complaint fails to allege that HomeAway is either an Operator or a Booking Agent and therefore all claims should be dismissed. I find the City has failed to allege HomeAway is an Operator. I further find the Portland City Charter does not grant the City the authority to tax HomeAway as a Booking Agent, and the City has not sufficiently alleged enough facts to tax HomeAway as a Booking Agent under the alternative authority of the relevant Oregon statute. Finally, I find the Ordinance does not place any duties and responsibilities on Booking Agents and, accordingly, I decline to reduce to judgment any fines assessed against HomeAway as a Booking Agent. I set forth my reasoning for these findings below.

A. HomeAway's Form 10–K Filing

In its Response to HomeAway's Motion to Dismiss, the City makes numerous factual allegations based on information contained in HomeAway's Form 10–K filing with the Securities Exchange Commission. HomeAway objects to my consideration of any facts included in the Form 10–K filing and not contained in or attached to the City's complaint and argues that the City has mischaracterized the company's disclosures. Therefore, as a threshold matter, I must determine whether it is appropriate in this case to consider a defendant company's Form 10–K filing when the company contests the facts contained in the filing. I find it inappropriate.

As a general rule, "a district court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion." Hal Roach Studios, Inc. v. Richard Feiner & Co. , 896 F.2d 1542, 1555 n. 19 (9th Cir.1990). In fact, Rule 12(b)(6) mandates that if "matters outside the pleading are presented to and not excluded by the court, the motion must be treated as one for summary judgment" rather than a motion to dismiss. FED. R. CIV. P. 12(d) (emphasis added). There are, however, two exceptions to the requirement. The first exception is "a court may consider material which is properly submitted as part of the complaint .... If the documents are not physically attached to the complaint, they may be considered if the documents' authenticity ... is not contested and the plaintiff's complaint necessarily relies on them." Lee v. City of Los Angeles , 250 F.3d 668, 688 (9th Cir.2001) (citations and internal quotation marks omitted).

The second exception to the requirement, under Federal Rule of Evidence 201, allows a district court to take judicial notice of "matters of public record." Mack v. South Bay Beer Distrib. , 798 F.2d 1279, 1282 (9th Cir.1986). Under this exception, courts can consider securities offerings and corporate disclosure documents, such as Form 10–K filings, which are publicly available. SeeMetzler Inv. GMBH v. Corinthian Colleges, Inc. , 540 F.3d 1049, 1064 n. 7 (9th Cir.2008) ; Wynn v. Chanos , 75 F.Supp.3d 1228, 1235 (N.D.Cal.2014) ("SEC forms such as a Form 8–K or Form 10–K are matters of public record and may be subject to judicial notice. Accordingly, I take judicial notice of Wynn's ... Form 10–K from 2011.") (citation omitted). But it is only appropriate for me to "to take judicial notice of the content of the SEC Forms [ ] and the fact that they were filed with the agency. The truth of the content, and the inference properly drawn from them, however, is not a proper subject of judicial notice under Rule 201. " Patel v. Parnes , 253 F.R.D. 531, 546 (C.D.Cal.2008) (emphasis added); see also Vesta Corp. v. Amdocs Mgmt. Ltd. , 80 F.Supp.3d 1152, 1157 (D.Or.2015) ("The Court takes judicial notice of the SEC filings ... not for the truth of the facts recited therein but for the existence of the records."); Gerritsen v. Warner Bros . Entm't Inc. , 112 F.Supp.3d 1011, 1032 (C.D.Cal.2015) (collecting cases from other circuits and various district courts within the Ninth Circuit).

Here, because the City has not attached HomeAway's Form 10–K filing to its complaint nor has the City's complaint necessarily relied on the filing, the first exception does not apply. The second exception also does not apply because neither party has formally requested I take judicial notice of HomeAway's Form 10–K filings. Even if the City were to request I take judicial notice of the Form...