Homeaway.Com, Inc. v. City of N.Y.

523 F.Supp.3d 573

HOMEAWAY.COM, INC., Plaintiff,

v.CITY OF NEW YORK, Defendant.

18 Civ. 7742 (PAE)

United States District Court, S.D. New York.

Signed March 1, 2021

Joshua Dick, Kristin Andrea Linsley, Gibson Dunn & Crutcher LLP, San Francisco, CA, Mylan Lee Denerstein, Patrick Hayden, Gibson, Dunn & Crutcher, LLP, New York, NY, for Plaintiff.

Karen Beth Selvin, Carlos Fernando Ugalde Alvarez, New York City Law Department Office of the Corporation Counsel, New York, NY, for Defendant.

OPINION & ORDER

PAUL A. ENGELMAYER, District Judge:

This decision resolves an application by HomeAway.com, Inc. ("HomeAway") for attorneys’ fees and costs under the Civil Rights Attorney's Fees Award Act of 1976, 42 U.S.C. § 1988. In parallel lawsuits filed in August 2018, home-sharing platforms HomeAway and Airbnb, Inc. ("Airbnb") sued New York City (the "City"). They challenged a City Ordinance obliging such platforms to produce to a city enforcement agency capacious data every month as to all their local users. In January 2019, they obtained a preliminary injunction, which enjoined the Ordinance as likely violating the Fourth Amendment. The Ordinance never took effect. After well over a year of continued litigation and during the summary judgment briefing process, the City adopted a new, and substantially different, ordinance, mooting the plaintiffs’ challenge.

For the reasons that follow, the Court agrees that HomeAway is a prevailing party in this important litigation addressing a Fourth Amendment question of first impression, and is entitled to a substantial award of fees and costs. The Court awards HomeAway $595,009.69.

I. Background

A. The Underlying Litigation

A history of this litigation, reflecting events through January 3, 2019, is set out in the Court's decision that day granting preliminary relief. See Airbnb, Inc. v. City of New York , 373 F. Supp. 3d 467 (S.D.N.Y. 2019) (" PI Decision "). The ensuing history is reflected in the briefs and other submissions on HomeAway's fee application. See, e.g. , Dkt. 132 ("HomeAway Mem."); Dkt. 142 ("NYC Opp'n"); Dkt. 148 ("HomeAway Reply").¹ The Court here recaps only the history necessary to give context to the fee application.

On July 18, 2018, the New York City Council approved, and on August 6, 2018, the Mayor signed, Local Law 146, N.Y.C. Admin. Code §§ 26-2101 to 2104 ("Local Law 146" or the "Ordinance"). Local Law 146 was an attempt to facilitate enforcement of "multiple-dwelling" laws prohibiting the short-term rentals of entire apartments in residential buildings. See N.Y. Mult. Dwell. Law § 4(8) (state law prohibiting rental of most apartments for fewer than 30 days in "Class A" multiple dwellings—i.e. , those occupied for permanent-residence purposes by three or more families living independently—unless a permanent resident remains on the premises); N.Y.C. Admin. Code §§ 28-210.3, 28-118.3.2, 27-2004, 27-265 ; N.Y.C Building Code §§ 310.1.2, 310.2 (city law prohibiting short-term rentals of entire multiple-dwelling units and one- and two-family units occupied for permanent residence purposes). Such short-term rentals, the City has contended, promote overcrowding and improper sanitation, reduce the availability of permanent housing, drive up rents, and harm the character of residential neighborhoods. The validity of these laws was not at issue in this litigation.

Local Law 146 aimed to facilitate the City's enforcement of these laws by requiring entities like Airbnb and HomeAway, which provide short-term rental platforms (termed "booking services" by the Ordinance), to provide the City with large volumes of customer data each month. City regulators and prosecutors could then draw upon those data to build cases against property owners or hosts. The "monthly transaction reports" that Local Law 146 required each booking service to produce were to include, for each listing, the owner's name, address, phone number, and email; the details of each booking transaction, including its duration, the fees earned, and how it was advertised; specific information about how the owners used and rented their properties; and personal bank-account and payment information of the property owner. The Ordinance required booking services to produce such information whether or not there was reason to suspect that the listing, or host, was violating the law.

Under the Ordinance, a platform's monthly reports were to be produced to the Mayor's Office of Special Enforcement ("OSE"), charged with enforcing quality-of-life laws, including the multiple-dwelling laws. OSE coordinates joint investigations with city agencies, including criminal law enforcement agencies. Under the Ordinance, booking services faced civil penalties for noncompliant monthly reports. These penalties were the greater of (1) $1,500 for each listing that was "missing, incomplete, or inaccurate"; or (2) the total fees collected by the booking service during the preceding year in connection with that listing. The Ordinance was scheduled to take effect February 2, 2019.

On August 24, 2018, Airbnb brought suit, seeking to enjoin enforcement of the Ordinance. It argued that the Ordinance facially violated the Fourth and First Amendments of the U.S. Constitution and conflicted with, and was therefore preempted by, the Stored Communications Act, 18 U.S.C. § 2701 et seq. ("SCA"). See 18 Civ. 7712, Dkt. 1. The same day, HomeAway also sued, making similar claims. See Dkt. 1. On August 30, 2018, Airbnb moved to preliminarily enjoin the Ordinance's enforcement. See 18 Civ. 7712, Dkt. 13. On September 4, 2018, HomeAway filed its own motion for the same relief. See Dkt. 10. On September 11, 2018, the Court consolidated the two cases, and scheduled a hearing for October 5, 2018 on the pending motions. Dkt. 15. On October 2, 2018, after the City had filed an opposition, both plaintiffs filed reply briefs.

The October 5, 2018 hearing lasted three hours. It consisted of a detailed examination of the history and operation of Local Law 146; the City's history of using less invasive enforcement means (e.g. , targeted subpoenas) to enforce the multiple-dwelling laws, including as directed to Airbnb and HomeAway; the manner in which penalties would be imposed and tabulated under the Ordinance; and the means, if any, available to booking services to bring pre-compliance challenges to the monthly reporting obligation. See generally 18 Civ. 7712, Dkt. 80 ("Oct. 5, 2018 Tr."). At the close of the hearing, the Court solicited letters as to the City's historical use of subpoenas with respect to the Airbnb and HomeAway platforms. Id. at 121.

In the PI Decision , the Court granted plaintiffs’ motions for a preliminary injunction, finding their Fourth Amendment challenges likely to succeed. After finding that the Amendment applied, 373 F. Supp. 3d at 481–86, the Court found two aspects of the Ordinance problematic.

First was the "breathtaking" scale of the data production the Ordinance compelled. Id. at 490–93. "Each month, the Ordinance appropriates from every participant in the burgeoning home-sharing industry what is effectively a wholesale replica of that booking service's database as to New York City users." Id. at 490. This production demand was not limited temporally or at all tailored, and thus was "the antithesis of a targeted administrative subpoena for business records." Id. at 491. This, the Court explained, likely violated the Fourth Amendment:

While granting OSE the run of the vast user databases of platforms like Airbnb and HomeAway would surely aid OSE in its mission to identify and pursue violators of the Multiple Dwelling Laws, no Fourth Amendment precedent countenances this expedient. The City has not cited any decision suggesting that the governmental appropriation of private business records on such a scale, unsupported by individualized suspicion or any tailored justification, qualifies as a reasonable search and seizure.

Id. at 492. See generally id. at 490–95.

Second, the Ordinance "fail[ed] to provide a neutral forum in which a booking service could bring a pre-compliance challenge," as required by City of Los Angeles v. Patel , 576 U.S. 409, 135 S. Ct. 2443, 192 L.Ed.2d 435 (2015) :

The Ordinance does not provide for a neutral forum before which a booking service could argue, before a monthly production deadline, that the demand for user data was unreasonable under the Fourth Amendment (e.g., because of its scale or lack of tailoring). Nor does the Ordinance provide for a neutral forum before which a booking service could challenge a penalty for noncompliance imposed by OSE on the grounds that, as in Camara , the underlying demand for user records had violated the Fourth Amendment.

Id. at 493.

Finally, the Court noted:

[E]ven if this Court's pre-effective-date assessment of the reasonableness of the Ordinance qualified as constitutionally adequate pre-compliance review, that assessment, albeit on the limited record developed to date, would not assist the City's cause. On the contrary, the Court's present assessment is that it is likely that the Ordinance's categorical demand that all booking services make sweeping monthly data productions would be held unreasonable under the Fourth Amendment.

The Court largely bases this preliminary judgment on the considerations addressed above: most notably, the scale of the user data compelled to be produced, as measured against the precedents that require that the demands of subpoenas and regulatory searches and seizures be reasonably tailored and that reject governmental attempts to dispense with tailoring in the generalized interest of investigative efficacy. If each monthly demand is viewed as the functional equivalent of an OSE subpoena to each booking service, as the Court regards as appropriate, the expansive user records required be produced cannot be credibly described as "limited in scope." The Ordinance's intrusion on protected Fourth Amendment interests is all the greater because (1) the user data

...