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Committee Activity 2018

June 2018

Park La Brea A LLC v. Airbnb, Inc.

Aimco sued Airbnb to stop Airbnb from providing booking, payments processing, and travel support services to Aimco's tenants at four of its residential apartment communities in Los Angeles County, California. As Airbnb has surged in popularity since 2014, a minority of Aimco's tenants have turned to Airbnb to rent out their apartment homes over Aimco's objections and in violation of their lease agreements.

The vacation rentals have resulted in significant problems for Aimco and Aimco's full-time residents, including loss of resident satisfaction due to disruptions and safety concerns, loss of Aimco's control over and right to exclude unauthorized persons from the properties, continuous trespassing by unauthorized Airbnb “Guests," and reputational and business harms. Airbnb has actual knowledge of Aimco's prohibition of vacation rentals, but does not care and does nothing to enforce its own terms of service against breaching tenants. Rather, Airbnb has made the business decision to broker rental transactions regardless whether the tenant has the landlord's permission and regardless whether the tourists—Airbnb's own customers—are denied access to their vacation accommodations because they are unwittingly trespassing on Aimco's property. Airbnb refuses to stop inducing Aimco's tenants to breach their leases because its continued success and rapid growth depend on ignoring the rules governing the properties they broker and because Airbnb believes it can wield the CDA to shield itself from liability from any claims.

Judge Gee agreed with Airbnb. The Court granted Airbnb's motion to dismiss with prejudice, treating the CDA as an insurmountable barrier to litigation against Airbnb by aggrieved property owners. The Court did not address whether Airbnb's trampling of private property rights and interference with contracts is legal under California law. Instead, the Court ruled that section 230(c) makes Airbnb immune from any liability under state law because “Airbnb hosts who use Airbnb's website have complete control over the content at issue—listing rentals in violation of Aimco's leases" and “it is with Airbnb's publication of this content that Aimco takes issue." 2017 WL 6799241, at *7-8.

The Court made a number of fundamental errors in granting Airbnb's motion to dismiss without leave to amend the complaint, including (i) ignoring the plain, narrow language of subsection 230(c)(1) defining the limited scope of the Good Samaritan defense; (ii) relying on a non-binding case (from the First Circuit) and other out-of-circuit decisions applying an overly broad interpretation of the CDA in direct violation of binding Ninth Circuit precedent; (iii) failing to conduct the claim-by-claim analysis required by the Ninth Circuit to properly evaluate the applicability of the CDA defense; Memo to Community Associations Institute and (iv) ignoring the operative complaint's well-pled factual allegations and instead relying on allegations in the original complaint and adopting Airbnb's own factual assertions as true. Aimco is confident that the Ninth Circuit will reverse the LA Park order as contrary to the Ninth Circuit's earlier CDA decisions—namely, Fair Hous. Council of San Fernando Valley v. Roommates.com, LLC, 521 F.3d 1157 (9th Cir. 2008) (en banc), Barnes v. Yahoo!, Inc., 570 F.3d 1096 (9th Cir. 2009), and Doe v. Internet Brands, Inc., 824 F.3d 846 (9th Cir. 2016)—and the federal rules governing motions to dismiss.

Aimco's appeal will challenge Airbnb's and the district court's erroneous position that the CDA gives Airbnb complete immunity from suits challenging its tortious brokering of prohibited vacation rentals. Section 230(e)(c)(1) provides that “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider." The Ninth Circuit has made clear that this does not provide “an all-purpose get-out-of-jail-free card for businesses that publish user content on the internet." Internet Brands, Inc., 824 F.3d at 853. Rather, “all businesses, whether they operate online or through quaint brick-and-mortar facilities," must comply “with laws of general applicability" and must “refrain from taking affirmative acts that are unlawful." Fair Hous. Council, 521 F.3d at 1169 n.24. “[W]hat matters is whether the cause of action inherently requires the court to treat the defendant as the 'publisher or speaker' of content provided by another." Barnes, 570 F.3d at 1102. Only those types of claims are barred by the CDA. Judge Gee's order ignores that Aimco's challenge to Airbnb's brokering activities do not rely on Airbnb being treated as the publisher or speaker of another's content and allows Airbnb to continue brokering short-term rentals in conflict with the legitimate interests of those who are attempting to maintain a building's residential character.

Amicus Brief

Brief Author: Steven Weil, Esq. and Dena M. Cruz, Esq.

CAI Amicus Review Panel: Robert Diamond, Esq., Chair of Amicus Committee, Edmund Allcock, Esq. (MA), Laurie Poole, Esq. (CA), and Jennifer Loheac, Esq. (GA)

May 2018

HomeAway.com, Inc. and Airbnb, Inc., v. City of Santa Monica (California)

Brief Summary: Eric S. Boorstin, Attorney for Amicus Curiae Apartment Investment and Management Company, requested that CAI join the attached amicus brief.

The following argument is made in the amicus brief:

Short-term rentals bring large numbers of tourists into places that were not designed to accommodate them.  Cities and landlords, as well as their residents and tenants, therefore have an interest in setting reasonable short-term rental policies to promote the overall well-being of their communities.

Plaintiffs Airbnb and HomeAway.com seek a regime where they can continue extracting massive profits from their short-term rental booking services while disclaiming any responsibility for the significant costs and burdens their services impose on the community at large.  They claim that the Communications Decency Act (CDA), 47 U.S.C. § 230, immunizes them from all liability for brokering short-term rentals that convert residential living spaces into hotel rooms, no matter whether the applicable local regulations or leases permit it. 

Plaintiffs are wrong.  The CDA was enacted to encourage “Good Samaritan[s]" to address the undesirable third-party content on their websites, not give online business “an all-purpose get-out-of-jail-free card" (Doe v. Internet Brands, Inc., 824 F.3d 846, 853 (9th Cir. 2016)) for all aspects of their business models no matter the terms of relevant state and local laws or contracts that generally govern a community.  47 U.S.C. § 230(c) (2012).  The CDA by its terms preempts only claims where a website operator is “treated" as the publisher or speaker of information provided by another, 47 U.S.C. § 230(c)(1), not all claims where third-party content is a but-for cause of a harm, or all claims that might cause a website operator to remove third-party content as a practical matter.

This Court has recognized the limited scope of the CDA, cautioning that it “must be careful not to exceed the scope of the immunity provided by Congress and thus give online businesses an unfair advantage over their real-world counterparts."  Fair Hous. Council of San Fernando Valley v. Roommates.com, LLC, 521 F.3d 1157, 1164 n.15 (9th Cir. 2008).  Accordingly, this Court has recognized that claims are not preempted unless they “inherently require[ ] the court to treat the defendant as the 'publisher or speaker' of content provided by another."  Barnes v. Yahoo!, Inc., 570 F.3d 1096, 1102 (9th Cir. 2009) (emphases added).

Plaintiffs enter into the contracts at the heart of the short-term rental transaction they facilitate, as well as provide travel support, guarantees, payment processing, rental rate setting, and other related services, which are integral for the transaction's success.  For all these services, Plaintiffs collect substantial fees.  These are not the activities of a publisher, so regulating these activities does not treat Plaintiffs as publishers.  The CDA, therefore, does not preempt the City of Santa Monica's ordinance, or any other attempt to hold Plaintiffs accountable for the rules they violate (such as limitations on short-term rentals in residential lease provisions) with their own conduct in providing short-term rental services.

Amicus Brief written by Eric S. Boorstin, Attorney for Amicus Curiae Apartment Investment and Management Company

Order Denying Plaintiffs' Motion for Preliminary Injunction; Granting Motion to File Amicus Brief

CAI Amicus Review Panel: Robert Diamond, Esq., Chair of Amicus Committee, Edmund Allcock, Esq. (MA), Jennifer Loheac, Esq. (GA),  and Laurie Poole, Esq. (CA) 

April 2018

Friedman v. Lieberman Management Services, Inc. (Illinois)

Plaintiff seeks to bring a class action suit against Lieberman, a third-party property management company, under a novel implied-right-of-action theory, for an alleged violation of Section 22.1 of the Condominium Property Act, 765 ILCS 605/1 et seq. (the “Condo Act"). Section 22.1 allows sellers of condominium units to obtain from their condominium association board certain documents and information regarding the condominium and make those documents “available for inspection to the prospective purchaser, upon demand." Section 22.1 requires that the information be furnished within 30 days of the written request, and provides that the board may charge a “reasonable fee covering the direct out-of-pocket cost." 765 ILCS 605/22.1. The statute makes no reference to property management companies or document processing companies.

Plaintiff bases his theory of liability on the premise that Defendant violated Illinois law by allegedly charging amounts beyond a “reasonable fee covering the direct out-of-pocket cost" in providing a package of disclosure documents listed in Section 22.1 (the “Disclosure Documents") to the prospective seller of the condo. Plaintiff concedes that the language of Section 22.1 makes no reference to a third-party property management business, and does not purport to regulate the business of third-party property management businesses. Despite this, Plaintiff alleges Lieberman can be sued as an agent of the condo associations, and can be individually liable for breaching a duty of the condominium associations under an “active-part agency" theory of legal liability.

Specifically, the class representative alleges that on October 7, 2016, Plaintiff sold a condo unit that was part of the Mission Hills Condominium Association in Northbrook, Illinois. On September 27, 2016, the prospective buyer requested information from Plaintiff regarding the condominium and association pursuant to Section 22.1 of the Condo Act. In turn, Plaintiff's real estate attorney directly requested that Lieberman prepare and provide the Disclosure Documents, as well as additional documentation, within five days. Plaintiff's attorney affirmatively submitted an order form from Defendant's web site requesting a Section 22.1 Disclosure and additional documents for a total cost of $220. Plaintiff's attorney also ordered a paid assessment letter, agreed to a rush fee, and buyer's transfer fee for a total of $250.

Defendant moved to dismiss the claim for violation of the Condo Act, arguing 1) that Section 22.1 does not apply to property management companies under the express terms of the statute; 2) there was no arguable violation of the statute because Plaintiff did not pay more than the condominium association's out-of-pocket costs; and 3) that Section 22.1 does not create a private cause of action, and no cause of action could be implied in favor of a seller against a property management company. The trial court allowed Plaintiff's cause of action for violation of the Condo Act to survive relying on the Seventh Circuit's decision Merrill Tenant Council v. HUD, 638 F.2d 1086 (7th Cir. 1981). The trial court found that Plaintiff could bring a cause of action under the Condo Act on the theory that Lieberman acted as the condominium association's agent and played an active part in breaching a duty owed by the condominium association under Section 22.1.

Following this order, the parties and the trial court agreed an interlocutory appeal was appropriate in this case given that it was an issue of first impression, and the trial court certified questions for appeal concerning whether Plaintiff could bring a cause of action under the Condo Act against the Defendant for actions taken by Defendant allegedly as the agent of a condominium association. Lieberman filed an application for leave to appeal, and the Appellate Court quickly granted the application.

Amicus Brief written by Diane J. Silverberg, Esq.
Leave to Appeal
CAI Amicus Review Panel: Robert Diamond, Esq., Chair of Amicus Committee, Edmund Allcock, Esq. (MA), Jennifer Loheac (GA), Jim Strichartz (WA), and Steven Sugarman, Esq. (PA) 

March 2018

erdogan, et al. v. preserve at Charleston Park homeowners association, et al. (South Carolina)

The lawsuit appears to involve seven named plaintiffs, those plaintiffs' seven community associations, and those seven community associations' community management companies and association law firms. The original complaint suggested that both the named plaintiffs and named defendants were representative of larger classes and might be expanded.

The Amended Complaint asserts claims for:

(1) violation of the FDCPA by defendants arising out of the filing of liens for unpaid assessments and subsequent foreclosure actions;

(2) a declaratory judgment to the effect that restrictive covenants do not create a mortgage or mortgage-like relationship, and the act (or threat) of foreclosure should not be available to community associations for the nonpayment of assessments;

(3) intentional interference with a contractual relationship between owners and their mortgages; and

(4) abuse of process.

Damages sought include actual, compensatory and consequential damages, statutory damages and attorney's fees, and punitive damages.

South Carolina has not adopted a planned community type statute. Plaintiffs argue that the actions or threats of action by community associations and their representatives are not supported by contract or common law. It appears that Plaintiffs are not arguing that Defendants have improperly followed the process, but that there is no legal process to be followed for collection of assessments and that Defendants' actions violate the law and should be stopped. This federal lawsuit and its outcome are relevant to all states where there is no community association statutory scheme as the same allegations could be made elsewhere and a bad decision in South Carolina would impact elsewhere.

Amicus Brief 
Status: Order and Opinion, Judgement in a Civil Action
Prior Opinions: Amended Complaint
Brief Author: Marvin Nodiff, Esq.
CAI Amicus Review Panel: Robert Diamond, Esq., Chair of Amicus Committee, Edmund Allcock, Esq. (MA), Marc Markel, Esq. (TX), Karyn Branco, Esq. (NJ), and Steven Sugarman, Esq. (PA)

January 2018

Orchard Estate Homes, Inc. v. The Orchard Homeowner Alliance (California)

The lower court found that the “voter apathy" is not a requirement under 4275, and that the association acted in accordance with election laws and granted the petition. The objectors filed an appeal.

The appeal concerns whether “voter apathy" is a requirement that must be met in order for a Court to grant a 4275 petition to approve a CC&Rs amendment. This is an issue that community association counselors encounter regularly when petitioning the court under Civil Code section 4275. Many courts are confused when faced with this issue because every published appellate case concerning a 4275 petition mentions “voter apathy" in the opinion based off a reference to a practice guide by Rosenberry and Sproul. However, the Code does not require a finding of “voter apathy" and such a requirement would greatly hinder community associations from getting their 4275 petitions granted. For example, if voter apathy was a requirement, the Association would need to hope for nearly 100% of the votes to be in favor of the CC&Rs amendment for a supermajority requirement because if 85% of owners in a 100-Unit CID turn out to vote on an amendment requiring 75% approval, is it voter apathy if 74 owners vote in favor and 11 owners vote against? This is why the most current practice guide by Rosenberry and Sproul “Advising Community Associations" lists this as an unresolved issue for a 4275 petition. If the appeal is successful, we would move to have the court published, thereby eliminating this argument in the future.

The Association argues that “voter apathy" is not a requirement to file a 4275 petition and would create disincentives to get owners to vote. Additionally, “voter apathy" is vague and has no definition thus subject to varying determinations by courts.

Amicus Brief
Prior Opinions: Final Order and Judgment Granting Petition to Reduce the Required Voting Percentage to Amend the CC&Rs
Brief Author: Laurie Poole, Esq., CCAL Fellow
CAI Amicus Review Panel: Robert Diamond, Esq., Chair of Amicus Committee (VA), Jennifer Loheac, Esq. (GA), Greg Daddario, Esq. (NH), Gary Kessler, Esq. (CA), Tom Moriarity, Esq. (MA) 

Stroh Ranch Development v. Stroh Ranch Business Circle (Colorado)

The case involves a declarant who consented to the annexation of real estate into a common interest community in 1999. Disputes arose overassessments on the property over the following years, which prompting the association to record a lien in 2017. The lien appeared to be proper under both the community's recorded covenants and the Colorado Common Interest Ownership Act (“CCIOA"), which our legislature adopted in 1991 based on the 1982 uniform act. The declarant responded by suing the association under Colorado's spurious lien statute, which allows property owners to make expedited challenges to frivolous liens that were neither approved by the owner nor authorized by law. After a short hearing, a district court judge granted the petition. He examined the 1999 annexation form and concluded that it did not comply with the requirements that the Colorado Supreme Court's would recognize seventeen years later in Ryan Ranch Community Association v. Kelley, 380 P.3d 137 (Colo. 2016).

CAI previously participated in the Ryan Ranch case, in which the court ultimately ruled against an association seeking to enforce covenants stating that units identified on a plat would be automatically annexed to a community upon recording of a deed. In that case, the court largely agreed with the property owners' argument that units could only be annexed by recording a declaration amendment in strict compliance with all statutory requirements, including a mathematical calculation of reallocated common interests. The court invalidated the common practices of “annexation by deed" and automatic reallocation of common interests by reference to other recorded documents.

The Stroh Ranch case asks the court of appeals to decide how broadly the Ryan Ranch opinion should be applied. The district court has interpreted Ryan Ranch to mean that all annexations recorded since 1991 are subject to challenge at any time by disgruntled property owners, and that any community association that attempts to enforce its covenants may be subject to penalties for recording a spurious document.

We do not think this is reasonable or what the supreme court intended when it announced Ryan Ranch last year. Although many community association lawyers were disappointed by the outcome of Ryan Ranch, the case was limited to a fairly unique fact pattern, wherein two developers had reached a side agreement to exempt nine units in a community from annexation or payment of assessments. The association argued that their agreement was superseded by the community's annexation-by-deed covenants, but the court disagreed and suggested that annexation requires strict compliance with CCIOA procedures for declaration amendment. 

The effect of the Ryan Ranch holding on other communities remains unclear. The supreme court ruled that certain methods of annexation are invalid, but it never suggested that it intended to open the door for the judiciary to examine the documents of every declaration recorded in the twenty-seven years since CCIOA's passage. On the contrary, the court remanded the case for determination of whether the statute of limitations precluded such review. The case settled before this question was ever answered.

Amicus Brief
Prior Opinions:
Brief Authors: Jerry Orten, Esq., CCAL Fellow, Aaron Goodlock, Esq. and Jonah Hunt, Esq. of the Orten, Cavanagh & Holmes law firm. 
CAI Amicus Review Panel: Robert Diamond, Esq., Chair of Amicus Committee (VA), Henry Goodman, Esq. (MA), Laurie Poole, Esq. (CA), James Strichartz (WA).

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