Rentberry takes a double-loss in its case against the city’s moratorium

Friday was a bad day for Rentberry in Seattle. U.S. District Court Judge Richard Jones ruled against it in its lawsuit challenging the City of Seattle’s moratorium on rent-bidding web sites. And in a separate case, the 9th Circuit Court of Appeals dealt a blow to Rentberry’s key argument — and its best hope of winning on appeal.

Rentberry and the City of Seattle had both filed motions for summary judgment, and the judge ruled in favor of the City. First, he found that Rentberry and the landlord that it had put forward as an additional injured party lacked standing to sue the City over the moratorium. The landlord (Wysingle) was problematic because of his particular circumstances: he hadn’t joined Rentberry, and he was not actually trying to rent his unit because he was renovating it — and couldn’t commit to when it would be complete and he would try to rent it again. It’s hard but not impossible to challenge a statute before you’re actually violating it, but one requirement for doing so is showing intent to violate; for the above reasons, the judge found Wysingle hadn’t made that required showing. As for Rentberry, the judge bought the city’s argument that the moratorium only applies to landlords and tenants, not to Rentberry itself, and said that the company’s purported injury (another stated requirement for standing) was “speculative at best.”

The judge could have stopped there, but instead he went on to address the merits of the case and ruled that the city’s argument prevailed. The heart of the case was the question of whether online bidding is speech protected by the First Amendment, or instead is “inexpressive conduct.” Case law says that “the First Amendment does not prevent restrictions directed at commerce or conduct from imposing incidental burdens on speech,” so this distinction is critical — and the judge found that online bidding as provided by Rentberry on its site is conduct, not speech. He relied on similar cases in other districts in the 9th Circuit that have found that rental transactions are conduct without a “significant expressive element.” One of those cases is a challenge brought by AirBnB and HomeAway against the City of Santa Monica for its ordinance regulating short-term rentals. That ordinance requires short-term rental platforms to only accept listings from hosts who have obtained the proper license from the city. The plaintiffs argued both that this violated the Communications Decency Act’s “safe harbor” provisions for third-party platform providers who choose not to police content posted on their sites, as well as the First Amendment.

Having found that Rentberry and Wysingle lack standing, the next step for the judge will be to dismiss the suit. Since the lack of standing is based upon the fact that the plaintiffs have not actually violated the moratorium yet, it will probably be “without prejudice” so they could potentially re-file it at a future point if and when the city tries to enforce the moratorium.

But that brings us to the second court decision issued yesterday: an appeal of the district court’s ruling in the case mentioned above, AirBnB and HomeAway vs. the City of Santa Monica. The 9th Circuit affirmed that booking transactions are nonexpressive conduct, and not primarily speech, and therefore do not fall under the protection of the First Amendment. That ruling strongly supports the judge’s ruling in the Rentberry case, and it’s now a controlling precedent. If it had gone the other way, it would be a strong argument for Rentberry on appeal; but now it’s a strong reason for Rentberry to give up and accept the loss. Even if the company and some set of landlords do establish standing in the future, they are largely precluded from arguing for First Amendment protection.

However, that doesn’t mean Rentberry is out of options, First, the one-year moratorium on rent-bidding platforms expires at the end of April, and so far the Council has not introduced, or held hearings on, any actual legislation regulating or prohibiting rent-bidding platforms. The moratorium may simply expire — or the Council may extend it another year without taking action.

One reason that the Council may put it off another year is because its purported basis for prohibiting rent-bidding platforms, the FIrst-in-Time Tenants ordinance that requires landlords to rent to the first qualified applicant who applies, has been struck down by a King County Superior Court judge and is now before the state Supreme Court on appeal. That case will be heard on June 11, with an expected ruling sometime before the end of the year. If the city loses the appeal, Rentberry can use the same legal argument to challenge the moratorium, or any subsequent legislation that tries to apply the First in Time ordinance to online bidding platforms. Rentberry may not win that argument, but it will have a running start.

 

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