Short-term rental sites Airbnb and HomeAway lost a legal challenge Wednesday against an ordinance enacted by a popular California tourist city.
The ordinance imposed several obligations involving rental sites in seaside Santa Monica, including refraining from booking properties that are not licensed and listed on a city registry.
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A 9th U.S. Circuit Court of Appeals panel ruled that a lower court properly dismissed the legal challenge over its failure to state a claim against the city.
The panel also rejected an assertion that the ordinance violates a 1996 federal law protecting internet companies from liability for posting third-party content, and that it violates speech protections of the First Amendment.
Santa Monica City Attorney Lane Dilg said the ordinance prevents residences from being converted into de facto hotels, protects affordable housing and helps residents stay in their homes.
"We look forward to collaborating and cooperating with technology companies to advance the community's best interests, but the platforms' broad assertions of immunity in this case simply go too far," he said in a statement.
In a statement that didn't specifically address the ruling, Airbnb said it had tried to work with Santa Monica for two years "on a solution that ensures working and middle-class families who want to visit the coast can find an affordable place to stay."
"Despite our efforts, the city insisted on an approach that was out of step with progress across the country," Airbnb said.
The claims were previously dismissed in June by a U.S. District Court judge. The appeal was argued in October before a three-judge panel in Pasadena.
The companies asserted that Santa Monica's ordinance violated the Communications Decency Act because it forced them to monitor and remove third-party content.
The judges found that the ordinance does not require the companies to review the content that property hosts post on websites, and said the only monitoring needed is to comply with the ordinance's prohibition on processing transactions for unregistered properties.
Incoming booking requests are the result of third-party listings, but the information is internal and not public, the ruling found.
The judges said they agreed with the district court's conclusion that the ordinance "regulates conduct, not speech, and that the conduct banned . . . does not have such a 'significant expressive element' as to draw First Amendment protection."