Mr. Brown

Hospitality Law

The Chink in the Armor of the Communications Decency Act

The Next Battle of the Short Term Rental War

By Banks Brown, Partner, McDermott Will & Emery LLP

CDA § 230 is shorthand for Section 230 of the Communications Decency Act, 47 U.S.C. § 230 (2016). It is the law cited by short term rental companies ("STRC"), such as Airbnb, when they argue with city and state governments and in the courts that their businesses are not subject to state and local regulation. It is fair to say that the STRCs are of the opinion that city and state governments are nearly powerless to regulate them in any way whatsoever, absent their consent.

CDA § 230 provides, in pertinent part, that: "No 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."

On its face, the power ascribed to CDA § 230 by the STRCs is not readily apparent. What it says is that companies which provide an interactive computer service, such as STRCs , cannot be treated as a publisher or speaker of any information provided by those who use the service. Zeran v. AOL, 129 F.3d 327, 330 (4th Cir. 1997) ("By its plain language, § 230 creates a federal immunity to any cause of action that would make service providers liable for information originating with a third-party user of the service."). Thus, for example, it can be argued that Craigslist and Facebook, which operate as bulletin boards for their users' content, are protected from lawsuits even if they might facilitate wrongful conduct by allowing its users to post information that is actionable. See Fraley v. Facebook, 830 F. Supp. 2d 785, 801 (N.D. Ca. 2011); Dart v. Craigslist, 665 F. Supp. 2d 961, 965 (N.D. Ill. 2009).

This makes sense. Given the amount of information being posted on Craigslist and Facebook on a daily basis, the burden placed on such companies if they could be sued for every libel (for example) could be enough to drive them out of business, even if they have reasonable measures in place to police the postings voluntarily. See Chicago Lawyers' Comm. for Civil Rights Under the Law, Inc. v. Craigslist, Inc., 461 F. Supp. 2d 681, 696 (N.D. Ill. 2006) ("As the Seventh Circuit already has suggested, 'defamation law would be a good example of [publisher or speaker] liability.'") (citation omitted).

The legislative history of CDA § 230 tells much. A detailed account of it is found in Robert Cannon's The Legislative History of Senator Exon's Communications Decency Act: Regulating Barbarians on the Information Superhighway, Federal Communications Law Journal: Vol. 49: Iss. 1, Art. 3 (1996) available at http://www.repository.law.indiana.edu/cgi/viewcontent.cgi?article=1115&context=fclj.(hereinafter"Cannon")

As detailed below, CDA § 230 was an amendment by the House to a Senate bill, the sole purpose of which was to regulate pornography on the internet. The Supreme Court struck down all of the CDA's provisions, except. CDA § 230, which, standing alone, then took on an unintended luminosity.

In its original incarnation, the Communications Decency Act was an attempt to control pornography over the internet. On February 1, 1995, Senator James Exon (D-Neb.) attempted to do what had never been done before-regulate speech on the Internet. Introducing the Communications Decency Amendment (CDA), Senator Exon declared a danger to society: Barbarian pornographers are at the gate and they are using the Internet to gain access to the youth of America.

Senator Exon proclaimed: "The information superhighway should not become a red light district. This legislation will keep that from happening and extend the standards of decency which have protected telephone users to new telecommunications devices.

"Once passed, our children and families will be better protected from those who would electronically cruise the digital world to engage children in inappropriate communications and introductions. The Decency Act will also clearly protect citizens from electronic stalking and protect the sanctuary of the home from uninvited indecencies."

In a year of deregulation, Senator Exon called for more regulation. In the year when Speaker of the House Newt Gingrich placed the House of Representatives on the Internet, praising it as a landmark for democracy, Senator Exon warned America that the Internet was filled with dark places from which we needed government protection. (Cannon at 52-53) (citations omitted).

The CDA made it "illegal to knowingly send to or display in a manner available to a person under 18 years of age, any comment, request, suggestion, proposal, image, or other communication that, in context, depicts or describes, in terms patently offensive as measured by contemporary community standards, sexual or excretory activities or organs, regardless of whether the user of such service placed the call or initiated the communication.". (Id.at 58)(footnotes omitted.)

Under the CDA as enacted: "[O]wners of telecommunications facilities [were to be] liable where they knowingly permit[ted] their facilities to be used in a manner that violated the CDA. The penalty for violation was changed from $10,000 to fines pursuant to Title 18 of the United States Code and from a maximum of six months imprisonment to a maximum of two years." (Id.) (footnotes omitted).

With respect to providers of internet services: The CDA added four defenses to section 223: protection for service providers giving "mere access," protection against respondent superior, recognition of good faith attempts to comply with this statute as compliance with the statute, and protection against criminal and civil liability where an individual makes a good faith effort to restrict access to offending material.

In its original version, the CDA did not incorporate all of these defenses. This resulted in strong objections from the interactive computer service industry. The industry stated that they were subject to an impossible task: monitoring and censoring of millions of bits of information flowing across computers each day. As a result of the criticism received, Senator Exon incorporated the [additional] defenses. (Id. at 59) (footnotes omitted).

Section 230 was not in the Senate version of the bill. It was added by the House after the Senate had passed the bill. See https://epic.org/free_speech/cda/cox.html. Mr. Cannon writes:

"When the House voted on its version of the telecommunications bill, the House gave what appeared to be a resounding rejection of the CDA and any attempt to meddle with the Internet. The younger House, having more experience with the Internet, wanted nothing of the CDA and sought to distance itself from the appearance of a regulatory-hungry federal government ready to trample the prized freedoms found in cyberspace. In opposition to the CDA, Representatives Cox and Wyden introduced the Family Empowerment Amendment, which proclaimed an Internet free of government interference. This amendment was attached to the House's telecommunications bill in a virtually unanimous 420 to 4 vote."

The opposition proclaimed that the Cox/Wyden Amendment would block the CDA in conference. In truth, the Cox/Wyden Amendment was far from a victory. The Cox/Wyden Amendment specifically and curiously stated that "[n]othing in this section shall be construed to impair the enforcement of section 223 of Title 47", the very statute that the CDA sought to amend. As a result, the House and Senate amendments were described as fitting together "like a hand in a glove.".

The opposition proclaimed that the Cox/Wyden Amendment forbade FCC regulation of the Internet; it did not. The opposition claimed that it preempted state regulation of the Internet; it did not. The only thing that the amendment in fact did was to overrule [Stratton-Oakmont, Inc. v. Prodigy Servs. Co., 1995 WL 323710 (N.Y. Sup. Ct. May 24, 1995) (holding that an internet provider could be sued for a libelous statement posted by third party)] by protecting from liability on-line services that make a good faith effort to restrict access to offensive material. This one affirmative act was, in fact, consistent with the provisions of the CDA. The Cox/Wyden Amendment was described as a bill without a verb. In response to a growing on-line opposition movement, congressmen were able to declare their allegiance to the First Amendment and cyberspace without actually committing themselves to legislation of significance. The victory was hollow. (Cannon at 67-69) (emphasis added)

Thereafter, in Reno v. American Civil Liberties Union, 521 U.S. 844 (1997), the Supreme Court struck down all of the CDA that involved pornographic material, leaving only CDA § 230 standing.

In sum, Congress did not want internet providers to be free of all regulation. To the contrary, the law, as enacted, put significant burdens on internet providers, not the least of which was: "[O]wners of telecommunications facilities [were to be] liable where they knowingly permit[ted] their facilities to be used in a manner that violates the CDA." The penalty for violation was changed from $10,000 to fines pursuant to Title 18 of the United States Code and from a maximum of six months imprisonment to a maximum of two years. (Cannon at 83). By stripping away all of such provisions, the Court left standing the impression that Congress wanted the STRCs to have the type of freedom they now claim they are entitled to. However, the legislative history of the CDA as a whole suggests strongly that CDA § 230 should be narrowly confined to its wording and purpose-to protect from liability on-line services that make a good faith effort to restrict access to offensive material.

That narrow reading would make certain cases of no precedential value. For example, in Doe ex rel Roe v. Backpage.com, 104 F.Supp.3d 149 (D. Mass 2015) the court granted immunity even though the plaintiff alleged that it had encouraged sex trafficking by "(1) posting illegal materials in sponsored ads; (2) stripping metadata from posted photos [making it more difficult for law enforcement to track its users]; (3) coaching the crafting of ads by allowing misspelling of suggestive terms [that would have been filtered out by the website's screening software]; and (4) designing the escorts section of the website in such a way as to signal to readers that sex with children was sold here." Backpage.com at 156. Similarly, the court in Hill v. StubHub, 727 S.E.2d 550, 554 (N.C. App. Ct. 2012) suggested that in order to lose immunity under an encouragement to post theory, the defendant must "essentially ensure[] that unlawful content would be posted." CDA § 230 does not support those holdings.

Other cases focus carefully on the language. In Fair Hous. Council v. Roommates.com, 521 F.3d 1157 (9th Cir. 2008) the court held: "A website operator can be both a service provider and a content provider: If it passively displays content that created entirely by third parties, then it is only a service provider with respect to that content. But as to content that it creates itself, or is "responsible, in whole or in part" for creating or developing, the website is also a content provider. Thus, a website may be immune from liability for some of the content it displays to the public but be subject to liability for other content." (Id. at 1162-1163) (footnote omitted).

The most recent example of this line of analysis is a decision in Airbnb, Inc. v. City and County of San Francisco, No. 3:16-cv-03615-JD, 2016 WL 6599821 (N.D. Cal.Nov 8, 2016) available at http://digitalcommons.law.scu.edu/cgi/viewcontent.cgi?article=2324&context=historical. (hereinafter "SF Op)".

The case involves a City ordinance which requires any short term rental of a residence to be registered with the City and obtain a registration number. The ordinance also makes it a misdemeanor to collect a fee for providing short term booking services for the rental of a property which has not registered with the City and thus does not have a registration number. (SF Op. at 3-4). Airbnb and HomeAway moved to preliminarily enjoin the City from enforcing the ordinance, relying on, among other things, CDA § 230. The court rejected the argument.

The court described Airbnb's and HomeAway's arguments as follows: "Plaintiffs' argument is straightforward. In their view, the threat of a criminal penalty for providing and receiving a fee for Booking Services for an unregistered unit requires that they actively monitor and police listings by third parties to verify registration. Plaintiffs contend that is tantamount to treating them as a publisher because it involves the traditional publication functions of "reviewing, editing, and deciding whether to publish or to withdraw from publication third-party content." (SF Op. at 6) [(citing Barnes v. Yahoo!, Inc., 570 F.3d 1096, 1102 (9th Cir. 2009)]; Fair Housing. Council of San Fernando Valley v. Roommates.com, LLC, 521 F.3d 1157, 1170-71 (9th Cir. 2008) (en banc) (any activity "that can be boiled down to deciding whether to exclude material that third parties seek to post online is perforce immune under section 230").

The court then neatly disposed of the argument: But the Ordinance does not threaten the liability plaintiffs fear. As the text and plain meaning of the Ordinance demonstrate, it in no way treats plaintiffs as the publishers or speakers of the rental listings provided by hosts. It does not regulate what can or cannot be said or posted in the listings. It creates no obligation on plaintiffs' part to monitor, edit, withdraw or block the content supplied by hosts. To the contrary, as San Francisco has emphasized in its briefs and at oral argument, plaintiffs are perfectly free to publish any listing they get from a host and to collect fees for doing so -whether the unit is lawfully registered or not - without threat of prosecution or penalty under the Ordinance. Dkt. No. 57 at 9; Dkt. No. 72 at 25:20-24. The Ordinance holds plaintiffs liable only for their own conduct, namely for providing, and collecting a fee for, Booking Services in connection with an unregistered unit. This regulation of plaintiffs' own conduct "does not depend on who 'publishes' any information or who is a 'speaker.'" City of Chicago, Ill. v. Stubhub!, Inc., 624 F.3d 363, 366 (7th Cir. 2010) (rejecting Section 230(c) challenge to municipal tax on Internet auction sites). (SF Op. at 6) (emphasis supplied).

The court then carefully distinguished four leading cases that granted immunity to the internet provider and then concluded: "Plaintiffs' other case citations are inapposite for the same reason -- they all turned on facts showing that the service provider would necessarily be held liable as the publisher or speaker of online content provided by another."(Id. at 8). The court then held: "The correct test, then, is not whether a challenged activity merely bears some connection to online content" and then noted: "[T]he challenged Ordinance regulates plaintiffs' own conduct as Booking Service providers and cares not a whit about what is or is not featured on their websites." (Id.)

The court then disposed of Airbnb's and HomeAway's other arguments. Airbnb and HomeAway lost their motion for a preliminary injunction. The case is being held in abeyance until regulations to implement the ordinance are promulgated.

One can safely assume that other jurisdictions concerned with the social and legal problems created by this type of "disrupter" will follow suit with similar regulatory regimes. If so, and if the STRCs concede the point, they might avoid another line of reasoning that would be more than a chink in the armor of CDA § 230 - it would put the STRCs in the position of the Emperor in the fable of the "Emperor's New Clothes."

The line of reasoning is that internet providers who act in concert with users subject those themselves to liability. As Judge Rakoff said in Meyer v. Kalanick, 174 F. Supp. 3d 817, 825 (S.D.N.Y. 2016), in a case concerning Uber: t is fundamental to the law of conspiracy that the agreements that form the essence of the misconduct are not to be judged by technical niceties but by practical realities. Sophisticated conspirators often reach their agreements as much by the wink and the nod as by explicit agreement and the implicit agreement may be far more potent, and sinister, just by virtue of being implicit.

Recently, for example, in United States v. Ulbricht, the Government alleged that defendant Ulbricht had organized an online marketplace for illicit goods and services called Silk Road. See United States v. Ulbricht, 31 F. Supp. 3d 540, 546-47 (S.D.N.Y. 2014). In ruling on motions in limine in Ulbricht, Judge Forrest rejected the defense's argument that transactions among Silk Road's users gave rise to "only buy-sell relationships and not conspiratorial behavior" or, at most, to "a multitude of discrete conspiracies." United States v. Ulbricht, 79 F. Supp. 3d 466, 481 (S.D.N.Y. 2015). Instead, Judge Forrest noted that the Government charged the defendant with sitting "atop an overarching single conspiracy, which included all vendors who sold any type of narcotics on Silk Road at any time." Id. at 490. In the instant case, Uber's digitally decentralized nature does not prevent the App from constituting a "marketplace" through which Mr. Kalanick organized a horizontal conspiracy among drivers. This analysis raises the factual issue of whether an STRC has functionally created a joint venture with its hosts.

With respect to Airbnb, it appears from its own website that Airbnb and its hosts might be partners. Airbnb collects and distributes all of the money. It charges both the guests and its hosts for its services. It provides its hosts a $1,000,000 guarantee available to pay for damage to the hosts' properties. It provides its hosts with insurance in case a guest is injured.

If the joint liability issue is raised, there will be substantial discovery before it can be tried. Many eyes will be watching and the many fortunes will be at risk. A loss by an STRC could strip it of all CDA § 230 protection. Its virtual hotels could then be subject to the laws that govern all hotels, as well as the multitude of laws that govern all businesses in any given jurisdiction. Unlike disrupters such as the printing press, the cotton gin, the assembly line, and the microprocessor, the STRCs' economics turn on a law- CDA § 230-which they claim protects them from the costs of obeying many other laws. The jury's verdict on that issue would be interesting to many.

The author would like to thank Allison E. Fleischer and Joseph Gerber for their invaluable contributions to this article.

Banks Brown is a partner in the New York office of McDermott Will & Emery. He has served as outside General Counsel for the American Hotel & Lodging Association and the Hotel Association of New York City, Inc. for 22 years. He helped to found the Travel Business Roundtable and served as its General Counsel until it was merged into the US Travel Association. He is co-author of a recognized treatise on hospitality law entitled “Understanding Hospitality Law” (4th Ed. Educational Institute, AHLA). He is the 2006 recipient of the Anthony G. Marshall Award for Pioneering and Continuous Contribution to Hospitality Law and the 2010 Distinguished Service Award of the Academy of Hospitality Industry Attorneys. He speaks yearly at the Hospitality Law Conference of HospitalityLawyer.com, where he hosts the hotel inside counsel segment. Mr. Brown can be contacted at 212-547-5361 or bbrown@mwe.com Extended Bio...

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