Challenge to Chicago Airbnb rules gets new life - if plaintiffs can prove they're allowed to sue

By Jonathan Bilyk | Jan 14, 2019

A group of people challenging the city of Chicago’s Airbnb ordinance may get another chance to press their legal action asserting he two-year-old city rules largely barring them from renting their homes, condos and apartments to visitors through the online sharing site are unconstitutional.

But first, a federal appeals panel says they must prove they actually have the right under the law to bring the lawsuit at all.

On Jan. 14, a three-judge panel of the U.S. Seventh Circuit Court of Appeals in Chicago tossed out rulings delivered by a Chicago federal district court judge, which had appeared to end the challenge to the city ordinance brought by the organization known as Keep Chicago Livable and six people, including Chicago homeowners and apartment tenants and would-be tourists.

The decision comes as the latest step in litigation dating back to 2016, when Chicago City Hall first approved the so-called Airbnb ordinance, which would regulate the so-called home-sharing industry operating within the city.

Judge Michael Y. Scudder  

Keep Chicago Livable and the six individual named plaintiffs had sued the city, asserting the rules spelled out in the ordinance violated the constitutional rights of those seeking to lease and rent homes, condos, apartments or rooms through the home-sharing sites, like Airbnb.

Plaintiffs alleged they had already been harassed by neighbors, police officers, city employees, condo associations and landlords, among others, and feared their plight would grow worse, should they be required under city rules to publicly identify themselves and register their properties.

“The Shared Housing Ordinance, which purports to attempt to regulate the phenomenon of home sharing on internet sites such as Airbnb, HomeAway, FlipKey and VRBO, in fact operates as a de facto and in some cases outright ban on the use of internet home sharing services, and violates the constitutional rights of Chicagoans to speak and communicate freely and anonymously on the internet, to use their own property, to have privacy, and to not be subject to arbitrary and discriminatory enforcement of the laws,” the lawsuit alleged.

The city and supporters of the ordinance, however, said the rules were needed to strengthen the city’s ability to police short-term rentals of condos, apartments and homes in the city’s neighborhoods and high rises.

They said the rules came in response to a flood of complaints.  Neighbors of the rented properties who said short-term tenants disrupted their communities and threatened public safety.

Hotel operators complained the home-sharing platforms enabled building owners and others to essentially run small hotel operations using otherwise vacant homes and apartments, sidestepping city hotel regulations.

After passage, the city amended the ordinance to address some of the plaintiffs’ complaints, including removing a provision which had claimed the power to force home-sharers to give city officials access to their records, including guests’ personal information, with a warrant.

U.S. District Judge Sara Ellis had sided with the city, saying she did not believe the plaintiffs could show how the ordinance actually impacts their constitutional rights and the “balance of harms” tilts in favor of the city, which had a legitimate interest in “putting into place a more orderly system for the home sharing industry.”

The plaintiffs appealed, and the Seventh Circuit declined to grant them any emergency relief.

However, the judges said the decisions to date lack an important element – any proof the plaintiffs still had standing under the law to bring the action anymore.

The judges noted some plaintiffs had moved from the city, and others had not provided enough information to allow the appellate judges to decide how they had been harmed by the ordinance.

That, the judges said, restricts their ability to address the merits of the case at this point.

“We have before us an organization and individuals with strongly-held views about the constitutionality of the City’s Ordinance, but Article III of the Constitution requires more,” Seventh Circuit Judge Michael Scudder wrote in the opinion. “Our authority is limited to deciding cases or controversies between adverse litigants, and without a clear indication that at least one named plaintiff has an actual or imminent injury, we have no authority to go further.”

Judges Joel Flaum and Frank Easterbrook concurred in the decision.

They remanded the matter to Judge Ellis for further proceedings specifically to determine standing. The judges specifically denied the plaintiffs’ request to take the case to a different judge.

They noted the plaintiffs could be allowed to file an amended complaint to address deficiencies.

“It may be on remand, perhaps following additional briefing or upon the filing of a second amended complaint, that at least one individual plaintiff is able to establish standing and thereby jumpstart this litigation, as the plaintiffs so plainly wish to do,” Scudder wrote. “But Article III’s case or controversy mandate does not allow us to take the shortcut of moving to the merits of plaintiffs’ claims before ensuring the presence of a plaintiff with standing.”

Plaintiffs are represented in the action by attorneys Shorge K. Sato, of Shoken Legal Ltd., of Chicago.

The city is represented by attorneys with the City of Chicago Department of Law.

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Organizations in this Story

Airbnb Inc. City of Chicago Keep Chicago Livable Shoken Legal Ltd. U.S. Court of Appeals for the Seventh Circuit U.S. District Court for the Northern District of Illinois

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