A split state appeals panel ruled Airbnb and a short-term rental property owner can’t escape a lawsuit from a man who fell through a railing because, as a guest of the person who rented the Galena home, he isn’t subject to the company’s arbitration agreement.
Andrew Peterson filed a negligence lawsuit against Airbnb, Stefania Devita, Ken Moore Construction and Lorie Melhous in Cook County Circuit Court. He said in May 2020 he visited a home rented by his friend, Ian Bannon, when Peterson fell form an elevated deck and suffered serious injuries that resulted in the amputation of his left leg below the knee. Airbnb moved to compel arbitration, invoking the user agreement Peterson signed for his own use of the service while also noting Bannon also agreed to the same terms.
Cook County Judge Moira Johnson denied Airbnb’s motion to dismiss the complaint, prompting it to ask the Illinois First District Appellate Court to vacate that order and compel arbitration. Justice Michael Hyman wrote the opinion, published Sept. 22; Justice Aurelia Pucinski concurred. Justice Terrence Lavin dissented.
Matthew Saltzman
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The majority said Airbnb’s arguments failed because it cited cases where the plaintiffs were the ones who booked or attempted to book the rentals. In one more factually similar incident, the 2002 Nevada case Airbnb v. Rice, “both plaintiffs had Airbnb accounts, but neither booked the property,” Hyman wrote. “An unknown person shot plaintiffs, killing one and injuring the other. The father and administrator of the deceased plaintiff’s estate sued Airbnb for wrongful death and personal injury. The trial court denied Airbnb’s motion to compel arbitration, finding, in part, that the dispute ‘did not arise from the agreements.’ ”
Hyman said the Nevada Supreme Court reversed that ruling in a split decision, saying the state court wasn’t allowed to decide whether the dispute should go to arbitration, as the “terms of service delegated the issue or arbitrability to an arbitrator.” Rice isn’t binding in Illinois, Hyman explained, saying he and Pucisnki were persuaded by a dissenting opinion in the Nevada case, in which the dissenting justice found an “arbitration provision should apply only when the claims arise from a plaintiff’s use of the Airbnb platform and not on the fortuity of a plaintiff having created an account.”
Hyman and Pucinksi called it an “absurd consequence” to make anyone who creates an account with a service forever subject to all contracts written with that service, even if they are never a party to such an agreement.
The majority also rejected Airbnb’s argument Bannon acted as Peterson’s agent when renting the home, and as such also bound Peterson to the service agreement. Hyman explained Bannon lacked the express or implied authority over Peterson necessary to establish the agency relationship. Bannon’s reservation included nine guests, but not Peterson, and Airbnb failed to show Peterson authorized Bannon to rent the home on his behalf.
Finally, the majority rejected Airbnb’s estoppel arguments, saying Peterson’s lawsuit doesn’t rely on Bannon’s home rental, nor does it stem from any benefits Peterson obtained through the booking.
“Peterson’s common law negligence claims do not rely on the terms to which Bannon agreed when he booked the property,” Hyman wrote. “Further, other than as an invitee to a party, Peterson did not benefit from Bannon’s booking.”
In dissent, Lavin focused on Peterson’s previous direct agreements with Airbnb, saying the terms of service he agreed to, initially and eventually updated, include a section “providing that the arbitration clause applied to all Airbnb members and all disputes with Airbnb.” He said the contract entitled Peterson, regardless of his utilization, “the benefit of the ability to view properties, correspond with hosts, and potentially book those properties — all in a manner consistent with Airbnb’s terms/policies.”
Further, Lavin said Bannon’s booking contract obligated him to make guests “aware of and agree” to its terms and noted Peterson’s position somewhat ironically seeks to impose a duty of care on Airbnb while insisting he wasn’t bound by any burdens applicable to Bannon or the guests listed on the reservation.
“By his own admission, Peterson would not have been present on the property or in a position to sue Airbnb but for Bannon’s rental agreement through Airbnb,” Lavin wrote. “As set forth, we are not dealing with a guest who is unfamiliar with Airbnb or its terms and can claim ignorance as to the rental conditions. Peterson does not claim he lacked knowledge that he had entered into an Airbnb rental.”
Lavin also agreed with Airbnb that Bannon had the implied agency of booking a rental on behalf of guests and other invitees, which means an arbitrator should decide which agreement applies: the terms of Peterson’s own Airbnb account or Bannon’s property rental contract.
Peterson is represented by Matthew Saltzman, of Sherwood Law Group, Chicago.
Airbnb is represented by John C. Ellis and David DeSchepper, of Ellis Legal, of Chicago, and Raechel Keay Kummer of Morgan, Lewis & Bockius, of Washington, D.C.,