Airbnb Wins Second Circuit Affirmance of Dismissal in Short-Term Rental Dispute

Paul, Weiss secured a victory for Airbnb when the U.S. Court of Appeals for the Second Circuit affirmed the dismissal of all claims brought by the owners of a New York City apartment building, stemming from their tenants’ alleged short-term rental activity on Airbnb’s platform. The court held that the plaintiffs waived appellate review by failing to timely object to a magistrate judge’s report and recommendation and, in any event, that they had failed to state a claim for negligence, fraud or deceptive trade practices under Section 349 of the New York General Business Law (GBL).

The plaintiffs, owners of an apartment building in Chelsea, Manhattan, had alleged that their tenants had used Airbnb to sublease their apartments for less than 30 days, in violation of New York City law, resulting in multiple city investigations and more than $100,000 in fines. Nearly three years after the final city inspection, the plaintiffs sued Airbnb for negligence, common-law fraud and GBL Section 349 violations. The magistrate judge recommended dismissal of all claims and, 10 days after the deadline to object, the plaintiffs requested an extension to file objections. The district court adopted the recommendation, dismissed the complaint both on waiver grounds and on the merits, and denied leave to amend.

The Second Circuit affirmed this decision. The court first held that the plaintiffs’ failure to object within the 14-day deadline waived appellate review, and no “plain error” warranted excusing the waiver. The court further concluded that, even absent the waiver, the complaint failed to state a claim. As to fraud, the court found no plausible allegations of a false statement made to the plaintiffs for the purpose of inducing their reliance, and no justifiable reliance by the plaintiffs on Airbnb’s Terms of Service or other statements. As to negligence, the court held the plaintiffs did not plausibly allege a specific duty owed by Airbnb to them under New York law. And as to GBL Section 349, the court determined the plaintiffs failed to plead causation, noting that any alleged misstatements did not cause the plaintiffs to enter the leases or the tenants to list accommodations on Airbnb. Finally, the Second Circuit affirmed the denial of leave to amend as futile, given the absence of privity, intent to induce reliance, duty and causation.

The Paul, Weiss team included litigation partner Kannon Shanmugam.