United States District Court, D. Oregon, Portland Division
CITY OF PORTLAND, Plaintiff.
v.
HOMEAWAY.COM, INC. and HOMEAWAY, INC., Defendants.
OPINION AND ORDER
MICHAEL W. MOSMAN Chief United States District Judge.
Plaintiff
City of Portland ("the City") sued Defendants
HomeAway.com, Inc. and HomeAway, Inc. (collectively
"HomeAway") for failure to comply with various
provisions of the Portland City Code collectively known as
the "Transient Lodgings Tax." After I dismissed its
original Complaint [1], the City filed an Amended Complaint
[34], which HomeAway now moves to dismiss. For the reasons
set forth below, HomeAway's Motion to Dismiss for Failure
to State a Claim [37] is GRANTED in part and DENIED in part.
BACKGROUND
HomeAway
operates an online vacation rental marketplace where people
interested in making their homes available for short-term
rental may advertise their property. Travelers interested in
renting a property can access HomeAway's websites to
search for and find available properties. HomeAway puts the
traveler in contact with the owner or lessee of the property
to sort out the details of the lodging arrangement. HomeAway
has property listings located all over the world, including
in Portland.
In
1972, the City enacted a Transient Lodgings Tax Ordinance,
Portland City Code ("PCC") § 6.04.010, et
seq. ("the Ordinance"), providing in part that
"[e]very [hotel] operator renting rooms or space for
lodging or sleeping purposes in this City . . . shall collect
a tax from the transient" to be remitted to the City.
PCC § 6.04.030(A) (2015). The Ordinance applies to hotel
"Operators, " defined by the Ordinance as "the
person who is proprietor of the hotel in any capacity. Where
the operator performs his/her functions through a managing
agent of any type or character other than an employee, the
managing agent shall also be deemed an operator PCC §
6.04.010(M). The Ordinance authorizes the City to levy fines
against Operators that do not comply with the Ordinance.
See, e.g., PCC § 6.04.170.
On
January 21, 2015, the Portland City Council passed amendments
to the Ordinance that took effect on February 20,
2015.[1] The apparent goal of the City Council in
passing the amendments was to extend the Ordinance to cover
"Booking Agents." The Ordinance defines
"Booking Agent" as "an Operator or any person
that provides a means through which a Host may offer a
Short-Term Rental for transient lodging occupancy. This
service is usually, though not necessarily, provided through
an online platform and generally allows a Host to advertise
the Short-Term Rental through a website . . . ." PCC
§ 6.04.010(D). The Ordinance expressly lists
"[o]nline travel booking sites" as examples of
"Booking Agents." Id.
After
the City Council passed the 2015 amendments to the Ordinance,
the City sent HomeAway notices in which the City contended
that HomeAway was in violation of various provisions of the
Ordinance. Included in these notices was an assessment of $2,
540, 106 in presumptive taxes, penalties, and interest.
HomeAway refused to pay the assessment, claiming it was not
in violation of the Ordinance because it was not an Operator
or Booking Agent and therefore did not fall under the
Ordinance's terms. On October 21, 2015, the City filed
this lawsuit against HomeAway seeking a declaratory judgment
that HomeAway is an Operator or a Booking Agent, a reduction
of fines to judgment, a reduction of presumptive taxes to
judgment, and an injunction enjoining HomeAway's
operations in Portland.
PROCEDURAL
HISTORY
On May
17, 2016, 1 held oral argument on HomeAway's first Motion
to Dismiss [7]. From the bench [28], I GRANTED HomeAway's
motion and DENIED the City's request for injunctive
relief. I later provided an Opinion and Order [29] clarifying
my rulings. In my Opinion and Order, I held that: (1) the
City had not sufficiently alleged that HomeAway is an
Operator under the Ordinance; (2) the Portland City Charter
("the Charter") does not grant the City authority
to impose tax collection obligations on Booking Agents; (3)
the City had not sufficiently alleged that HomeAway falls
under the City's authority to impose tax collection
obligations on Booking Agents under the relevant Oregon state
statutes; and (4) the Ordinance does not impose any
regulatory duties or responsibilities on HomeAway as a
Booking Agent. I dismissed the Complaint but granted leave to
amend.
On July
11, 2016, the City filed its Amended Complaint [34]. HomeAway
moves to dismiss the Amended Complaint for failure to state a
claim. I held oral argument on the current motion on December
16, 2016.
LEGAL
STANDARD
When
reviewing a motion to dismiss, the court must "accept
all factual allegations in the complaint as true and construe
the pleadings in the light most favorable to the nonmoving
party." Knievel v. ESPN, 393 F.3d 1068, 1072
(9th Cir. 2005). A court need not accept legal conclusions as
true because "[t]hreadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do
not suffice." Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009). To survive a motion to dismiss for failure to
state a claim under Federal Rule of Civil Procedure 12(b)(6),
"a complaint must contain sufficient factual matter,
accepted as true, to 'state a claim to relief that is
plausible on its face.'" Id., (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). A pleading that offers only "labels and
conclusions" or '"naked assertion[s]'
devoid of 'further factual enhancement'" will
not suffice. Id. (quoting Twombly, 550 U.S.
at 555, 557). While a plaintiff does not need to make
detailed factual allegations at the pleading stage, the
allegations must be sufficiently specific to give the
defendant "fair notice" of the claim and the
grounds on which it rests. See Erickson v. Pardus,
551 U.S. 89, 93 (2007) (per curiam) (citing Twombly,
550 U.S. at 555).
Federal
Rule of Civil Procedure 15 provides that a court should
freely give leave to amend a complaint "when justice so
requires." Fed.R.Civ.P. 15(2). As such, when a court
dismisses a complaint for failure to state a claim,
"leave to amend should be granted 'unless the court
determines that the allegation of other facts consistent with
the challenged pleading could not possibly cure the
deficiency.'" DeSoto v. Yellow Freight Sys.,
Inc., 957 F.2d 655, 658 (9th Cir. 1992) (quoting
Schreiber Distrib. Co. v. Serrv-Wel1 Furniture Co.,
806 F.2d 1393, 1401 (9th Cir. 1986)). If amendment would be
futile, the court need not grant leave to amend. Id.
DISCUSSION
HomeAway
argues that the Amended Complaint should be dismissed for
three principal reasons: (1) the City has failed to allege
sufficient facts to show that HomeAway is a Managing Agent,
and therefore an Operator, under the Ordinance; (2) the City
has failed to allege sufficient facts to show that HomeAway
is a Booking Agent under the Ordinance or a Transient Lodging
Intermediary under relevant Oregon state statutes; and (3)
even if HomeAway is deemed an Operator under the Ordinance,
federal law preempts the City's claim seeking to compel
HomeAway to provide customer information and display permit
numbers when advertising. I will address each argument in
turn.
I.
HomeAway as a Managing Agent
The
City's First, Fourth, Sixth, Ninth, and a portion of its
Eleventh Claims are all premised on the notion that HomeAway
qualifies as an Operator under the Ordinance. The Ordinance
defines an Operator as a "person who is [a] proprietor
of the hotel in any capacity. Where the operator performs
his/her functions through a managing agent of any type or
character other than an employee, the managing agent shall
also be deemed an operator . . . ." PCC §
6.04.010(M). The City does not allege that HomeAway is a
proprietor of hotel properties. Thus, HomeAway can be an
Operator only if it qualifies as a Managing Agent.
A
Managing Agent is defined as a "person with general
power involving the exercise of judgment and discretion, as
opposed to an ordinary agent who acts under the direction and
control of the principal." Managing Agent,
Black's Law Dictionary (10th ed. 2014). As such, to
be a Managing Agent under the Ordinance, a person must
exercise judgment and discretion in performing the functions
of a hotel proprietor. See id.; PCC §
6.04.010(M).
A.
Judgment and Discretion in Performing the Functions of an
Operator
The
parties dispute whether a Managing Agent must perform all the
functions of a proprietor or merely a subset of those
functions. HomeAway argues that the Ordinance's reference
to "his/her" functions, without any additional
limiting terms, means that a Managing Agent must perform all
of an Operator's functions in order to be considered an
Operator. The City suggests that the performance of an
Operator's significant functions is sufficient, as long
as the entity exercises judgment and discretion in performing
those functions.
I agree
with HomeAway. The Ordinance provides no limiting term to
"his/her functions, " and the City provides no
persuasive reason to read one into the text. See Or.
Rev. Stat. § 174.010 (2016); Ramirez v. Haw. T &
S Enters., Inc., 39 P.3d 931, 936 (Or. App. 2002). The
fact that a Managing Agent can be of any type or character
does not limit the functions that a Managing Agent must
perform in order to be deemed an Operator. Moreover, a
contrary interpretation of the Ordinance's language would
lead to a rather strange result. If the Ordinance could be
read to require the performance of only some functions, a
third party exercising judgment and discretion in performing
cleaning services, for example, would qualify as a Managing
Agent and, therefore, an Operator. I find such interpretation
to be untenable. As such, in order to be a Managing Agent
under the Ordinance, an entity must perform all or nearly all
the functions of an Operator.
Even if
the Ordinance does not require an entity to perform all an
Operator's functions to be a Managing Agent, it certainly
requires more than what the City alleges here. Although the
City alleges several significant functions that HomeAway does
perform, it fails to allege other functions that are
fundamental in operating hotel properties. The City fails to
allege, for example that HomeAway provides access and
services for the rental properties, sets the price charged
for occupancy, and accepts or rejects reservation requests.
The City alleges some actions that relate to these functions,
such as penalizing hosts who do not keep their availability
calendars up to date, but not enough to show that HomeAway
exercises judgment and discretion in performing those
functions. Thus, because the City fails to allege that
HomeAway exercises judgment and discretion over several
significant proprietary functions, let alone all of them,
HomeAway cannot qualify as a Managing Agent under the
Ordinance.
B.
Similar Cases Around the Country
The
parties point to several cases that have addressed whether
online travel companies ("OTCs") are managing
agents under similar transient lodging tax ordinances in
other jurisdictions. All of these cases have one common
characteristic: they all involve OTCs that purchase hotel
rooms at wholesale prices and then resell them at higher
retail prices. See, e.g., Pitt Cnty. v. Hotels.com,
L.P., 553 F.3d 308, 313 (4th Cir. 2009); City of
Goodlettsville v. Priceline.com, Inc., 605 F.Supp.2d
982, 993-97 (M.D. Tenn. 2009). Despite this common fact, the
outcomes have been mixed. In some cases, courts have allowed
the complaints to move forward, reasoning, in large part,
that the OTCs "control" the rooms to an extent that
triggers the relevant tax ordinances. See, e.g., City of
Goodlettesville, 605 F.Supp.2d at 993-97; City of
Charleston v. Hotels.com, 520 F.Supp.2d 757, 768 (D.S.C.
2007); City of San Antonio v. Hotels.com, LP, No.
SA-06-CA-381-OG, 2007 WL 1541184, at *2-3 (W.D. Tex. 2007).
In other cases, however, courts have dismissed the complaints
because the OTCs do not "perform the functions" of
hotel operators or participate in the "day to day
operation or management of hotels." See, e.g.,
Columbus v. Hotels.com, L.P., 693 F.3d 642, 649 (6th
Cir. 2012); Pitt Cnty., 553 F.3d at 313; City of
Findlay v. Hotels.com, 561 F.Supp.2d 917, 921 (N.D. Ohio
2008).
Here,
the task of reconciling these cases is somewhat relieved by
the fact that HomeAway is not the same type of OTC as
companies like Priceline and Hotels.com. Because the OTCs
purchased and then resold hotel rooms directly to patrons,
they had a degree of control over the rooms that HomeAway has
not been alleged to have. The OTCs, for example, were able to
confirm or reject reservations, set pricing, and receive
payments directly from patrons. Although the City alleges
that patrons make payments directly to HomeAway, there is no
dispute that HomeAway does not exercise judgment and
discretion in confirming or rejecting reservations, or
setting prices for any short-term rentals. Thus, even if
cases in which courts allowed the complaints to move forward
were for some reason more persuasive, there is an important
factual distinction in the case at hand that would warrant a
different outcome.
Because
the City fails to allege sufficient facts demonstrating that
HomeAway is a Managing Agent, I dismiss the City's First,
Fourth, Sixth, Ninth, and a portion of its Eleventh Claims
for relief. Furthermore, because it is undisputed that
HomeAway does not ...