940 F.3d 439
9th Cir.2019Background
- Santa Monica Ordinance No. 2484 (2015) bans vacation rentals (rentals of 30 days or less) in the city, but allows "home sharing" when a primary resident remains on-site during the stay.
- The ordinance prohibits undertaking, facilitating, or advertising noncompliant vacation rentals and imposes fines and potential jail time; it also places reporting and tax-collection duties on hosting platforms.
- Plaintiff Arlene Rosenblatt, a Santa Monica homeowner who previously listed her home on Airbnb, sued on behalf of a putative class claiming the ordinance violates the dormant Commerce Clause (directly and indirectly burdening interstate commerce and favoring local hotels).
- The district court dismissed Rosenblatt’s amended complaint under Rule 12(b)(6) without leave to amend; Rosenblatt appealed.
- The Ninth Circuit affirmed, holding the ordinance does not directly regulate interstate commerce, does not discriminate against out-of-state interests, and Rosenblatt failed plausibly to allege an incidental burden on interstate commerce that clearly exceeds local benefits.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the ordinance is a per se dormant Commerce Clause violation because it "directly regulates" interstate commerce by banning vacation rentals | Rosenblatt: The ban directly regulates interstate commerce because most vacation rentals involve out-of-state parties and affect interstate travel/lodging | Santa Monica: The ordinance regulates in-city conduct (use of Santa Monica real property); any interstate effects are incidental | Not per se; the ban targets in-city conduct and only has incidental interstate effects |
| Whether the ordinance directly regulates out-of-state booking/payment/advertising transactions (extraterritorial regulation) | Rosenblatt: The prohibition on facilitating/advertising reaches bookings, payments, and ads that occur wholly outside California | Santa Monica: The rules apply evenhandedly to activity tied to in-city property and can be read as territorial in scope | Not a direct/extraterritorial regulation; advertising clause construed to apply to in-city activity |
| Whether the ordinance discriminates against interstate commerce by favoring local hotels / increasing TOT for out-of-state travelers | Rosenblatt: The ordinance protects local hotel revenue and imposes costs on out-of-state travelers and out-of-state vacation-rental interests | Santa Monica: The ordinance applies equally to in-state and out-of-state persons; hotels and rentals alike can be owned by out-of-state entities | Not discriminatory; applies evenhandedly and does not facially or functionally favor in-state interests |
| Whether incidental burdens on interstate commerce clearly exceed local benefits under Pike v. Bruce Church | Rosenblatt: The ordinance substantially burdens the national vacation-rental market and shifts business away from out-of-state suppliers | Santa Monica: Land-use and housing-stock preservation are legitimate local interests; any burden is small or speculative | Pike balancing fails for plaintiff: complaint lacks specific factual allegations showing a significant interstate burden that clearly outweighs local benefits |
Key Cases Cited
- Pike v. Bruce Church, Inc., 397 U.S. 137 (Pike balancing governs nondiscriminatory laws with incidental burdens)
- Edgar v. MITE Corp., 457 U.S. 624 (distinguishing direct regulation of interstate transactions/extraterritorial effect)
- Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520 U.S. 564 (state regulation affecting access for nonresidents analyzed under discrimination/effect principles)
- Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573 (framework distinguishing direct discrimination from incidental effects)
- Chinatown Neighborhood Ass’n v. Harris, 794 F.3d 1136 (9th Cir.) (extraterritorial effects permissible when regulating in-state conduct)
- S.D. Myers, Inc. v. City & County of San Francisco, 253 F.3d 461 (9th Cir.) (requirements for pleading a Commerce Clause violation; construe ordinance to preserve constitutionality)
- Valley Bank of Nev. v. Plus Sys., Inc., 914 F.2d 1186 (9th Cir.) (evenhanded local regulation that affects interstate networks can be permissible)
- Exxon Corp. v. Governor of Maryland, 437 U.S. 117 (state law that shifts market structure not necessarily discriminatory under Dormant Commerce Clause)
- Dean Milk Co. v. City of Madison, 340 U.S. 349 (example of facially discriminatory local regulation invalidated under the Commerce Clause)