46 F.4th 317
5th Cir.2022Background:
- In 2017 New Orleans created a short-term rental (STR) licensing regime stating licenses were "a privilege, not a right," licenses could "may issue," and expired after one year.
- After a 2018 Planning Commission study found nuisances, housing-pressure, and loss of neighborhood character, the City revised the ordinance in 2019.
- Two relevant 2019 changes: (1) a residency/homestead requirement for STRs in residential neighborhoods (owner must reside on the property and have a homestead exemption); (2) advertising restrictions banning ads for illegal STRs or ads misrepresenting licensed capacity.
- A group of property owners sued under 42 U.S.C. § 1983 alleging: (a) a Takings Clause violation for nonrenewal of STR licenses; (b) the residency requirement violated the dormant Commerce Clause; and (c) advertising rules were an unconstitutional prior restraint. The district court granted summary judgment to the City on the Takings and Commerce claims but found the prior-restraint claim "viable."
- The Fifth Circuit affirmed dismissal of the Takings claim (no property interest in license renewal), reversed the dormant Commerce Clause ruling (residency rule is facially discriminatory and invalid because nondiscriminatory alternatives exist), and dismissed the City’s cross-appeal about the prior-restraint holding for lack of appellate jurisdiction.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs had a property interest in renewal of STR licenses (Takings) | Plaintiffs argued licenses were property (relying on case law recognizing licenses as property for due process) so nonrenewal was a taking without compensation | City argued STR licenses were privileges, not rights; ordinance said licenses "may issue" and could be revoked/not renewed; no state-law entitlement or long-standing custom | No property interest; affirmed. Licenses were privileges, short-lived, and not entrenched in custom sufficient for Takings protection |
| Whether the residency/homestead requirement violates the dormant Commerce Clause | Plaintiffs: requirement discriminates against out-of-state (and nonresident) owners by barring them from residential STR market | City: requirement serves local interests (nuisance control, affordable housing, neighborhood character); not protectionist; alternatives exist but City defended necessity | Requirement is facially discriminatory against interstate commerce; invalid because reasonable nondiscriminatory alternatives exist; vacated summary judgment for City |
| Whether this Court has jurisdiction to review district court’s "viable" prior-restraint holding on cross-appeal | Plaintiffs sought declaration and injunction; district court’s order did not resolve injunctive relief; argued appealable | City argued the district court’s order was final or that appellate review of jurisdictional rulings is permitted | No appellate jurisdiction: district court order was not final (requested relief unresolved); cross-appeal dismissed |
Key Cases Cited
- Phillips v. Wash. Legal Found., 524 U.S. 156 (property interests for Takings are defined by state law)
- Melancon v. City of New Orleans, 703 F.3d 262 (5th Cir.) (customary rights may sometimes create Takings interests, but due-process property is not automatically Takings property)
- Bowlby v. City of Aberdeen, 681 F.3d 215 (5th Cir.) (licenses can be "property" for procedural due process purposes)
- Pike v. Bruce Church, Inc., 397 U.S. 137 (standards for nondiscriminatory incidental burdens on interstate commerce)
- Dep’t of Revenue v. Davis, 553 U.S. 328 (facially discriminatory laws against interstate commerce are virtually per se invalid)
- United Haulers Ass’n v. Oneida-Herkimer Solid Waste Mgmt. Auth., 550 U.S. 330 (Commerce Clause limits on discriminatory local regulation)
- C & A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383 (flow-control ordinance that excluded out-of-state businesses violates dormant Commerce Clause)
- Bell v. Burson, 402 U.S. 535 (entitlement labels do not determine whether an entitlement exists under constitutional protections)