In the heavily discussed and disputed legislation proposing regulation of short-term homesharing (facilitated via online services such as airbnb.com or vrbo.com, among others), one offered amendment proposes to give the ordinance some "teeth" by including an opportunity for pro-tenant non-profits to sue landlords for violations of this short-term vacationing ordinance. In other words, to have a citywide Private Attorney General Act, or, more appropriately labeled as a Private City Attorney Act. We are yet to see if this proposal will fit the applicable state law on the subject. Comparing with the already existing enforcement schemes in the fields of disability discrimination (ADA) and employment (PAGA), there are several things are to consider:
1. Standing.
The proposed enforcers of the legislation are "nonprofits whose primary purposes include housing preservation." (see article cited above; countered here). Given that Mr. Randy Shaw's disclosed affiliation is the SF Tenderloin Housing Clinic, it appears safe to assume that mentioned housing preservation nonprofits meant to be the pro-tenant organizations. If that's the case, there may be issues with the enforcer's standing.
1. Standing.
The proposed enforcers of the legislation are "nonprofits whose primary purposes include housing preservation." (see article cited above; countered here). Given that Mr. Randy Shaw's disclosed affiliation is the SF Tenderloin Housing Clinic, it appears safe to assume that mentioned housing preservation nonprofits meant to be the pro-tenant organizations. If that's the case, there may be issues with the enforcer's standing.
There are several legislative schemes already in existence, allowing a right for a private action in enforcing a previously exclusive governmental claim. For instance, such a right exists in a context of ADA compliance (enforcement of the Americans with Disabilities Act, see particularly Cal. Health & Saf Code § 19953, "Private action to enjoin violation"), and in enforcing penalties in violations of California Labor Code and corresponding regulations, an act unambiguously called as the "Private Attorney General Act," or "PAGA," allowing an "aggrieved employee" to enforce penalties on own and other aggrieved employees' behalf. (Cal. Labor Code § 2699(a)).
In either scenario, standing of the party bringing forth a lawsuit under either HSC 19953 for ADA or LC 2699 for PAGA, is not taken for granted. This is especially true for an organization, attempting to sue on behalf of third parties, in today's environment after the Proposition 64 amendment of the UCL.
See for PAGA, Amalgamated Transit Union, Local 1756, AFL-CIO v. Sup. Ct. (2009) 46 Cal.4th 993, 994. [The law requires that a representative claim, that is, a claim seeking relief on behalf of others as defined in Bus. & Prof. Code, § 17203, may be brought only by a person who has suffered injury in fact and has lost money or property as a result of the unfair competition. Bus. & Prof. Code, § 17204.] For ADA, Californians for Disability Rights v. Mervyn's, LLC (2006) 39 Cal.4th 223, 224 [Bus. & Prof. Code, § 17203, as amended, withdraws the standing of persons who have not been harmed to represent those who have.]
Therefore, a nonprofit attempting to sue for a violation of the short-term vacationing ordinance will have to withstand the standing challenges. There are a few. Some of the issues are present regardless of who is the defendant. For instance, whether individually aggrieved persons assigned their rights to the subject non-profit, therefore providing such non-profit with enough vested interest to satisfy the post-Proposition 64 requirement.
Other problems will depend on who is sued:
- if such organization sues a landlord on behalf of tenants generally, than they have a problem with standing because no injury happened to them--they are still tenants, renting a permanent place somewhere;
- if such organization sues a landlord on behalf of tenants, who only anticipate future harm by feeling being threatened to be evicted due to the vacationing services, or, feeling that their particular rent will be increased because of the neighborhood stock decrease due to the short-term practice, then there is still a problem to satisfy the three "irreducible" Lujan factors, particularly the first one, to avoid a "conjectural or hypothetical" claim (Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992), followed by Harris v. Del Taco # 342, 2004 U.S. Dist. LEXIS 29453, 2004 WL 3744291 (C.D. Cal.Sept. 13, 2004);
- if the action is brought on behalf of the already-evicted tenants, then it will be another Lujan factor to satisfy foremost: to establish a causal connection between the claimant's eviction and the accused act of violation of the ordinance;
- if the organization sues a tenant (since tenants may just as well violate the proposed ordinance and offer their places for short-term vacations), then the standing problem will be in establishing on whose behalf such claim is brought up, see the first three options above, but consider them being even harder to apply in an action vs. a tenant; additionally, there may be a potential conflict of interest, if the targeted tenant is a member of that organization.
2. Intent.
On the defendant's side, it will be interesting to see if the proposed ordinance will require a finding of intent, and to what degree. Presence of intent is not an obvious requirement. See an ADA case holding that no intentional discrimination is required for finding an ADA violation, Munson v. Del Taco, Inc. (2009) 46 Cal.4th 661, but then see O'Campo v. Ghoman, 2013 U.S. Dist. LEXIS 106016, 2013 WL 3934422 (E.D. Cal. July 26, 2013) [lack of standing without demonstrating intent].
Will the intent be a requisite element of the proposed legislation, and, if yes, where will be the line drawn to define what acts are sufficient to show intentional violation (just knowingly offering the place for a short-term vacation, or only offering it while in knowledge that it causes a tenant a loss of permanently rented housing), is yet to be seen.
3. Notice and Procedure.
Next item to check in the upcoming legislation will be the notice requirement. Who will be required to be notified, when, whether an opportunity to cure will be a prerequisite factor, whether the city will be a part of the notification process, "one-way" as a recipient of a copy of the initial notice, or "two-way," by issuing a "go ahead" notice afterwards.
The often compared-with "Hotel Conversion Ordinance," based on San Francisco Administrative Code, Section 41, has provisions for notices (See, e.g., Section 41.11, as applied via 41.20). Statewide, PAGA provides two schemes for its notices to employer, one as a simple notice, for enumerated serious violations (Labor Code §§ 2699.3(a), 2699.5), and another notice with an opportunity to cure, for lesser serious, unspecified violations (Labor Code § 2699.3(c)). An "aggrieved employee" receives a right to sue on behalf of the government only after compliance with the notice requirements.
In the ADA context a reform proposing pre-litigation notices is being addressed (SB 1186), and may be addressed furthermore.
4. Distribution of the fees collected.
Let's assume that a nonprofit under the new ordinance satisfies the standing and notice requirements, proves the intent and all other required elements, and wins the case, collecting a certain amount in penalties and fees/costs reimbursement. Who gets what portion of the funds? If the lawsuit was a straightforward "private action," most or all collected funds may remain with the nonprofit, subject to distribution to the actually harmed represented claimants. If the lawsuit was under a private attorney general act, recovered funds would belong to the government, at least in some proportion.
Under PAGA, 75% of recovered penalties go to the state. Cal. Lab. Code § 2699(i). It appears only logical that a significant portion of the penalties recovered under the proposed city ordinance, for enforcement of a city policy for increasing amount of affordable housing in the city, will similarly go to the city, presumably sponsoring the cause. A benefit for the city, may be chill some overly enthusiastic litigants, who might reconsider bringing a lawsuit if a lionshare of obtained funds will end up in someone else's coffers.
If you are concerned about your rights and obligations in connection with the short-term vacation licensing, make your first step toward taking control over the circumstances, and call my office at (415) 987-7000. I will be glad to assist in guiding you through the jungle. The only thing you can't afford is to stay put and uninformed. My office provides a confidential assessment of your particular scenario, free of charge, and I will share with you the results of the analysis along with my thoughts on available solutions.
4. Distribution of the fees collected.
Let's assume that a nonprofit under the new ordinance satisfies the standing and notice requirements, proves the intent and all other required elements, and wins the case, collecting a certain amount in penalties and fees/costs reimbursement. Who gets what portion of the funds? If the lawsuit was a straightforward "private action," most or all collected funds may remain with the nonprofit, subject to distribution to the actually harmed represented claimants. If the lawsuit was under a private attorney general act, recovered funds would belong to the government, at least in some proportion.
Under PAGA, 75% of recovered penalties go to the state. Cal. Lab. Code § 2699(i). It appears only logical that a significant portion of the penalties recovered under the proposed city ordinance, for enforcement of a city policy for increasing amount of affordable housing in the city, will similarly go to the city, presumably sponsoring the cause. A benefit for the city, may be chill some overly enthusiastic litigants, who might reconsider bringing a lawsuit if a lionshare of obtained funds will end up in someone else's coffers.
If you are concerned about your rights and obligations in connection with the short-term vacation licensing, make your first step toward taking control over the circumstances, and call my office at (415) 987-7000. I will be glad to assist in guiding you through the jungle. The only thing you can't afford is to stay put and uninformed. My office provides a confidential assessment of your particular scenario, free of charge, and I will share with you the results of the analysis along with my thoughts on available solutions.
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