Nekrilov v. City of Jersey City
| Decision Date | 24 March 2021 |
| Docket Number | Civ. No. 19-22182 (KM) (JBC) |
| Citation | 528 F.Supp.3d 252 |
| Parties | Gennadiy NEKRILOV, Eugene Nekrilov, Kwan Ho Tang, Jayu Jen, and Alen Suen, Plaintiffs, v. CITY OF JERSEY CITY, Defendant. |
| Court | U.S. District Court — District of New Jersey |
James Michael Van Splinter, Xavier Marc Bailliard, Kranjac Tripodi & Partners LLP, New York, NY, for Plaintiffs.
Stevie Darrel Chambers, Jersey City Law Department, Jersey City, NJ, for Defendant.
Plaintiffs are individuals who operate short-term rentals in Jersey City. In 2015, Jersey City passed an ordinance affirmatively permitting short-term rentals in the City. In 2019, however, the city passed another ordinance which limited such rentals. The 2019 ordinance, among other things, banned the practice of subletting long-term lease properties as short-term rentals and limited non-owner-occupied properties to hosting no more than sixty nights of short-term rentals per year. The effect of this new ordinance has been to significantly impair the plaintiffs’ short-term rental businesses.
Plaintiffs bring this suit pursuant to the Takings, Contract, and Due Process Clauses of the United States Constitution, seeking an injunction and monetary damages. Jersey City has opposed the motion for a preliminary injunction and moved to dismiss the complaint for failure to state a claim. For the reasons stated in this opinion, I will GRANT the motion to dismiss and DENY the motion for a preliminary injunction.
Plaintiffs operate short-term rentals which they market through online home-sharing platforms. Home-sharing platforms permit individuals to lease or sublease properties they own for days, weeks, or months at a time. (Compl. ¶ 18.) The property owner creates a listing on the home-sharing platform offering the property as a rental, and prospective tenants are then able to select the listing and enter a short-term rental contract with the property owner. The platforms do not offer their own properties, but rather function as brokers, and collect commissions for transactions executed by their users.
Short-term rentals offered through home-sharing platforms tend to compete with hotels, but offer a more residential setting, because they are typically located in residential properties in neighborhoods. (Id. ¶¶ 17–18.) The largest home-rental platform is Airbnb, which Plaintiffs used to rent out their properties in this case. (Id. ¶ 19.) There are numerous other home-sharing platforms, however, which are equally subject to Jersey City's short-term rental restrictions.
Plaintiffs all operated numerous short-term Airbnb residences in Jersey City. They did so via two methods. The first was that each plaintiff purchased a property (or properties) and offered short-term rentals of that property through Airbnb. (Id. ¶¶ 121, 132 (Gennadiy and Eugene Nekrilov), ¶ 204 (Kwan Ho Tang and Jayu Jen), ¶¶ 251, 255 (Alan Suen).) The second was that the Nekrilovs, Tang, and Jen, but not Alan Suen, all entered into long-term leases with other property owners and then, with those property owners’ permission, sublet those leases as short-term rentals through Airbnb. (Id. ¶¶ 111–15 145–152, 189, 194.)
The plaintiffs each allege that they chose Jersey City as a location to focus their short-term rental business due to the City's enactment of ordinances permitting short-term rentals and its efforts to advertise those ordinances. (Id. ¶¶ 105, 185, 233–35.) They claim that they are unable to make a profit from their owned and leased properties unless they are permitted to continue exploiting them as short-term rentals.
Jersey City has passed two rental ordinances relevant to this dispute. The first, in 2015, legalized short-term rentals in the City, subject to certain conditions; the second, in 2019, imposed quite significant restrictions on such rentals.
Steven Fulop was elected Jersey City's mayor in 2013. (Id. ¶ 28.) After his election, Mayor Fulop began a public relations campaign designed to draw development and young professionals into the city. (Id. ¶¶ 29–30.) As a part of his development plan, the Mayor supported an ordinance which would affirmatively permit home-sharing platforms such as Airbnb in Jersey City. (Id. ¶ 33.) The ordinance was to be the first of its kind in New Jersey. (Id. ¶ 34.)
The ordinance, Ord. 15.137, stated:
Jersey City Ord. 15.137. The proposal of the ordinance was accompanied by a press release. The press release stated that Ordinance 15.137 would "make Jersey City the first city in the Tristate area to formally embrace the popular home-renting platform [Airbnb] by permitting city homeowners and certain lessees to rent their home for less than 30 days." (Id. Exh. 3.) The press release also stated that (Id. )
In addition to the press release, Mayor Fulop made numerous public remarks stating that he would prefer to work with, rather than against, Airbnb, and that he hoped Jersey City would be a leader on home-rental platforms in the Tri-State area. (Id. ¶¶ 40–41.) He said Airbnb was the "future" of Jersey City's economy and that "while some people might have concerns about the sharing economy upending old ways of doing business, the best way to address those concerns is by engaging with these companies, not pretending they do not exist." (Id. ¶ 42.) He wrote an article in Huffington Post stating that Jersey City would embrace Airbnb and "make change our friend." Steven Fulop, Why Jersey City Will Allow Airbnb , HuffPost, Oct. 19, 2015, https://www.huffpost.com/entry/why-jersey-city-will-allo_b_8331016.3
Mayor Fulop observed that permitting Airbnb rentals would allow "middle-class folks [to] earn a bit of extra income by renting out their apartments," noting that the City could not realistically police Airbnb rentals in any event. Id. He noted, however, that Ordinance 15.137 included "common-sense ground rules: people can't rent out so many rooms as to create an informal hotel; they can't change the nature of the neighborhood[,]" and Airbnb would be obligated to pay a hotel tax. Id. Other Jersey City officials also praised the ordinance as allowing the city to expand its tourism industry. (Compl. ¶¶ 45–46.) The ordinance was unanimously approved by the Jersey City Council on October 28, 2015, and signed into law by Mayor Fulop on October 30, 2015. (Id. ¶ 47 & Exh. 2.)
In 2016, Mayor Fulop reportedly approached Airbnb and sought a contribution towards his reelection campaign. Luis Ferre-Sadurni, Where a $5 Million War Rages Between Airbnb and the Hotel Industry , The New York Times, Oct. 30, 2019, https://www.nytimes.com/2019/10/30/nyregion/jersey-city-airbnb-vote.html (referenced in the Complaint at paragraph 58). The next year, Fulop attended a fund-raising event at the company's headquarters in San Francisco. Id. A donation apparently was not forthcoming, so Mayor Fulop emailed Airbnb expressing his frustration. Id. Twelve days later, Airbnb made a $10,172 contribution. Id. Four months after that, the Hotel Trade Council began donating to Mayor Fulop's joint committee, in an amount totaling $33,200 since late 2017. Id. Two years later, Mayor Fulop's office initiated Ordinance 19-077, which imposes significant restrictions on short-term rentals in Jersey City.
Ordinance 19-077, while not banning short-term rentals, imposed important new restrictions. First, it barred short-term rentals in non-owner-occupied dwellings in excess of a total of 60 nights per year. (Compl. Exh. 1.) Second, it no longer permitted short-term rentals as subleases; that is, only property owners were permitted to rent their property on a short-term basis. (Id. ) To those restrictions, there were some exceptions. As relevant here, the ordinance provided for a transition period of approximately 18 months; through January 1, 2021, it exempted (i.e., allowed) short-term rental bookings initiated prior to its effective date of June 25, 2019. (Id. ) The Ordinance also imposed permitting and registration fee requirements, and created a Division of Housing Preservation, which was empowered to enforce the short-term rental limitations set out by the ordinance. (See generally id. )
The Jersey City Council held a special meeting to vote on Ordinance 19-077 on June 25, 2019. (Id. ¶ 63.) Several members of the City Council spoke in favor of the ordinance at the meeting. Councilman James Solomon stated that he supported the ordinance, for the following reasons:
[T]here [are] also people who have been harmed by the introduction of...
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