Nekrilov v. City of Jersey City, Civ. No. 19-22182 (KM) (JBC)

CourtUnited States District Courts. 3th Circuit. United States District Courts. 3th Circuit. District of New Jersey
Writing for the CourtKEVIN MCNULTY, U.S.D.J.
Citation528 F.Supp.3d 252
Decision Date24 March 2021
Docket NumberCiv. No. 19-22182 (KM) (JBC)
Parties Gennadiy NEKRILOV, Eugene Nekrilov, Kwan Ho Tang, Jayu Jen, and Alen Suen, Plaintiffs, v. CITY OF JERSEY CITY, Defendant.

528 F.Supp.3d 252

Gennadiy NEKRILOV, Eugene Nekrilov, Kwan Ho Tang, Jayu Jen, and Alen Suen, Plaintiffs,
v.
CITY OF JERSEY CITY, Defendant.

Civ. No. 19-22182 (KM) (JBC)

United States District Court, D. New Jersey.

Signed March 24, 2021


528 F.Supp.3d 260

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.

KEVIN MCNULTY, U.S.D.J.:

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

528 F.Supp.3d 261

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.

I. BACKGROUND1 ,2

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.

A. Plaintiffs

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.

B. Jersey City's Rental Ordinances

Jersey City has passed two rental ordinances relevant to this dispute. The first, in 2015, legalized short-term rentals in the

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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:

1. Short Term Rentals are permitted as an accessory use to a permitted principal residential use in all zoning districts and redevelopment plan areas where residential uses are permitted.

a. The person offering a Dwelling Unit for Short-Term Rental use must be the owner or lessee of the residence in which the Short-Term Rental activity occurs. Short-Term Rental activity may occur in a habitable accessory building located on the same premises as the residence.

b. No person offering a Dwelling Unit for Short-Term Rental use shall be required to obtain any license for such use ... unless such person offers more than 5 separate Dwelling Units for Short-Term Rental use in the City. Any person offering more than 5 separate Dwelling Units for Short-Term Rental use in the city must:

i. Obtain a license pursuant to Section 254-82 ....

ii. Ensure that the Short-Term Rental use is clearly incidental to the principal residential uses permitted in the zone where each such Dwelling United is located ....

....

d. The Short-Term Rental use shall be conducted in a manner that does not materially disrupt the residential character of the neighborhood.

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 "the measure ... includes several commonsense protections. It would prohibit homeowners and renters from ‘changing the character of the neighborhood.’ It would also limit the number of properties one user could rent on the platform to five, so as to prevent the formation of informal ‘Airbnb hotels.’ " (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

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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...

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2 practice notes
  • Mogan v. City of Chicago, 21 C 1846
    • United States
    • United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
    • January 18, 2022
    ...of homeowners, renters, and short-term visitors” and dismissing substantive due process claim); Nekrilov v. City of Jersey City, 528 F.Supp.3d 252, 282 (D.N.J. 2021) (finding ordinance that regulated home sharing and short-term rentals passed rational basis review because “the City had legi......
  • ZapFraud, Inc. v. Barracuda Networks, Inc., Civil Action No. 19-1687-CFC-CJB
    • United States
    • United States District Courts. 3th Circuit. United States District Court (Delaware)
    • March 24, 2021
    ...of a pirate." Id. The purpose of enhanced damages is to punish and deter bad actors from egregious conduct, not to provide a 528 F.Supp.3d 252 financial incentive for opportunistic plaintiffs to spring suits for patent infringement on innocent actors who have no knowledge of the existence o......
3 cases
  • Mogan v. City of Chicago, 21 C 1846
    • United States
    • United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
    • January 18, 2022
    ...of homeowners, renters, and short-term visitors” and dismissing substantive due process claim); Nekrilov v. City of Jersey City, 528 F.Supp.3d 252, 282 (D.N.J. 2021) (finding ordinance that regulated home sharing and short-term rentals passed rational basis review because “the City had legi......
  • ZapFraud, Inc. v. Barracuda Networks, Inc., Civil Action No. 19-1687-CFC-CJB
    • United States
    • United States District Courts. 3th Circuit. United States District Court (Delaware)
    • March 24, 2021
    ...of a pirate." Id. The purpose of enhanced damages is to punish and deter bad actors from egregious conduct, not to provide a 528 F.Supp.3d 252 financial incentive for opportunistic plaintiffs to spring suits for patent infringement on innocent actors who have no knowledge of the existence o......
  • Mogan v. City of Chicago, 21 C 1846
    • United States
    • United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
    • September 12, 2022
    ...substantial reduction in property value does not constitute a severe economic impact. See, e.g., Nekrilov v. City of Jersey City, 528 F.Supp.3d 252, 272 (D.N.J. 2021) (finding that a fifty to sixty-six percent reduction in property value was not a severe economic impact sufficient to amount......

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