A federal judge said in San Francisco today that he will temporarily block a new city law that prohibits rental booking services such as Airbnb Inc. from collecting fees for rentals of unregistered units.
U.S. District Judge James Donato said, "I'm disappointed with both sides" for not having agreed on an efficient way to determine whether homeowners wanting to provide short-term rentals had registered their units with the city.
"You haven't worked hard enough," Donato told lawyers for the city and online booking services Airbnb and HomeAway Inc.
"This can be solved. This is not an insoluble issue," he said.
Donato said he will issue a temporary restraining order later today that will bar the city from enforcing the law.
Meanwhile, he ordered lawyers from both sides to meet with a federal magistrate next month to try to come up with an agreement.
The new law was enacted by the city's Board of Supervisors in August. It makes it a misdemeanor punishable by a fine of up to $1,000 for a rental booking service to collect a fee if the unit being rented has not been registered with the city.
San Francisco-based Airbnb and Austin, Texas-based HomeAway sued the city, claiming that the measure violates their constitutional right of free speech and also violates the U.S. Communications Decency Act by treating them as publishers.
Last week, Donato rejected those arguments, saying that the law regulated conduct, not speech, and declined to issue a preliminary injunction suspending the law until a full trial is held.
But he said that a third question was still unresolved. That issue is whether the city has an effective system that would enable the services to determine whether an owner has registered a unit for short-term rentals.
Deputy City Attorney Sara Eisenberg told the judge that the services could use an online property map to see whether properties were registered and also said that a fully automated system is "in process."
The attorneys for Airbnb and HomeAway said they want the judge to issue a final preliminary injunction immediately so that they can take their challenge to the law to the 9th U.S. Circuit Court of Appeals.
James Grant, a lawyer for HomeAway, said Donato's order for an attempt at an agreement "doesn't change that we challenge the ordinance."
"An appeal is inevitable. We still think the law is invalid," he said.
Donato said, "I know you want to appeal, but we're not going to do that yet.
You are going to try harder to work this out."