Airbnb Lawsuits: Why Arbitration Keeps the Company Winning

[00:00:00]airbnb has been the subject of numerous complaints investigations and news reports relating to everything from assault to hidden cameras to murder happening at rentals listed on the website yet despite this airbnb isn't losing these lawsuits how is that possible let's discuss first let me thank the sponsor of today's video senford now i'm a big sense gail i love a good scent and i hate a bad scent and i want my body in my home to always be filled with beautiful delicious smelling things and scentbird is so fun because it allows you to try out a variety of fragrances to find the ones you absolutely love scent bird is a fragrant subscription service where you get to choose a new designer fragrance to try out every month for just 17 it's a great way to begin figuring out your fragrance palette if you've never done so or expanding your understanding of what you like if you don't know where to start you can head over to scentbird's fragrance recommendation quiz and they'll help 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eight dollars for your first month and an exciting new scentbird is now available in canada and i know quite a few of you are from there so i hope you take advantage thanks to scentbird for sponsoring this video okay we'll start with the tamest of the cases i uncovered relating to airbnb and this is related to covid cancellations but please know that it just gets weirder from here okay covet obviously hit the hospitality industry especially hard and in 2020 airbnb had to make some hard pivots to manage the pandemic and its effects on hosts guests and cancel reservations because of allegedly bungled handling of guest refunds a class action lawsuit against airbnb claimed that airbnb wasn't issuing refunds or paying hosts and instead pocketed a lot of the money for cancelling reservations due to covet this class action case is called farmer v airbnb and it was filed in november 2020. basically what was happening is that when kova 19 hit airbnb said that it was going to give full refunds to people whose trips are being affected by kovid but then when guests tried to get refunds they were given the options to get a travel credit instead or to get no refund if the host policy was no refund because hosts get to set their own refund policies and then there was a third less obvious option in small print at the very bottom of the request form where you could request a full refund but the guest had to justify the refund and the options were limited and required guests to provide documentation to back up why they were canceling the reservation and the lawsuit alleges that airbnb often rejected guests documentation as insufficient then airbnb set up a fund of 250 million dollars to pay hosts for lost income but at the same time only offering to pay hosts 25 of what they would have made under their own cancellation policy so the combo according to the lawsuit means that guests were often opting for a travel credit that then expired at the end of the year or to get whatever they would have gotten as a refund from the host which was often zero dollars but then hosts only got 25 of their refund so allegedly airbnb was pocketing the rest but it got to benefit off the good pr of seeming to offer both guests and hosts the solution right ahead of airbnb's ipo allegedly the airbnb extenuating circumstances policy didn't allow for travel credits even though that's what they were offering to guests due to the extenuating circumstances of covid the named plaintiff in this case was a host complaining of not receiving compensation for cancelled reservations so he took airbnb to arbitration per the arbitration clause in the contract now this is important so let's have a little refresher what is arbitration why is it in contracts we've discussed arbitration clauses before on this channel erin brockovich is an entertaining look into the process but let's go over the basics arbitration clauses are placed in pretty much every contract you ever sign to use a company's product or services ever look at the terms of service of any website read the fine print before you sign a waiver at like a water park it's even in the contract that drag queens sign when they audition for rupaul's drag race it's literally everywhere and is standard practice across virtually every industry and people often don't understand the weight that these arbitration clauses carry let's look at the drag race one because that's the one that i've looked at most recently shout out to busy queen for providing me with access to the contract notice that the arbitration provision is in bold in my experience usually they are bolded because the lawyers drafting the document understand the weight of the provisions and so do courts who don't take too kindly to fine print being too fine you know what i mean it is however usually buried somewhere in the agreement for example this arbitration clause is on page 22 of a 53-page document when you agree to arbitrate it means that you are waving your right to sue in traditional public court arbitration is a form of very rapid very private court the rules of evidence typically aren't followed the arbitration clause usually states that the company who wrote the contract gets to choose the arbitrator and that the arbitration will take place in the city of the company's choosing so whatever's most convenient for the company meaning that if you want to take airbnb to court you'd have to do so on their home turf which is very inconvenient if you live in the other side of the country and have to travel to find a lawyer and fight a legal battle arbitration is also much more limited than traditional court the discovery process is quicker and less expansive and the process moves along very swiftly and finally arbitration is entirely private there are no public records to search which is why companies love arbitration it's over more quickly and costs them less money and the process shields companies from the public scrutiny that usually comes with public legal battles so farmer goes to arbitration per the contract and tries to get airbnb to pay him allegedly airbnb was required to pay an arbitration fee to initiate the arbitration and according to the lawsuit they never paid that so therefore farmers lawyers argue that airbnb waived the arbitration clause so farmer took the case then to regular court in november of 2020. farmers suing airbnb for breach of contract breach of fiduciary duty and unfair competition in june 2021 the court told the parties to go back to arbitrate because apparently farmer the named plaintiff requested to withdraw when airbnb failed to pay the arbitration fee but the arbitrator didn't officially dismiss the case or rule that it should be taken to federal court so the federal court said that the final decision as to the arbitrability is up to the arbitrator who hasn't made that finding yet so they granted the motion to compel arbitration but stayed the case or paused it instead of officially dismissing it in case it is ruled that it can't be arbitrated that was fully a year ago at this point so i assume arbitration was the route that ultimately ended up happening which means no class action just individuals having to go through the arbitration process which is prohibitive because lawyers are expensive which is why class actions can be so beneficial it's also private so we don't know the outcome moving on airbnb has also been the subject of multiple complaints of racial discrimination something that is incredibly touchy given this country's history of racial discrimination in housing and the subsequent laws that have been passed to try to curb that discrimination whether or not the laws are effective are another topic for another day first we have selden v airbnb a class action lawsuit filed in 2016. the complaint alleges the following selden is a black man who tried to book airbnb accommodations in 2015 in pennsylvania the host told him that the room was no longer available then selden created two fake accounts using pictures of white men and tried to book the same day with the same host who immediately accepted the bookings he then confronted the host who said people like him were just trying to victimize themselves so he contacted airbnb about discrimination and then never heard back from them so he sued airbnb in federal court for violating his civil rights specifically the civil rights act of 1964 which guarantees equal treatment in public accommodation and the civil rights statute 14 usc section 1981 which protects against racial discrimination in the creation of contracts and for violating the fair housing act which prohibits against discrimination in rental accommodation just like with the covet issue the judge required the case to first go to arbitration based on the arbitration clause in the contract this is going to be a theme and the judge stayed the case pending arbitration then selden lost in arbitration and appealed that loss back to federal court again arbitration is private so we don't have access to the records of the proceedings but we can get at least some alleged information from the appeal that selden filed in federal court according to selden's appeal during arbitration airbnb initially claimed that they were protected from any liability by cda230 which i've made a whole video on before i'll link it up here it's a law that protects platforms from liability for the content that others post on their site this was an argument that the arbitrator rejected apparently we don't know why because arbitration again is private the appeal also alleges that the arbitrator severely restricted discovery the phase during which the parties gather information and build their case but the federal court rejected the appeal saying that the arbitrator rejected zeldin's claims because he found that the room didn't count as public accommodation because it was a room in a private home where the host lived with his wife and a public accommodation is typically defined as an inn a hotel someplace like that and the arbitrator found that the host is not an agent of airbnb because airbnb didn't control him and he couldn't bind airbnb in any sort of contract of course other lawyers have argued that hosts are agents of airbnb we'll hear about that coming up which is important because whether or not airbnb can be held liable for the actions of its hosts rest on the determination of whether the hosts are agents of airbnb or if they're wholly independent from airbnb and therefore airbnb can't be held liable but nevertheless it sounds like the arbitrator took a narrow view of what counts as public accommodation and it's a really high burden for a plaintiff to get an arbitration ruling thrown out and selden didn't meet that burden further showing how powerful arbitration clauses can be since that lawsuit was filed hosts can now no longer see your picture until after you've officially booked with them that doesn't mean that they can't see your picture and then cancel on you after you've already booked which does happen but airbnb also has some pretty strict penalties for hosts who do cancel it not only hurts their ratings but also they're required to pay a fee however given how often anecdotal evidence points to hosts cancelling on guests it does make me wonder whether the penalties airbnb uses are actually effective in curbing last-minute host cancellations including cancellations that are the result of racial discrimination and there appears to be a group of lawyers working to build another class action against airbnb for allegedly faulty background checks that showed up when guests tried to apply to use airbnb and the background checks found expunged records that are not legally allowed to be used against a person or showed records multiple times making it look like the person committed the same crime over and over or showed accusations for which the person was later acquitted making their record look worse than it actually was all leading to denials and account deactivations this is important because over policing of black and brown populations means that the people that are more likely to have expunged records or accusations that never resulted in being found guilty tend to be black and brown people okay and then airbnb ran into some hot water due to their smart pricing algorithm this isn't a lawsuit but it is an interesting tidbit that falls under the umbrella of discrimination in 2015 airbnb unveiled its smart pricing software which was meant to help hosts get more bookings and to help lessen the disparity in incomes between black and white hosts on the app by allowing hosts to set the minimum nightly rate and then the algorithm does the rest based on demand and average prices and availability in the area the problem was that airbnb created this with the explicit purpose to lessening the racial disparity in incomes on the app and then didn't track whether it was actually meeting its goal of closing the disparity gap instead what happened is more white hosts implemented smart pricing than black hosts and it actually ended up increasing the disparity of earnings between black and white hosts by 20 of course this isn't necessarily the direct fault of airbnb but it does highlight the fact that airbnb claims to be a company very concerned with diversity and equity but in the end it doesn't really walk the walk they have an anti-discrimination team but instead of the 10 to 15 employees that most project teams have they only have five employees according to an anonymous employee on that anti-discrimination team and they're operating on a shoestring budget constantly in a reactionary mode instead of having the resources to be proactive about anti-discrimination according to this employee and the technology that allowed for the smart pricing tool also had the tools built into it to analyze how it was affecting racial disparity between hosts but airbnb allegedly didn't do anything with that tool or the information that they could have gotten from it even with all of this one former aclu director said that airbnb is doing more than any other company in silicon valley to measure the disproportionate racial impact of its services so apparently the bar is really low which i guess probably doesn't surprise us all right then we have the issue of hidden cameras airbnb created a camera policy in 2014 that requires hosts to disclose where there are cameras throughout the property and bars cameras are being located in areas where guests would have an expectation of privacy like bedrooms and bathrooms despite this policy there have been numerous lawsuits filed against airbnb hosts for hidden cameras people are creeps double check your hotel rooms and airbnbs for like two-way mirrors and recording devices people tons of hosts have been sued directly by guests for having hidden or undisclosed cameras airbnb itself as far as my research could find has been accused of allowing hosts to use recording devices without disclosing it but as far as i could find they've only been sued twice once was in 2015. the lawsuit alleges that a german woman named yvonne shoemaker was staying at an airbnb in irvine california when she realized that there was a camera filming her from next to the tv in the living room this was not disclosed to her when she rented the place and she had been just walking around the apartment naked as one does and having personal conversations with her partner in full view of the camera which was also recording audio she moved out immediately and made a complaint to airbnb who allegedly did nothing and allowed these hosts to continue renting and hosting guests so she sued airbnb for negligence and sued the host for violating her privacy and for intentional infliction of emotional distress the parties had some back and forth in court and a year and a half later they you guessed it settled out of court so we don't know the settlement terms and the most recent lawsuit was filed in march of this year by jane does 1-3 against airbnb and unnamed hosts the complaint alleges that the three plaintiffs went to this secluded farm for a girls weekend getaway and that the hosts had placed a camera in one of the bedrooms in the airbnb and that my friends is the perfect setup for a horror movie so you can count me out okay the complaint further alleges that it was entirely foreseeable on airbnb's part that this would have happened because not only does airbnb already receive hundreds of complaints about hidden cameras they also received complaints specifically about this hidden camera and allegedly did nothing in fact these three plaintiffs didn't even know that they were recorded until six months later when the sheriff's office contacted them the complaint alleges that airbnb did nothing to alert the plaintiffs help or protect them in any way and in fact stonewalled law enforcement's investigation into the matter so they're suing airbnb for negligence because they knew or should have known that this invasion of privacy would occur and the complaint really harps on airbnb's relationship with its hosts and guests because past lawsuits on other issues against airbnb have failed because courts have found that hosts don't act as agents of airbnb and therefore airbnb can't be held liable for the actions of the hosts this is called vicarious liability which is where you can find a business liable to pay you damages for things that their employees contractors or agents do determining whether someone is an agent of a company is a bit tricky because the plaintiff has to show that the airbnb held out the hosts to be agents of their company and exacted a certain amount of control over the actions and behavior of the alleged agent airbnb on their part can argue that it's clear that hosts are individuals not affiliated with airbnb in any employment capacity simply using the airbnb platform to conduct their businesses the complaint argues that the way airbnb is set up the platform requirements the rules for hosts and guests etc means that airbnb exacts control over hosts such that they can be found to be agents of airbnb and then airbnb can be held liable they do build a strong argument in the complaint but it's an argument that has still failed in other courts so the complaint argues that airbnb negligently hired these people and that airbnb is vicariously liable for invasion of privacy sexual harassment premises liability and misleading advertisements and unfair competition because airbnb says it's safe and creates a false sense of security according to the complaint now that lawsuit was filed in march of this year and you know the law moves at a glacial pace so airbnb has yet to respond to the complaint something tells me though that it'll eventually settle out of court i don't know what something tells me okay an airbnb has also been under scrutiny for numerous complaints of assault on airbnb properties despite this according to this very damning bloomberg article about airbnb only a single lawsuit has ever been filed against airbnb related to alleged assault that's not to say that there haven't been hundreds of complaints of assault there have but only one has made its way into a lawsuit why arbitration clauses again hosts and guests sign arbitration clauses requiring them to arbitrate which is a private process so even if airbnb ends up paying a settlement to an alleged victim the info never sees the light of day oftentimes because of the arduous process of even bringing airbnb to arbitration victims of assault and other instances that occur on airbnb listings will bring up the incidents with the company and will then be offered a hefty sum as part of a settlement agreement and that settlement agreement includes a non-disclosure agreement barring the victim from discussing the terms of the settlement one of those settlements amounted to seven million dollars according to one woman who was raped by an intruder who had a copy of keys to the apartment she was staying in so because of all this airbnb never loses in court because it never makes it to court to begin with and typically if airbnb's lawyers know it's on the losing side they'll offer a settlement before the process goes too far which is often preferable for victims who don't have the resources to wage an expensive legal battle against the company because even though arbitration is cheaper and faster than regular court it still costs thousands of dollars like i mentioned though one assault-related lawsuit has made its way into court against airbnb related to an assault that occurred on an airbnb property in 2017 a 51 year old woman named leslie la payalker lapiker airbnb alleging that she was assaulted by a host in los angeles she alleged that she had been staying at this studio apartment but decided to leave because of the host's bizarre behavior he then followed her into the studio locked the door and held her against her will while performing sexual acts in front of her as she fled the scene he yelled after her don't forget to leave me a positive review on airbnb late stage capitalism truly never ceases to amaze she apparently called the cops but the guy who wasn't charged because he claimed the encounter was consensual and then i guess they just dropped it because they didn't have enough evidence to the contrary now the reason why la payauker was able to file this lawsuit when others aren't was because her lawyer argued that airbnb hadn't done a thorough background check of the host he had apparently been charged with battery in the past but wasn't convicted though that's a tricky argument to get behind because as we've talked about it's ethically dubious to hold a charge against someone who was then acquitted of the charge a lot of people get charged for things that they don't do and people who are charged are supposed to be innocent until proven guilty so holding a charge that resulted in a acquittal against a person opens the door to a lot of different issues and as we discussed doing so against a potential guest also has consequences either way it was enough for the case to make its way into court and airbnb eventually settled with la payalker for an undisclosed sum so again they were sued but they didn't lose settlement agreements almost universally come with the stipulation that the settlement doesn't mean anyone is admitting to guilt and it bars the other party from ever bringing the same issue to trial again it's just two parties coming together at arm's length to form a contract and keep the pesky lawsuit out of the court's hair which is why courts love settlements so because of these arbitration agreements a case has never successfully been tried in court so courts have never had the opportunity to establish the extent to which short-term rental companies could be held liable for the crimes that occur on properties listed on their website and the secrecy extends to the rental properties themselves due to privacy concerns airbnb typically doesn't release the names and addresses of hosts and properties to the government which on one hand is a business just trying to exercise good privacy protections i personally am not thrilled at the idea of a company just handing off my personal information to the government but on the other hand it means that governments don't know where the properties are and people can't study the effect that properties have on neighborhoods on safety on anything it allows a veil of secrecy to remain that obscures the effect that airbnb rentals actually have on our society which is notable given the housing crises being faced by virtually every large city in the u.s because wealthy investors are scooping up hundreds of properties and converting them from long-term rentals to short-term rentals and frankly it's just gonna keep happening because anecdotally you can make twice as much renting a unit on airbnb than you could get in long-term rentals there's no incentive for big investors to stop and there's not even incentive for individual rental unit owners to switch their units to long-term rentals the only way forward that i see is through regulation specifically focused on the big-time rental owners who are profiting off literally hundreds of airbnb units and exasperating the housing crisis often in cities they don't even live in it would take action likely at the local level from state and local governments barring the number of units that can be owned by a single entity in the city which frankly small governments aren't incentivized to do because more airbnb rentals means more tourists and tourists are often an enormous source of revenue for major cities however some cities are stepping up to the bat against the short-term rental industry including new york where whole home rentals shorter than 30 days are banned and hosts are not permitted to have more than one listing at any single address in new york city so shared space rentals are fine but if it's just the whole unit being rented out it's usually a no-go in new york city and this was done specifically to try to curb the absolutely insane long-term rental prices in the city how much it's helping the problem is unclear given that rent is still astronomical there but it's probably keeping the rents from going up even higher due to limited long-term rental supply and that my friends is the sordid tale of airbnb and all of its legal troubles i'm interested to see the future of the short-term rental industry because it does seem like it's been this wild west that legislators are now slowly starting to catch up with and i think future regulations will continue to mount against things like airbnb and maybe will allow for victims to get their day in court thanks once again to my partner for today's video scentbird reminder to click the link in the description down below and use my code lijam55 to get 55 off your first month with senber that's only about eight bucks for your first month thanks senpai thank you so much to my patreon supporters yes that's right i have a patreon head over there for behind the scenes footage lija's book club and so many other things we have a discord server where we're constantly chatting it up so please join our little community thank you in particular to my extra special patreon supporters old man pence l l fork mcspoon daniel taylor and brett piantek thank you so much for your ongoing support it means the world to me the link to my patreon is in the description below if you want to join if you liked this video you might also like this video that i made all about pesky celebrity wills thanks so much for watching have a good day bye [Music] you