PHILADELPHIA – A federal judge has granted Airbnb’s motion that arbitration should govern a dispute between itself and a South Philly landlord, who said the property he offered for rent through the service sustained damages in excess of $75,000.
Joseph Foresta first filed suit in the Philadelphia County Court of Common Pleas on March 30, 2023 versus Airbnb, Inc., of San Francisco, Calif.
“At all times relevant herein plaintiff listed his apartments at 1514 Christian Street as a host property with defendant Airbnb. These apartments were all newly furnished. At the time plaintiff listed his property at 1514 Christian Street with defendant Airbnb, defendant Airbnb advised plaintiff that before it accepted a reservation from a prospective guest, they thoroughly vetted the prospective guest, led plaintiff to believe it was responsible for the safety of the host’s property from any damage caused by the guest to the host’s property, and it would be responsible for any over stay of the guests beyond the time reserved and paid for by the guest,” the suit said.
“At all times relevant herein, by accepting guests from defendant Airbnb, plaintiff relied upon these assurances made by defendant Airbnb and believed that defendant Airbnb would protect him from a guest causing property damage and/or overstaying their prepaid reservation. An adult individual by the name of Lawrence H. Jackson made a reservation with defendant Airbnb for one night, June 13, 2020, as a guest in the second-floor apartment of plaintiff’s property at 1514 Christian Street. Defendant Airbnb collected the rent for one night from Jackson.”
The suit added that on June 14, 2020, Jackson refused to vacate the property and remained living in the property until plaintiff was able to obtain a Court order for the Sheriff to remove him from the property on Sept. 9, 2020.
“After June 14, 2020 Lawrence H. Jackson took possession of the entire 1514 Christian Street property, he: A) Changed the locks on the outside door to the building so plaintiff could not gain access to the property and B) Proceeded to rent out the other two apartments to four to six people per apartment, and collected rent from his ‘tenants’. At no time did plaintiff give permission to Jackson to remain living in the building after June 14, 2020, to change the locks on the outside door, and allow him to rent the apartments to persons unknown to plaintiff and collect rent from those unknown persons,” the suit stated.
“Jackson and the occupants that Jackson allowed to live in the property did extensive damage to the interior and exterior of the property, including but not limited to, damaging the furniture and piling up to five feet of trash on the sidewalk outside the front and back of the property, defacing the exterior walls, breaking the doors and windows, breaking the water pipes, breaking the appliances, breaking the bathroom fixtures, breaking the banister on the stairs, breaking the fire alarms, damaging the walls and floors and breaking the patio railing.”
Foresta said when tried to gain access to the property, one of the occupants “physically attacked him, striking him with a baseball bat to his head and to his stomach and threatened to kill him if he ever returned to the property, causing the plaintiff to sustain serious bodily injuries, including a subsequent stroke, and he was fearful of ever returning to the property.”
“From the time Jackson overstayed his reserved time, plaintiff made many attempts to contact defendant Airbnb, but his calls were never returned. After plaintiff retained legal counsel, letters were written by his counsel to defendant. Airbnb, none of which were acknowledged. It was not until August 2020 that defendant Airbnb finally ‘acknowledged’ the communications, but did nothing to remove Jackson from the property or to address the damage done to the property. On Aug. 10, 2020, plaintiff instituted a legal action by filing a complaint in ejectment against Jackson and other unknown occupants and a petition for injunctive relief, docketed at case No. 200800813 and incurred attorney’s fees and costs of $4,500,” the suit continued.
“A hearing was held on Sept. 9, 2020, at which time the Court ordered that a writ of possession be issued against Jackson and unknown occupants, and they were removed from the property by the Sheriff. The damage done to the property and the furnishings was in excess of $75,000. The damage was so excessive that even after Jackson and the unknown occupants were removed, it was impossible to rent the apartments. It took plaintiff until December 2021 to repair the damage to the property.”
The suit said that Airbnb violated the implied contract with the plaintiff, by failing to do anything to remove Jackson from 1514 Christian Street after June 14, 2020, or to repair the damage to the property.
As a result of said breach of its implied contract, the plaintiff suffered damages as follows:
• Loss of rental income from the entire property from June 14, 2020 until Dec. 30, 2021 of $91,200;
• Repairs to the damage property and replacing the furniture of $75,000;
• Attorney’s fees, court costs and Sheriff’s fee incurred by plaintiff in bringing and prosecuting the ejectment action of $4,500.
On April 11, 2023, Airbnb filed to remove the case to the U.S. District Court for the Eastern District of Pennsylvania, citing diversity of citizenship between the parties and the amount of damages in question exceeding the federal threshold of $75,000.
Airbnb motioned on May 4, 2023 to compel arbitration and stay the proceedings, or alternatively, to dismiss the complaint through lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2).
“Plaintiff’s claims – based on damages allegedly incurred while serving as the host of an accommodation he listed on Airbnb’s online marketplace – cannot proceed in this forum for two reasons. First, plaintiff must pursue all claims against Airbnb in binding arbitration. It is undisputed that plaintiff consented to Airbnb’s Terms of Service and Host Guarantee Terms, both of which include mandatory arbitration agreements. Those arbitration agreements cover all claims arising out of or relating to the use of the platform or any Airbnb service, including plaintiff’s listing of his property as a host and delegates all questions concerning arbitrability to the arbitrator. Thus, the Court should compel plaintiff to binding arbitration and stay all proceedings in the interim,” the motion stated.
“Second, even if plaintiff is not subject to mandatory arbitration (which he is), the Court should dismiss plaintiff’s claims against Airbnb for lack of personal jurisdiction. As an out-of-state defendant that simply operates an internet platform accessible to anyone in the world with internet access, plaintiff cannot establish that Airbnb is subject to either general or specific personal jurisdiction in Pennsylvania. Airbnb does not have continuous and systematic contacts with Pennsylvania for purposes of general personal jurisdiction. Nor can plaintiff demonstrate the required connections for specific personal jurisdiction. Airbnb does not have the requisite minimum contacts with Pennsylvania, nor do plaintiff’s claims arise out of or relate to any such contacts with Pennsylvania. Thus, the Court should dismiss plaintiff’s complaint as to Airbnb for lack of personal jurisdiction in the alternative to compelling plaintiff to arbitration.”
UPDATE
U.S. District Court for the Eastern District of Pennsylvania Judge John F. Murphy granted Airbnb’s motion staying the case and redirecting it to arbitration, in a Jan. 29 memorandum opinion.
Though Murphy found the Court did in fact have personal jurisdiction over the case, he added that the Airbnb renter agreement’s arbitration clause was valid and would govern the proceedings.
“The Terms of Service include an arbitration provision providing that ‘individuals’ within the United States ‘agree that any dispute, claim or controversy arising out of or relating to [the Terms of Service]…or to the use of the Airbnb Platform…will be settled by binding individual arbitration.’ Mr. Foresta does not directly challenge his assent to the Terms of Service, nor the authenticity of the version of the Terms of Service that Airbnb has provided. Instead, he relies on two Pennsylvania statutes to argue we should not compel arbitration: The Pennsylvania Unfair Trade Practices and Consumer Protection Law and the Pennsylvania Plain Language Consumer Contract Act. However, Mr. Foresta cites to no cases applying those statutes to overcome a motion to compel arbitration. Additionally, to the extent these arguments challenge the length and complexity of the contract, they are misplaced. Arguments challenging ‘the contract as a whole’ as opposed to the validity of the arbitration clause specifically are proper for the arbitrator because arbitration provisions are severable from the rest of the contract. Therefore, Mr. Foresta has not persuaded us that there was no contract to arbitrate between Airbnb and him,” Murphy stated.
“Normally, it is for the courts to decide whether the claims fall within the scope of the arbitration agreement, however, ‘the parties may contract around it, and agree to have…these questions decided by an arbitrator.’ To go so far, the arbitration agreement must include a ‘delegation clause’ that ‘reserves arbitrability questions for an arbitrator to decide.’ The caveat is that ‘courts should not assume that the parties agreed to arbitrate arbitrability unless there is ‘clear and unmistakable’ evidence that they did so.’ In the Terms of Service, the ‘clear and unmistakable evidence’ of an intent to delegate arbitrability questions to the arbitrator is the following clause: ‘If there is a dispute about whether this arbitration agreement can be enforced or applies to our dispute, you and Airbnb agree that the arbitrator will decide that issue.’ Delegation clauses can be challenged, but that requires challenging the delegation clause specifically because ‘a delegation clause is severable from the underlying arbitration agreement such that it is separately entitled to FAA-treatment.’ Mr. Foresta did not challenge the delegation clause here. And the delegation clause requires us to allow the arbitrator to determine whether his claims fall within the scope of the arbitration agreement.”
Aside from attempting to defeat Airbnb’s motion to compel arbitration based on Pennsylvania’s Unfair Trade Practices and Consumer Protection Law and the Plain Language Consumer Contract Act, Murphy explained, Foresta argued that Airbnb did not follow the procedural prerequisites outlined in the Terms of Service – however, Murphy added that the delegation clause “places these defenses within the purview of the arbitrator.”
“The delegation clause here applies to any questions regarding whether the arbitration agreement ‘can be enforced’ or ‘applies to our dispute,’ which includes whether Airbnb complied with any prerequisites. Additionally, the ‘procedural questions which grow out of the dispute and bear on its final disposition’ are presumptively not for the judge, but for an arbitrator, to decide.’ In sum, all of Mr. Foresta’s arguments are for the arbitrator,” Murphy said.
For a lone count of breach of contract, the plaintiff is seeking damages of $170,000, plus interest, attorney’s fees and other costs as allowed by the Court.
The plaintiff is represented by Joyce Ullman in Philadelphia.
The defendant is represented by Kelly J. Fox of Gerolamo McNulty Divis & Lewbart, in Philadelphia.
U.S. District Court for the Eastern District of Pennsylvania case 2:23-cv-01379
Philadelphia County Court of Common Pleas case 220601113
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com