Arlene Rosenblatt, an individual, on behalf of herself and all others similarly situated, Plaintiff-Appellant,
City of Santa Monica, a municipal corporation; The City Council of the City of Santa Monica, a governing body, Defendants-Appellees.
and Submitted October 12, 2018 Pasadena, California
from the United States District Court for the Central
District of California, No. 2:16-cv-04481-ODW-AGR Otis D.
Wright II, District Judge, Presiding
L. Esensten (argued) and Jordan S. Esensten, Esensten Law,
Los Angeles, California, for Plaintiff-Appellant.
Shen (argued), Chief Deputy City Attorney; Heidi Von Tongeln
and Michael R. Cobden, Deputy City Attorneys; Lane Dilg, City
Attorney; Santa Monica City Attorney's Office, Santa
Monica, California; for Defendants-Appellees.
Before: Mary M. Schroeder and Jacqueline H. Nguyen, Circuit
Judges, and Michael H. Simon, [*] District Judge.
panel affirmed the district court's dismissal of a
putative class action against the City of Santa Monica and
Santa Monica City Council alleging that the City's
short-term vacation rental ordinance violates the dormant
Monica's ordinance prohibits property rentals of 30 days
or less with an exception for rentals where a primary
resident remains in the dwelling. Plaintiff is a Santa Monica
resident and homeowner who, prior to the passage of the
ordinance, rented out her house on Airbnb.
panel first held that the ordinance is not a per se violation
of the dormant Commerce Clause because it does not directly
regulate interstate commerce. At most, the ordinance has an
interstate effect because it makes travel lodging to Santa
Monica less accessible, available and affordable. Moreover,
the ordinance penalizes only conduct in Santa Monica,
regardless of whether the visitors are in-state or
out-of-state. The panel rejected plaintiff's argument
that the ordinance violates the dormant Commerce Clause by
directly regulating booking and payment transactions that may
occur entirely out-of-state. The panel held that the
ordinance applies evenhandedly and does not directly restrain
interstate commerce although it may regulate transactions
with an interstate component. The panel further held that
nothing in the ordinance suggested that its advertising ban
was intended to have extraterritorial application.
panel held that the ordinance does not discriminate against
interstate commerce by favoring in-state over out-of-state
interests. The panel determined that Santa Monica's ban
on vacation rentals applies in the same manner to persons
nationwide, including Santa Monica residents who may be
interested in renting a vacation home from another resident.
The panel further noted that the ordinance applies equally to
renters and property owners from outside California,
California residents outside of Santa Monica, and Santa
Monica residents. The panel held that the complaint did not
adequately allege that the ordinance increases the relative
market share of local businesses or that it has a net
negative effect on commerce outside of California. Finally,
the panel held that the complaint failed to plausibly allege
that the home-sharing exception obviously advantages Santa
Monica residents at the expense of out-of-state homeowners.
panel held that the complaint failed to plausibly allege that
the ordinance unduly burdens interstate commerce through its
incidental effects. Because plaintiff failed to show a high
burden on interstate commerce - and, at most, suggested some
negligible burden on the local economy of Santa Monica - the
complaint could not meet the standard established in Pike
v. Bruce Church, Inc., 397 U.S. 137 (1970). Thus, the
complaint's allegations did not adequately demonstrate
how the alleged burden on interstate commerce would clearly
exceed the stated benefits of the ordinance.
NGUYEN, CIRCUIT JUDGE
case involves the perennial clash between a city's
exercise of traditional police powers in regulating land use
and the rights of property owners to use their property as
they see fit. But this familiar problem has a not-so-familiar
backdrop: online marketplaces-such as Airbnb and
HomeAway-where travelers can rent privately-owned residential
properties as vacation rentals.
Monica resident Arlene Rosenblatt used to rent out her house
on Airbnb when she and her husband went on vacation. Santa
Monica passed an ordinance prohibiting property rentals of 30
days or less ("vacation rentals") with an exception
for rentals where a primary resident remained in the dwelling
("home sharing"). Rosenblatt brought a putative
class action against the city of Santa Monica and Santa
Monica's City Council (collectively, Santa Monica),
arguing that the ordinance violated the dormant Commerce
Clause. Rosenblatt contended that the ordinance directly and
indirectly regulated and burdened interstate commerce.
district court dismissed the amended complaint without leave
to amend, concluding that Rosenblatt failed to allege a
Commerce Clause violation as a matter of law. We have
jurisdiction under 28 U.S.C. § 1291. Reviewing de novo,
see Chinatown Neighborhood Ass'n v. Harris, 794
F.3d 1136, 1141 (9th Cir. 2015), we affirm.
FACTUAL AND PROCEDURAL
Monica has implicitly prohibited short-term property rentals
in residential zones since at least 1988. In 2015, Santa
Monica explicitly codified this zoning prohibition on
vacation rentals in an ordinance. See Santa Monica
Ordinance 2484 (May 12, 2015) (codified as amended at Santa
Monica Mun. Code §§ 6.20.010-
6.20.100). The ordinance created an exception for
home sharing to allow residents to "host visitors in
their homes, for compensation . . ., while at least one of
the dwelling unit's primary residents lives on-site, in
the dwelling unit, throughout the visitors' stay."
Santa Monica Mun. Code § 6.20.010(a).
ordinance defines vacation rentals to cover situations where
the unit owner or lessee rents out the property for
"exclusive transient use," meaning that "none
of the dwelling unit's primary residents lives on-site .
. . throughout any visitor's stay." Id.
§ 6.20.010(f). Violations of the vacation rental
ordinance are punishable by a fine not exceeding $500 and up
to six months in jail. Id. § 6.20.100(a).
enacting this ordinance, the Santa Monica City Council sought
to preserve the city's "available housing stock and
the character and charm which result, in part, from cultural,
ethnic, and economic diversity of its resident
population," and "its unique sense of community
which derives, in large part, from residents' active
participation in civic affairs, including local government,
cultural events, and educational endeavors." Santa
Monica Ordinance 2484, pmbl. The city council stressed that
"vacation rentals . . . are detrimental to the
community's welfare and are prohibited by local law,
because occupants of such vacation rentals, when not hosted,
do not have any connections to the Santa Monica community and
to the residential neighborhoods in which they are
visiting" and "the presence of such visitors within
the City's residential neighborhoods can sometimes
disrupt the quietude and residential character of the
is a Santa Monica resident and homeowner who, prior to the
ordinance, rented out her house on Airbnb for $350 per night
when she and her husband traveled. After the city of Santa
Monica enacted the ordinance, Rosenblatt sued the city and
its city council to enjoin the ordinance and recover damages
on behalf of herself and a class of similarly situated
individuals, claiming that the ordinance violates the dormant
alleges that the development of "an online marketplace
to list privately-owned properties for rent on a short-term
basis" allowed tourists to opt for less expensive
residential rentals over "the ultra-luxurious, highly
occupied, and pricey hotels in the City." According to
Rosenblatt, Santa Monica's real reason for enacting the
vacation rental ordinance was to prop up demand for the
city's high-end hotels and thereby reverse a decline in
revenue from the city's 14% transient occupancy tax,
which the hotels paid but the vacation rentals did not. The
district court dismissed Rosenblatt's initial complaint
for failure to state a claim, and Rosenblatt filed her first
amended complaint. The district court again dismissed
Rosenblatt's amended dormant Commerce Clause claims under
Federal Rule of Civil Procedure 12(b)(6), this time without
leave to amend. Rosenblatt appeals.
The dormant Commerce Clause
Commerce Clause affirmatively grants to Congress the power to
regulate interstate commerce. In order to advance national
solidarity and prosperity, the Supreme Court has given
meaning to the Clause's "great silences."
H.P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525,
535 (1949). The Court refers to these silences-the
Clause's "negative" aspect-as the dormant
Commerce Clause. See Tenn. Wine & Spirits Retailers
Ass'n v. Thomas, 139 S.Ct. 2449, 2459 (2019).
dormant Commerce Clause "denies the States the power
unjustifiably to discriminate against or burden the
interstate flow of articles of commerce." Or. Waste
Sys., Inc. v. Dep't of Envtl. Quality, 511 U.S. 93,
98 (1994). "The primary purpose of the dormant Commerce
Clause is to prohibit 'statutes that discriminate against
interstate commerce' by providing benefits to
'in-state economic interests' while 'burdening
out-of-state competitors.'" Ass'n des
Éleveurs de Canards et d'Oies du Québec v.
Harris, 729 F.3d 937, 947 (9th Cir. 2013) (quoting
Nat'l Ass'n of Optometrists & Opticians v.
Harris, 682 F.3d 1144, 1148 (9th Cir. 2012)); see
also C & A Carbone, Inc. v. Town of Clarkstown, 511
U.S. 383, 390 (1994) (explaining that the "central
rationale" of the dormant Commerce Clause "is to
prohibit state or municipal laws whose object is local
economic protectionism, laws that would excite those
jealousies and retaliatory measures the Constitution was
designed to prevent").
reviewing challenges to local regulations under the dormant
Commerce Clause, we follow a two-tiered approach:
 When a state statute directly regulates or discriminates
against interstate commerce, or when its effect is to favor
in-state economic interests over out-of-state interests, we
have generally struck down the statute without further
inquiry.  When, however, a statute has only indirect
effects on interstate commerce and regulates evenhandedly, we
have examined whether the State's interest is legitimate
and whether the burden on interstate commerce clearly exceeds
the local benefits.
Brown-Forman Distillers Corp. v. N.Y. State Liquor
Auth., 476 U.S. 573, 579 (1986) (citations omitted);
see also S.D. Myers, Inc. v. City & County of San
Francisco, 253 F.3d 461, 466 (9th Cir. 2001). "It
is well settled that a state regulation validly based on the
police power does not impermissibly burden interstate
commerce where the regulation neither discriminates against
interstate commerce nor operates to disrupt its required
uniformity." Constr. Indus. Ass'n of Sonoma Cty.
v. City of Petaluma, 522 F.2d 897, 909 (9th Cir. 1975);
see also Village of Euclid v. Ambler Realty Co., 272
U.S. 365, 390 (1926) (upholding zoning regulations that
excluded hotels from residential areas).
succeed on her facial challenge under the dormant Commerce
Clause, Rosenblatt must establish "that no set of
circumstances exists under which the [Ordinance] would be
valid. The fact that [the Ordinance] might operate
unconstitutionally under some conceivable set of
circumstances is insufficient to render it wholly
invalid." S.D. Myers, Inc., 253 F.3d at 467
(alterations in original) (quoting United States v.
Salerno, 481 U.S. 739, 745 (1987)). Because of this high
burden, "we construe the Ordinance narrowly and resolve
any ambiguities in favor of the interpretation that most
clearly supports constitutionality." Id. at
The complaint does not allege a per se violation of the
dormant Commerce Clause
The ordinance does not directly
regulate interstate commerce
se violation of the dormant Commerce Clause occurs
"[w]hen a state statute directly regulates or
discriminates against interstate commerce, or when its effect
is to favor in-state economic interests over out-of-state
interests." Daniels Sharpsmart, Inc. v. Smith,
889 F.3d 608, 614 (9th Cir. 2018) (alteration in original)
(quoting Brown-Forman Distillers Corp., 476 U.S. at
579). A local law directly regulates interstate commerce when
it "directly affects transactions that take place across
state lines or entirely outside of the state's
borders." Id. (quoting S.D. Myers,
Inc., 253 F.3d at 467).
argues that the ordinance directly regulates interstate
commerce because 95% of Santa Monica vacation rentals involve
an out-of-state party. Although we agree that vacation
rentals generally implicate interstate commerce, see
Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520
U.S. 564, 573 (1997), the relevant question here is whether
the ordinance directly regulates the interstate or
extraterritorial aspect of the vacation rental business.
See Chinatown Neighborhood Ass'n, 794 F.3d at
1145 ("[E]ven when state law has significant
extraterritorial effects, it passes Commerce Clause muster
when, as here, those effects result from the regulation of
relies heavily on Camps, but that case addressed
whether state law discriminated against interstate commerce,
not whether it directly regulated it. There, a state
statute provided a tax break to charitable institutions but
expressly exempted institutions that were "conducted or
operated principally for the benefit of persons who are not
residents" of the state. 520 U.S. at 568. The Supreme
Court concluded that "[t]he services that [the camp]
provides to its principally out-of-state campers clearly have
a substantial effect on commerce, as do state restrictions on
making those services available to nonresidents."
Id. at 574. However, the Court recognized that
"the discriminatory burden is imposed on the
out-of-state customer indirectly," not directly.
Id. at 580.
this court has considered laws directly regulating interstate
commerce, we have also distinguished between laws that
directly regulate extraterritorial activity and laws that
indirectly regulate the effects of commerce. In Chinatown
Neighborhood Association, we held that a state law
banning shark fin trading survived a dormant Commerce Clause
challenge even though the law had direct effects on commerce
outside the state. 794 F.3d at 1145. We contrasted
extraterritorial effects that "result from the
regulation of in-state conduct," id., with
legislation that directly regulates interstate commerce by
either "fix[ing] prices in other states, requir[ing]
those states to adopt California standards, or attempt[ing]
to regulate transactions conducted wholly out of state,"
id. at 1146.
Santa Monica's ordinance does not directly regulate
interstate commerce by prohibiting vacation rentals for Santa
Monica homes. At most, Rosenblatt alleges that the ordinance
has an interstate effect because it "makes travel
lodging in Santa Monica less accessible, available, and
affordable." The ordinance penalizes only conduct in
Santa Monica, regardless of whether the visitors are in-state
or out-of-state. Accordingly, we conclude that the complaint
does not sufficiently allege that the vacation-rental ban
itself is a direct regulation of interstate commerce.
Booking and payment transactions
ordinance makes it illegal to "undertake, maintain,
authorize, aid, facilitate or advertise any vacation rental
activity." Santa Monica Mun. Code § 6.20.030.
Rosenblatt argues that the ordinance violates the dormant
Commerce Clause by directly regulating booking and payment
transactions that may occur entirely out-of-state.
Rosenblatt's argument relies primarily on the plurality
opinion in Edgar v. MITE Corp., 457 U.S. 624 (1982),
and our decision in Valley Bank of Nevada v. Plus System,
Inc., 914 F.2d 1186 (9th Cir. 1990).
MITE, the state law directly regulated interstate
communications by preventing interstate tender offers unless
certain requirements were met. 457 U.S. at 640. The Supreme
Court held that this "direct regulation" surpassed
the "incidental regulation" of interstate commerce
permitted under the dormant Commerce Clause. Id. The
MITE plurality did not opine, as Rosenblatt asserts,
that "state and local laws purporting to regulate
transactions and/or commercial offers that occur 'across
state lines' constitute 'a direct restraint on
interstate commerce.'" Appellant's Opening Br.
at 30 (quoting MITE, 457 U.S. at 641-42). The
plurality instead held that the particular state statute at
issue was "a direct restraint on interstate
commerce" because it regulated conduct that "would
not affect a single [in-state] shareholder" and had
"a sweeping extraterritorial effect." Id.
at 642. A state or local law that regulates transactions with
an interstate component is not in itself problematic; the law
becomes problematic when it directly regulates the interstate
component of the transaction.
Bank, in contrast, held that a state law regulating
in-state ATM transactions did not violate the Commerce Clause
even though it directly affected the workings of an
interstate ATM network. 914 F.2d at 1190-93. There, we
rejected the ATM network's argument that the law directly
regulated interstate commerce just because uniformity among
ATMs in different states was important to the network's
efficient operation. Id. We stressed that "the
commerce clause does not exist to protect a business's
right to do business according to whatever rules it
wants," which is especially true in industries where
uniformity is not a necessity. Id. at 1192. We also
noted that a state's law "is not
'discriminatory' under the commerce clause simply
because it applies most often to out-of-staters."
Id. We concluded that a law "that applies
evenhandedly certainly passes muster under the commerce
clause." Id. at 1193.
discussed above, the ordinance here applies evenhandedly.
Unlike MITE, the ordinance does not directly
restrain interstate commerce although it may regulate
transactions with an interstate component. Because every
out-of-state booking and payment that the ordinance regulates
necessarily concerns property within Santa Monica, we cannot
characterize these transactions as activities that are
separate and entirely out-of-state. They are better
categorized as part of a contractual relationship that Santa
Monica properly regulates under its police power. Further,
uniformity is not necessary to the vacation rental market.
Even if numerous municipalities nationwide adopted ordinances
like Santa Monica's, the national market for vacation
rental bookings and payments would not be stifled. See
Valley Bank, 914 F.2d at 1191-93; see also Exxon
Corp. v. Governor of Maryland, 437 U.S. 117, 128 (1978)
(stating that the Court "has only rarely held that the
Commerce Clause itself pre-empts an entire field from state
regulation, and then only when a lack of national uniformity
would impede the flow of interstate goods").
also contends the ordinance "purports to ban wholly
extraterritorial communications and advertisements made over
the Internet and in other jurisdictions" by preventing
the advertisement of Santa Monica vacation ...