Welcome back for another week of What's Next, where we report on the intersection of law and technology. This week, we learn about the legal conundrums raining down on Airbnb and the sublet economy. Plus, former marketing partner Stackla finds common ground with Facebook. And ADA experts tell us what lawyers sometimes don't understand about web accessibility. Let's chat: Email me at [email protected] and follow me on Twitter at @a_lancaster.

Airbnb Has a Local Liability Problem

Most of the problems coming out of the growth of the sharing or sublet economy have to do with how companies like Airbnb have sprouted up almost overnight and outpaced local laws and regulations, said Andrew Zacks, managing shareholder of Zacks, Freedman & Patterson in San Francisco. When the real estate specialist first heard of Airbnb, he thought the business model was absolutely illegal. "What they do violates local zoning laws, they're converting residences into hotel-uses—those are not allowable uses under existing law," he said. Zacks said he was flabbergasted when San Francisco suddenly had thousands of Airbnb listings. Now, Airbnb is actually being discouraged in the city where it all began, he said. Here's a glimpse of the liabilities and legal pressures popping up from the explosion of the sublet economy.

Answers have been edited for length and clarity.

➤➤ What are some new liabilities emerging with the growth of the sublet economy? In my practice, I would say the biggest issues we're dealing with have to do with local regulations around the use of residentially zoned homes. In places where we have housing shortages, particularly in California, we're seeing significant local regulations that are arising and, in some cases, completely banning the use of Airbnb. As you can imagine, the regulation of these uses is seen as a significant threat to the business model that Airbnb has developed. So it's kind of ironic that Airbnb, which was founded in San Francisco, is now so heavily regulated here that it's been reduced to a couple thousand listings. Two-thirds of the available Airbnb listings in San Francisco just disappeared overnight as a result of the regulations that were enacted.

➤➤ What do those regulations look like? The gist of those regulations have to do with registration. San Francisco has staffed around eight to 10 people in the Office of Short-term Rentals, these are potentially new jobs created to deal with this. At the office, you get a registration number. Without that number, you can't be listed on Airbnb.

In other cities, you have absolute prohibitions of Airbnb. Some also have limits on the number of days the property can be used for short-term rentals. Municipalities have enacted requirements that you can only do one Airbnb listing in a building, and the owner has to live in that building, as well. The other issue is protecting tenants from being evicted so that the property can then be used as an Airbnb. I think most of the regulations you see in California will say if you have evicted a tenant, you won't be able to convert the property into any kind of short-term rental use.

➤➤Which court cases are you following in the space? There was a recent decision in a case out of Santa Monica, where Airbnb and others tried to challenge the power of cities to regulate primarily based upon the application of a federal law, which is designed to have a free flow of information on the internet. Airbnb has argued that they aren't really a broker, they're simply a platform for people to communicate with each other. The courts are rejecting that argument and allowing cities to impose local regulations that Airbnb thinks are inconsistent with their rights from federal law. The ruling gave Santa Monica the power to regulate Airbnb and other sublet economy companies.

However, if you're living there, and you want someone to come sleep in a bedroom in your home and you charge them money to do that, the city has acknowledged there's probably no way to stop that. The case law in California has articulated that it's very unusual or difficult for governments to regulate in one person's home. Some of the cases we've seen involve situations where local governments try to say that you have to live as a single family in a single family home in certain zoning districts. You had communes popping up in Santa Barbara, and the government tried to say, "Well, you're not related, and you're not a traditional family. So we're going to require that in order to live in this zoning district in a single family home, you have to be related." The court said no, no, no. That's not how the law works in California.

➤➤ Where are these laws coming from? It's a coalition of affordable housing advocates, apartment owners, particularly where we have rent-controlled apartments, neighborhood associations and tenant advocates. These groups, which usually disagree on things, have actually come together to oppose Airbnb because of the sort of multi-pronged problems they believe it causes. From the affordable housing perspective, every unit that's being used as an Airbnb or rented on a short-term basis is one less unit that can be rented permanently for San Francisco residents. It's perceived that's causing the price of housing to rise, because there's less housing. I think there's probably some merit to that. Imagine if everyone decided, well, "I'm not going to be a landlord anymore, and I'm just going to rent my apartment on Airbnb short-term." That would create further shortages.

Conversely, landlords that have rent-controlled tenants are really unhappy when their long-term tenant who is paying $1,000 a month for a beautiful apartment in San Francisco's Pacific Heights neighborhood decides they are going to put that apartment on Airbnb for $200 a night. You have apartment owners in rent-controlled districts like San Francisco, Berkeley, Santa Monica and Oakland that are absolutely insistent that they be a part of the decision over whether their property is used for short-term rentals. You can also be sure that if a tenant were allowed to do that, that apartment is probably never going to open up, the landlord is never going to be able to raise the rent, and it's just going to be a windfall for the tenant and a total bummer for the landlord.

➤➤ How are you seeing insurance companies respond to the sublet economy? When you occupy residentially owned property, the insurance policies that you buy are typically designed to protect against the risks associated with that use. When you invite strangers into your home and convert your home into a hotel, there are different risks presented by that.

Insurance companies usually want to be involved with the decision on how much to charge or what those risks look like. So, you could have situations if you have a guest that gets injured or harmed in your home, and you haven't told the company that's how the property is being used, the insurance company is going to be denying coverage for those claims. I would imagine there are some companies that are writing policies for short-term rentals, but I think most people aren't going to want to pay for them and aren't paying for them. I think Airbnb offers some type of insurance for their hosts, as well as their guests.

Stackla & Facebook Reach A Legal Ceasefire

Content marketing company Stackla Inc. has agreed to dismiss its lawsuit against Facebook accusing the social media giant of revoking its Facebook and Instagram licenses under false pretenses.

Stackla and Facebook filed a joint stipulation to dismiss Monday in the U.S. District Court for the Northern District of California.

Stackla's DLA Piper lawyers alleged the company received a cease and desist letter from Facebook one week after a Business Insider article falsely accused it of violating Facebook's privacy guidelines. In the letter sent in August, Facebook accused Stackla of violating the federal Computer Fraud and Abuse Act and the California Comprehensive Computer Data Access and Fraud Act, as well as Facebook and Instagram's terms of use.

Stackla denied the allegations and contended that Facebook, which was represented by Wilmer Cutler Pickering Hale and Dorr, improperly invoked the laws against Stackla and violated their "good-faith partnerships and agreements."

U.S. District Chief Judge Phyllis Hamilton of the Northern District of California said last month that she was unconvinced of any wrongful motivations. In a bench ruling, she denied Stackla's motions for a temporary restraining order and preliminary injunction that would restore its access to Facebook and Instagram. At the Sept. 25 hearing, she suggested Stackla and Facebook work together to resolve their issues.

If You Don't Know, Now You Know: ADA Edition

Last week, I reported on the U.S. Supreme Court's denial of Domino's petition for certiorari in a case about whether the Americans With Disabilities Act applies to the websites of brick and mortar businesses. The justice's decision to pass on Domino's Pizza v. Guillermo Robles left in place a decision from the U.S. Court of Appeals for the Ninth Circuit. The January ruling said the ADA applies to Domino's website and mobile services, "even though customers predominantly access them away from the physical restaurant."

In the story, I reported that some lawyers said the Ninth Circuit precedent is nearly impossible for businesses to keep up with, since new versions of accessibility software can become incompatible with websites in a matter of months. A couple engineers responded to the story arguing that web accessibility software can last much longer than just a few months.

One software engineer who asked not to be named said, "Any reputable software developer who writes accessible code should have their code last for years, likely decades. Backwards compatibility with previous versions of web software is almost always maintained, and there's no reason that properly written accessible code shouldn't last for 10 to 20 years or more."

Lainey Feingold, a disability rights lawyer and author, said that while it's true accessibility can be broken, she's never heard that a short software shelf life would make it difficult for businesses to keep up with the ADA.

"People have analogized this to the kind of culture change that happened when companies realized, 'Oh, we have to make our technology secure and protect people's privacy,'" Feingold said. "You'd never allow your content management system to post something that broke security for your website. The same thing needs to happen for accessibility. It needs to be built into the systems, processes and development."

Feingold, who has brokered structured negotiation for companies like Wells Fargo, Major League Baseball and Albertsons, negotiated the first settlement agreement with any company in the U.S. calling for web accessibility back in 2000. She said the Web Content Accessibility Guidelines have been in place for 20 years, and have only been updated twice.

She suggested that lawyers speak with people with disabilities and disability advocates who have been fighting for web accessibility for decades. "Without accessibility millions of people are excluded from the web, and lawyers don't tend to talk about accessibility in terms of people," she said. "And accessibility is all about people."

On the Radar

California AG: We're Better Than Captain Kirk California Attorney General Xaviar Becerra released draft rules last week for enforcing the state's new data protection laws that take effect in January. The rules lay out how companies must comply with the California Consumer Privacy Act, with guidelines on consumer notification and procedures for responding to collected data requests. Final comments on the 24-page regulations are due by Dec. 6. The rules are plowing new ground, Becerra told reporters at a press conference. "We're better than Captain Kirk and the Enterprise. We're going really where no one in America has gone before," he said. Read more from Cheryl Miller here.

The Law Firm Data Breach Problem Is Getting Worse More than 100 law firms have reported data breaches across 14 states since 2014, according to a Law.com investigation. Law firm data breaches might also be occurring more often. The number of unique law firm data breaches in New York doubled in 2018 to eight, compared with 2017. A former head of the FBI's cyber branch in New York said law firms are targeted because their data offers bad actors a one-stop shop for sensitive information. Read more from Christine Simmons, Xiumei Dong and Ben Hancock here.

Facebook's Appellate Beeline Facebook's Gibson, Dunn & Crutcher lawyers want to move its litigation over the Cambridge Analytica scandal to the U.S. Court of Appeals for the Ninth Circuit. After U.S. District Judge Vince Chhabria largely denied Facebook's motion to dismiss the case last month, Facebook changed its tactics to argue that plaintiffs' privacy claims do not show evidence of the concrete harm needed to establish standing in federal court. "The question whether alleged data privacy violations give rise to Article III standing is an evolving issue of increasing importance that already has drawn considerable attention from the nation's appellate courts, including the U.S. Supreme Court," wrote Facebook's lawyers. Read more from Ross Todd here.

Square GC on Paying for CBD Square Inc. announced last Thursday that it would support CBD retailers with payment processing. Sivan Whiteley, Square's general counsel, said the company's compliance team saw the move as a way to cater to a historically underserved group of sellers. However, the decision required building brand new compliance measures and getting Square's banking partners on board. Read more from Dan Clark here.

Thanks for reading. We will be back next week with more What's Next.