Posted by: Patricia Salkin | April 25, 2019

NY Lower Court Dismisses Lawsuit Against Airbnb on Collateral Estoppel Grounds

This post was authored by Amy Lavine, Esq.

A lawsuit alleging that Airbnb was operating as an unlicensed “real estate broker” was dismissed in April by a New York court. The complaint was barred under the doctrine of collateral estoppel, the court found, as it was almost identical to a previous lawsuit that the plaintiff had filed against Airbnb in federal court and which had been dismissed for failure to establish injury in fact.

Parker Madison, a licensed New York State real estate broker, sought to recover damages from Airbnb for deceptive trade practices and unfair competition, alleging that Airbnb met the legal definition of a “real estate broker” but was operating without a New York State real estate broker’s license. Parker Madison had unsuccessfully filed a similar lawsuit against Airbnb in federal court, however, and Airbnb moved for a dismissal of the state court complaint on the basis of collateral estoppel and failure to state a cause of action.

The New York court first explained that “To invoke the doctrine of collateral estoppel, two requirements are necessary: 1) ‘there must be identity of parties, and identity of issues that were decided in the prior action and decisive of the present action’; and 2) ‘there must have been a full and fair opportunity to contest the decision now said to be controlling.'” Because the parties in this case were identical to those in the federal court action, the only issues to be considered were the identity of issues and whether Parker Madison had a full and fair opportunity to be heard in its federal court action.

The court found that the claims in Parker Madison’s state court and federal court actions were substantially identical, thus establishing an identity of issues for purposes of collateral estoppel. The court noted in particular that the only new allegation in Parker Madison’s state court complaint was that it “had units advertised and rented through Airbnb without [its] knowledge or authorization.” This allegation was conclusory, however, as Parker Madison failed to identify any specific units being rented in this manner, nor did it explain how Parker Madison had been injured as a result of these allegedly improper rentals. As a result, the court found that “any ‘new’ allegations here do not remedy the defects in the Second Federal Complaint regarding the establishment of injury.” It made no difference that the federal court’s decision was made in the context of Article III standing because injury was also an element of Parker Madison’s state law claims for deceptive trade practices and unfair competition. In other words, the court explained, “a question of fact material to the merits (i.e., injury) was decided by the federal court and was essential to its judgment for Airbnb based on lack of jurisdiction. Accordingly, this determination by the federal court precludes Parker Madison’s claims, both of which require establishing injury, in this state court action.”

Parker Madison also claimed that it was denied a full and fair opportunity to be heard in federal court because it hadn’t been allowed “to remedy what the federal court deemed to be a pleading deficiency regarding injury.” The court rejected this argument as well, however. As it explained, Parker Madison’s request to submit a third complaint in federal court was denied because it failed to show “good cause for its failure to address or adequately plead standing” and rather than appeal this denial, Parker Madison simply commenced this state court action. Given these circumstances, the court found no basis for Parker Madison’s claim that it was denied a full and fair opportunity to litigate the issue of injury, and it emphasized that “Parker Madison may not bring its identical claims to state court to re-litigate the unfavorable outcome it received in federal court.”

Parker Madison Partners v. Airbnb, Inc., 2019 NY Slip Op 31132(U) (N.Y. Sup. Ct., N.Y. Cty. 4/25/19).

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