Fed. Dist Court of LA Denies Takings, 1st Amendment and 8th Amendment Claims Challenging Ordinance Restricting Short Term Rentals

This post was authored by Matthew Loescher, Esq.

In 2019, the New Orleans City Council adopted ordinances that amended the City of New Orlean’s Comprehensive Zoning Ordinance (“CZO”) and City Code to authorize short term rentals (“STR”). The CZO defined an STR as rental of all or a portion of a residential dwelling unit for a period of less than thirty consecutive days. These ordinances were effective beginning April 1, 2017, but had since been repealed and replaced by ordinances M.C.S. 28,156 and M.C.S. 28,157, which imposed rules and regulations regarding STRs in the New Orleans Area. The court denied plaintiffs’ motion for temporary restraining order and/or preliminary injunction on December 30, 2019.

 As to the Fifth Amendment Takings Claim, the court first noted that STR permits were defined in the original city ordinances as “a privilege, not a right” which “may be revoked or not renewed based on non-compliance with the requirements of the Comprehensive Zoning Ordinance…” As plaintiffs have not shown they will prevail on the merits of a Fifth Amendment takings claim, either regulatory or actual, their motion for summary judgment failed. Conversely, the court found that the City had shown that it was entitled to a judgment as a matter of law that the ordinances did not effectuate a taking. Accordingly, defendant was granted summary judgment.

The record reflected that the ordinances required the City to provide notice and an opportunity for hearing prior to the imposition of fines or penalties. Specifically, the relevant provision of the City Code stated that “Any violation of this Article is prohibited, and shall subject the Owner, Operator, or Platform to penalties as provided in Sec. 26-629…and notice and hearing requirements for determining violations shall be in accordance with the administrative procedures provided in Chapter 6, Article III of the Code of the City of New Orleans.” Additionally, the ordinances provided opportunity for review before a hearing officer prior to assessment or imposition of any penalties. Accordingly, the ordinances did not fall outside the confines of the Fourth Amendment and were constitutional. As the Department did not keep the funds, and its annual budget was not tied to the number of fines it collected, Plaintiffs’ assertion that there would be collusion amongst the Department and its hearing officers was unsupported by any evidence.

Plaintiffs argued that the fines imposed by violation of the ordinances were excessive, unlimited, and violative of the Eight Amendment. Here, the STR ordinances allowing the imposition of fines were made in conjunction with state law, were proportional, and were facially constitutional. The court found that Plaintiff’s speculative arguments that the disabled and elderly will be burdened by this were unavailing and unpersuasive. Accordingly, the penalty provisions of the ordinance did violate the Eight Amendment.

 Next, Plaintiffs contended that the revised ordinances violated their First Amendment rights to free association and assembly, by prohibiting more than two persons from sharing a bedroom, thereby “criminalizing…a couple who allow their infant or child to sleep in the bedroom with them.” The court found the STR ordinances did not prohibit non-commercial social events of the type plaintiffs described, as Section 26-620(B) (8) set forth that STRs are only prohibited from being operated as commercial reception facilities. Accordingly, Plaintiffs’ First Amendment claim was denied.

The court lastly noted that any incidental effect on interstate commerce would be one that was unintended, and “not clearly excessive in relation to the putative local benefits.” The record indicated that the City Council discussed, at length, about protecting neighborhoods and ensuring accountability by requiring homestead exemptions for temporary STR permits. This demonstrated that the ordinance was subject to a legitimate local public interest and not mere protectionism for Louisiana residents. Accordingly, the court granted defendant judgment as a matter of law with respect to whether the ordinances ran afoul of the dormant Commerce Clause.

 Hignell v City of New Orleans, 2020 WL 4541478 (ED LA 8/6/2020)