A New York State Supreme Court judge has granted Airbnb, Inc.’s motion to quash the New York State Attorney General’s subpoena for information on Airbnb’s New York clients on the grounds that the subpoena was overly broad. Airbnb Inc. v. Schneiderman, Index No. 539313 (N.Y.S. Sup. Ct. May 13, 2014). The Attorney General, Eric T. Schneiderman, served a subpoena on Airbnb in connection with his investigation of short term rentals in New York and potential violations of the New York Multiple Dwelling Law and State and local occupancy tax laws.

New York law provides that in cities with a population of over 325,000, certain types of “Class A” multiple dwellings, such as apartment houses, may only be used for “permanent residence purposes.” Multiple Dwelling Law, Art. 1, § 4.8(a). In addition, hotel rooms in New York City are subject to a 14.75% total tax, consisting of a New York City hotel room occupancy tax, and New York State and City sales and use tax on hotel room occupancies. New York State and local sales tax is due on room rentals outside New York City only if the building is considered a hotel and is regularly kept open for the lodging of guests. Tax Law § 1101(c); N.Y.C. Admin. Code § 11-2001(a).

The Attorney General (“AG”) served a subpoena on Airbnb asking for the following information: the name, address, and contact information of each host; the address of the accommodation rented; dates, duration of stay, and rates charged for each rental; the method of payment to each host; the total gross revenue generated through Airbnb for each host; and “Documents sufficient to identify all tax-related communications” between Airbnb and each host. Airbnb objected to the subpoena on multiple grounds – that there was no factual basis for the issuance of the subpoena, that the investigation by the AG was based on laws that are unconstitutionally vague, that the subpoena was overbroad and unduly burdensome, and that the subpoena sought confidential private information from Airbnb’s clients.

The judge held that the AG had demonstrated an adequate factual basis for the subpoena, and that the subpoena did not seek confidential information. He also held that Airbnb’s objection to the subpoena on the grounds that the investigation was based on unconstitutionally vague laws was not ripe for review since no attempt had yet been made to enforce the laws at issue.

However, the judge did find that the subpoena was overly broad. With respect to the Multiple Dwelling Law, the judge found that the subpoena was overly broad because it sought information for all of New York State, and was not limited  to hosts that lived in cities (such as New York City) to which the Multiple Dwelling Law applied.  With respect to the New York City hotel occupancy tax and sales tax, the judge found that the subpoena was overly broad because it was not limited to New York City hosts and did not take into account certain exceptions to the City hotel occupancy tax, e.g., for rentals on fewer than three occasions during the year. Finally, with respect to the New York State sales tax, the judge found that the subpoena was overly broad because it was not limited to rooms rented by hotels.  Accordingly, the judge granted Airbnb’s motion to quash the subpoena.

Additional Insights

The decision is a reminder that the government’s subpoena power is not unlimited and may be successfully challenged, as it was here where the government sought information that went beyond the scope of its authority.  Although Airbnb’s motion to quash the subpoena was granted, reportedly the AG served another subpoena on Airbnb the next day, presumably narrower in scope.  On May 21, 2014, Airbnb and the AG reached an agreement under which Airbnb will provide the AG with data about its hosts in New York, but that data will not include their names, addresses, or other personally identifiable information, unless there is an investigation or planned enforcement action directed to individuals.