Legal analysis is certainly not something that comes to mind when planning a vacation.  However, with the increasing popularity of finding accommodations via an online service called Airbnb, you might need to hire a lawyer before booking a place to stay or, more importantly, deciding to rent that spare room in your home to an overseas vacationer.

Airbnb operates a website that allows people to find hosts in cities in close to 200 countries around the world.  It is one of the growing number of companies active in what many refer to as today’s “sharing economy,” which involves “cloud-based platforms that establish a market between individuals” according to Freakonomics co-author Stephen J. Dubner.  Instead of booking a hotel room in a new or unfamiliar neighborhood, travelers use Airbnb to help connect them to potential hosts in their desired area, in whose home or rental property they can stay—usually at a rate far less than what a mainstream hotel costs.

This may seem like a win-win situation.  Visitors keep their travel expenditures down and hosts have an income stream to help cover their own expenses.  However, there are a number of considerations that could spell trouble for either or both of the parties.  In a typical hotel environment, for example, building codes dictate that the facility adhere to certain safety standards in terms of fire exits, informative signage, emergency-lit pathways, and the like.  The rationale is that transient guests are not familiar with their surroundings and need clear and immediately understandable instructions in case of emergency.  Joe Neighbor’s residential apartment on East 8th Street does not offer the same safeguards to the short-term guests passing through his doors.  This could pose a significant safety hazard in the event of an emergency.  The liability for injury or death may lie squarely on the owner of the dwelling in such a scenario.

Which brings us to another potential issue that may arise with this hosting model: Tenants who decide to list “their” apartments (or rooms therein) on Airbnb, without express permission from their landlords (a.k.a. the actual owners of the residence).  Depending upon the language in the lease, as well as any state regulations in effect, operating an ad hoc bed-and-breakfast may violate the lease, put one at risk of eviction, and/or incur significant fines (even if the host is the actual property owner).  Many states, including New York, have an “illegal hotel law” which, among other things, prohibits residents from accepting payment for houseguests who stay for fewer than 30 days, especially if the host is not present during their stay.  See New York State Multiple Dwelling Law § 4(8)(a).  Additionally, New York City imposes a 5.875 percent occupancy tax on hotel and other short-term room rentals.  To resolve the tax issue, Airbnb has been rolling out official automatic collection of a Transient Occupancy Tax, or “hotel tax,” in some of its service areas.

Before listing as a host on Airbnb, individuals should do their due diligence not only on their guest but to ascertain that their plans will not constitute a violation of their lease or of their location’s building safety and tax laws—laws which are now being revisited because of how widespread the service has become.

Believe it or not, many of the characteristics stereotypically associated with Sherlock Holmes were not actually significant elements in most—or even any—of the 60 stories written by Sir Arthur Conan Doyle about the now-iconic fictional detective.  Holmes’ magnifying glass, for example, appeared occasionally in the novels and short stories, while the distinctive, curved calabash pipe did not feature at all, but became a part of the Holmes persona over time, as people interpreted the character on stage, in films, and in illustrations.  The instantly-recognizable double-brimmed deerstalker hat, while not mentioned by name in the Sherlock Holmes canon, was represented in the original commissioned illustrations that accompanied the first publications of Conan Doyle’s stories in The Strand Magazine in the late 19th century.  Since then, there have been numerous adaptations and reinterpretations of the famous sleuth and his adventures with trusted sidekick, Dr. Watson.  Many of these adaptations, however, were produced only with the blessing of (and payment of licensing fees to) the late British author’s estate, even though only a handful of the stories from the Sherlock Holmes catalog of work were still under copyright. 

California-based lawyer and author Leslie Klinger—who, according to his website, is “one of the world's foremost authorities on Sherlock Holmes”—agreed to the Conan Doyle estate’s demand of purchasing a $5,000 copyright license before publishing his 2011 anthology entitled “Study in Sherlock: Stories Inspired by the Sherlock Holmes Canon.”  When the estate learned that Klinger was working on a sequel a few years later, they demanded his publisher halt publication until he would agree to obtain another license.  Instead of capitulating, Klinger sued the estate on the grounds that his work was only drawing from stories that were already in the public domain under copyright law, and thus, did not require a license for use.  Under US law, works published before 1923 are now considered to be in the public domain; this includes the 50 Sherlock Holmes stories published between 1887 and 1922.  But the 10 most recently-published stories are still under copyright protection, since they were published after 1923.  The Conan Doyle estate argued that the dynamic development of the two main characters was not fully complete until those final 10 stories were published, and hence, Holmes and Watson should not yet be freely used in the public domain, as elements of the characters themselves were still copyrighted.

A federal appeals court in Chicago disagreed with the Conan Doyle estate and the Conan Doyle estate has petitioned the Supreme Court to review this case.  If this court decision stands, the enigmatic residents of the fictitious 221B Baker Street will finally enter the public domain in their entirety and may be used freely in new creative works without having to seek permission from the author’s descendants.

Many commercial loan packages involve the signing of non-recourse, otherwise known as “bad boy,” guaranties.  Since the guarantor is often the principal of the borrower, the guarantor typically signs the “bad boy” guaranty assuming that the guarantors assets are not really at risk if the loan goes into default.  However, this assumption is far from the case because the “bad boy” events that trigger guarantor liability are usually not limited to fraudulent conduct, but other less pernicious conduct such as the borrower’s filing of bankruptcy, failure to pay taxes or maintain insurance.  Because the guarantor’s personal assets are potentially on the hook in these circumstances, it is critical that loan participants carefully negotiate the recourse provisions of the loan agreement.  Ambiguities often lead to contentious litigation . . . and more often than not, courts have sided with lenders.
 
Judge Deborah A. Batts of the Southern District of New York recently disrupted that cycle earlier this year when she decided that the defendant guarantor was not liable for payment of a loan balance after the property had gone into foreclosure.  See CP III Rincon Towers Inc. v. Cohen, 2014 WL 1357323 (S.D.N.Y. Apr. 7, 2014).  The Court held, inter alia, that various mechanic’s and judgment liens that encumbered the property were not “voluntary” and therefore did not trigger the guarantor’s full recourse liability under a “bad boy” provision that applied to “voluntary” liens.  By contrast, for a decision in which a lender successfully recovered against a guarantor on summary judgment, see Greenwich Capital Financial Products, Inc. v. Negrin, 74 A.D.3d 413 (1st Dep’t 2010), which was litigated by, among others, a member of our office while at his prior law firm.

Seeking Alpha (SA), an online news and opinion forum primarily focused on financial markets, made the news itself about six months ago when an anonymous post incurred the legal wrath of biopharmaceutical company NanoViricides (NNVC).  On February 11, 2014, a contributor using the pen name “Pump Terminator” published a rather scathing review of the drug company, including discussion of suspected questionable trading and management activity and shareholder violations, ultimately recommending the stock as a “strong sell.”  According to a March press release announcing their decision to take action against SA, NNVC alleges that the post was “defamatory, malicious and libelous,” contained “factual inconsistencies,” and directly contributed to a 23% drop in their stock price on the day that the piece was published.  NNVC, which focuses primarily on research and development of antiviral drugs, filed a pre-action disclosure petition against SA, demanding that they disclose the identity of the anonymous poster so that they could pursue a libel case against him or her.  The author of the post self-identified as a short-seller of the stock, further arousing NNVC’s suspicions that the negative coverage was a premeditated attempt to manipulate the market and ultimately profit from the sharp decline in share price.  When SA chose not to remove the offending post from their virtual bulletin board, NNVC denounced the investment analysis website as being a “complicit agent in the criminal act(s) perpetrated by the article author and collaborators-in-action.”

At the end of June, New York Judge Cynthia S. Kern dismissed NNVC’s suit against SA, releasing them from any obligation to divulge the identity of “Pump Terminator,” as the court had determined that the post was not defamatory and was considered “protected opinion and not actionable as a matter of law."  The court found that NNVC did not sufficiently demonstrate that that article in question could be constituted as defamation.  The post contained clear disclosure that its content reflected the author’s own opinions, and any facts that were presented were accompanied by links to sources which readers were encouraged to review in order to reach their own conclusions.  Furthermore, as the courtnoted, the fact that the author’s opinions were published in the “unique context of the Internet,” and considering such fora are often rife with hyperbole and “the repository of a wide range of casual, emotive, and imprecise speech,” the greater context of the statements signals to the reader that the article must consist of the author’s personal opinion.  The author’s repeated use of phrases such as “we believe” and “it seems to us” clearly reinforces this point, even without the court’s having to figure out a way to apply foundational constitutional principles to this contemporary situation.

Presumably, investors take anonymous opinion pieces like this with a grain of salt, and do not rely on  recommendation to make any drastic trading decisions.  The nature of Seeking Alpha’s crowdsourcing platform is summed up by the website’s tagline: "Read. Decide. Invest."  It is a forum based on what the site’s editor-in-chief describes as a Socratic approach that encourages independent (and sometimes anonymous) investors to freely express their opinions, debate ideas, and make informed choices based on their own due diligence.  Clearly expressing the court’s support for the rights of a free press, Justice Kern concluded her decision by emphasizing that “[I]t is paramount in an open and free society that we protect the anonymity of those whose ‘publication is prompted by the desire to question, challenge and criticize the practices of those in power without incurring adverse consequences.’”  In addition to being an important and precedent-strengthening ruling for Seeking Alpha, this decision allowing pseudonymous posts is an important free speech victory.