Guest Injured at Airbnb Not Bound by Airbnb’s Arbitration Clause
Last week, we were all exercised over Disney’s attempt to compel arbitration based on an agreement with a pretty attenuated relationship to the cause of action. Obviously Disney’s officers and directors are avid readers of the blog, because, as Claire Fahy reports in The New York Times, the company reversed course and has abandoned its motion to compel arbitration. Well, Disney is not the only entity trying to engage in this form of arbitration-clause bootsrapping.
Andrew Peterson was injured when a railing on an elevated porch gave way at an Airbnb venue rented by a friend. His injuries were serious enough to necessitate the amputation of one of his legs below the knee. Peterson sued Airbnb and others, but Airbnb moved to compel arbitration. Airbnb claimed that Peterson had agreed to Airbnb’s terms of service years earlier when he created an Airbnb account, even though he never used the site. The trial court denied Airbnb’s motion and it took an interlocutory appeal.
In Peterson v. Devita, a split Illinois appellate court affirmed. The majority found that courts, rather than arbiters, decide threshold issues of arbitrability and that Mr. Peterson’s injuries are unrelated to his use of the Airbnb and thus not governed by any arbitration agreement to which he agreed when he registered on the site. Neither agency nor equitable estoppel principles apply.
In 2020, a Peterson’s friend booked a house using Airbnb. Peterson, not a listed guest at the house, attended a party at the home and sustained serious injuries. He sued Airbnb for negligence.
Airbnb’s arbitration provision provides that issues of arbitrability are to be determined by the arbiter. However, under caselaw interpreting the Federal Arbitration Act (FAA), a court must first establish that the dispute is covered by an arbitration agreement between the parties. The majority then reviewed case law, including a rich trove of Airbnb cases. There is authority from SCOTUS (Henry Schein, Inc. v. Archer & White Sales, Inc.), that where, as here, the arbitration provision delegates questions of arbitrability to arbiter, such questions must go to the arbiter even if the arguments for arbitrability are “wholly groundless.” However, the majority concluded that the Henry Schein rule must be harmonized with common sense. Disputes cannot be sent to the arbiter when the dispute between the parties is wholly independent of any agreement between the parties.
The majority also rejected Airbnb’s argument that Mr. Peterson was bound because his friend acted as his agent when the latter booked the house through Airbnb. No elements of an agency relationship were established. Nor was the majority convinced by arguments sounding in equitable estoppel.
The dissenting justice would have ruled for Airbnb on two grounds. First, the dissenting Justice found that, by registering with Airbnb, Mr. Peterson bound himself to Airbnb’s terms of service, including its arbitration provision. According to the dissent, Mr. Peterson was also bound by Airbnb’s terms because when he knowingly entered into an Airbnb rental as a guest, he did so through an agency relationship with his friend who made the booking. The dissenting justice attributes to Mr. Peterson knowledge of Airbnb’s terms of service that he agreed to in 2018 when he signed up on a website that he never subsequently used. No doubt, his mind was thinking of nothing else between the time the railing gave way and the moment he hit the ground. The matter should be referred to the arbiter, said the dissent, and the arbiter may then decide (in case it matters) whether Mr. Peterson is bound through his own agreement with Airbnb or derivatively through his agent’s agreement with Airbnb.
The majority was concerned that giving effect to Airbnb’s terms of service in cases like this “would lead to absurd consequences.” The dissent thinks doing so is simply an application of existing caselaw interpreting the FAA. I think both sides are correct.