Reported / Citable
Background
Airbnb runs an online marketplace linking hosts with guests, and its subsidiary Airbnb Payments, Inc. (API) processes payments. Under the Terms, a guest generally pays API at booking, and API releases funds to the host about 24 hours after check-in. The payments terms say API may combine and invest guest funds and keep the interest, and that API acts only as the host's payment collection agent for accepting and processing guest payments.
Jamie Edson, a guest, sued API and Airbnb, Inc. (collectively, defendants) under the Unfair Competition Law (UCL). She alleged they operate as unlicensed escrow agents in violation of California's Escrow Law (Fin. Code, § 17000 et seq.), under which escrow holders may not keep interest. After the case was sent to arbitration and Edson limited her claim to public injunctive relief, her third amended complaint sought an order requiring licensure, revised Terms, and payment of the interest to guests or hosts.
The trial court sustained a demurrer without leave to amend. It found the Consumers Legal Remedies Act and unjust enrichment claims were added without leave, which Edson did not challenge on appeal. It held the two UCL claims failed because the Terms make API the host's disclosed agent, so no neutral escrow holder was alleged. Edson appealed the order and judgment, and the appeals were consolidated.
The Court’s Holding
In a published opinion by Petrou, J., the First District, Division Three, affirmed the judgment. Reviewing de novo and accepting properly pleaded facts, it held the complaint alleged no facts showing defendants act as escrow holders, so neither the unlawful nor the unfair UCL claim was stated. An escrow holder is the agent and fiduciary of all parties and carries out their instructions, and the deposit is irrevocable without the parties' consent.
Edson alleged no facts that any party expected or intended defendants to act as escrow holders, or that guests were entitled to interest, and the Terms disclaim that role. They treat a guest's payment as a payment to the host. The Terms also allow unilateral cancellation by guests, hosts, and Airbnb itself, which the court found fundamentally inconsistent with an escrow. It distinguished Pasternak v. Boutris, which involved a licensed escrow company acting under express escrow instructions. It read the 1999 and 2000 internet escrow amendments as aimed at companies holding themselves out as escrow providers. It also warned that Edson's theory could reach travel and other online booking sites.
On the unfair prong, the complaint alleged no facts showing that keeping the interest offends public policy or is oppressive or substantially injurious to consumers. Edson did not argue amendment could cure the defects, and the court found it not reasonably possible because her claims misapply the Escrow Law. It did not decide standing or any private right of action. Defendants recover costs on appeal.
Key Takeaways
- A marketplace payment subsidiary that is the host's disclosed limited agent and allows unilateral cancellations was not alleged to be an escrow holder under the Escrow Law.
- Escrow status requires a third-party holder that is agent and fiduciary for all parties, holding a deposit that is irrevocable without consent.
- The internet escrow amendments were read to target companies holding themselves out as escrow providers, not online platforms generally.
- The unfair-practice claim failed for lack of pleaded facts, and the court did not hold that retaining interest is never unfair.
- The ruling rests on the pleadings, and the court left standing and any private right of action undecided.
Why It Matters
The decision draws a line between payment processing and escrow for online marketplaces. Because the Terms disclosed a limited agency for the host and allowed cancellations by any side, the court treated the arrangement as outside the Escrow Law, avoiding a reading that could reach many booking and e-commerce platforms.
Its reach is bounded: it resolves a demurrer on this complaint's allegations. Whether other payment-holding models, with different terms or different expectations, could qualify as escrow remains open, as do the standing and private-right-of-action questions the court expressly left undecided. As a published opinion, it is citable precedent in California courts.