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Murphy v. Walworth County

United States District Court, E.D. Wisconsin

April 10, 2019

MARTIN J. MURPHY and STAY LAKE GENEVA, INC., Plaintiffs,
v.
WALWORTH COUNTY, Defendant.

          ORDER

          J.P. Stadtmueller U.S. District Judge.

         This action arises from a newly enacted ordinance in Walworth County that imposes various requirements on short-term rental properties. On April 25, 2018, plaintiffs Martin J. Murphy and his family's rental business, Stay Lake Geneva, Inc., (collectively, “Murphy”) filed a complaint in this Court alleging that an ordinance enacted by defendant Walworth County (“the County”) violated Murphy's Fourth and Fourteenth Amendment rights, and seeking declaratory and injunctive relief. (Docket #1). The parties each filed motions for summary judgment, and their motions are now fully briefed. For the reasons explained below, the Court will grant the County's motion for summary judgment, deny Murphy's motion for summary judgment, and dismiss the case.

         1. STANDARD OF REVIEW

         Federal Rule of Civil Procedure 56 provides that the Court “shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); Boss v. Castro, 816 F.3d 910, 916 (7th Cir. 2016). A fact is “material” if it “might affect the outcome of the suit” under the applicable substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute of fact is “genuine” if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. The Court construes all facts and reasonable inferences in the light most favorable to the non-movant. Bridge v. New Holland Logansport, Inc., 815 F.3d 356, 360 (7th Cir. 2016). The Court must not weigh the evidence presented or determine credibility of witnesses; the Seventh Circuit instructs that “we leave those tasks to factfinders.” Berry v. Chicago Transit Auth., 618 F.3d 688, 691 (7th Cir. 2010). The party opposing summary judgment “need not match the movant witness for witness, nor persuade the [C]ourt that [his] case is convincing, [he] need only come forward with appropriate evidence demonstrating that there is a pending dispute of material fact.” Waldridge v. Am. Hoechst Corp., 24 F.3d 918, 921 (7th Cir. 1994).

         2. RELEVANT FACTS

         2.1 The County's Short-Term Rental Regulations

         The County is home to many lakes and outdoor attractions, as well as a community of long-term residents. During the summer season, tourists flock to the region to enjoy Lake Geneva, Kettle Moraine State Forest, and the Alpine Valley Music Theater. There are many places for tourists to stay in the County including hotels, bed and breakfasts, and short-term rentals. The annual wave of tourists has both positive and negative effects for the residents who live there.

         The last several years have seen the rise of short-term rental websites such as Airbnb and VRBO. As a result, short-term housing rentals have become a viable way for multi-property owners to make money by leasing their seasonal homes for brief periods of time. Short-term rentals are often found in residential zones and offer the temporary experience of living like a local. The short-term rental phenomenon, which rides in tandem with summer tourism in the County, has positive and negative effects for the long-term residents in the community. On the one hand, tourism is a boon for the local economy. On the other hand, shorter term residents often have less of an interest in preserving the environment, or in respecting the communities that have been settled there for years. Long-term residents may welcome tourists in their commercial zones but find them annoying and un-bargained-for in residential areas.

         In September 2017, the State of Wisconsin passed “Act 59, ” which sought to address the competing interests surrounding short-term rental properties. Act 59 prohibited local governments from outlawing short-term rentals-presumably because a property owner should be able to use his property as he sees fit, within reason and the law. In exchange, however, Act 59 allowed counties and municipalities to regulate short-term rentals through zoning and licenses.

         In light of the new statutory framework, in late 2017, the County held a series of “vacation rental workshops” in order to address issues with short-term rentals that are often the subject of resident complaints. They discussed potential solutions for controlling problems such as excess noise, over-occupancy, and waste, and considered zoning regulations, licensing requirements, and taxes. Ultimately, zoning and licensing regulations were agreed upon. The goal of this approach, according to the County, was to allow short-term rentals while protecting the interests and quality of life for long-term residents.

         Following this process, the County enacted various ordinances to counteract the negative externalities of tourism, including the one at issue, Ordinance No. 1099 (“the Ordinance”). The Ordinance dealt with various concerns raised by the community, including over-occupancy and sanitation issues. The stated purpose of the Ordinance is to “ensure a short-term rental operating in a residential dwelling within Walworth County is adequate for protecting public health, safety and general welfare, including establishing minimum standards for human occupancy. . .[and] provid[ing] minimum standards necessary for the health and safety of persons occupying or using the buildings. . .” (Docket #24 at 6). The County goes on to explain that “purpose of the Ordinance was not to prohibit month-to-month or short-term lease agreements, but to address the concerns associated with short-term rentals, while complying with state law.” (Docket #31 at 10).

         The Ordinance applies only to short-term rental properties.[1] The contested provisions are Section 26-336, which limits the Ordinance's application to short-term rentals, and Section 26-342, which requires a guest registry. The parties discuss two other sections to illustrate the effect of the Ordinance: Section 26-338, which requires adequate sanitation facilities, and Section 26-339, which limits occupancy. The relevant policies are provided below.

Sec. 26-336. Applicability. This article shall apply to all rentals of a Residential Dwelling as a Short-Term Rental as defined in Chapter 74 of the Walworth County Code of Ordinances. . .This article shall not apply to facilities approved as a hotel, motel, tourist court, rooming house, lodge, lodging house, or bed and breakfast as defined in Section 74-131 and 74-263 of the Walworth County Code of Ordinances.
Sec. 26-338. Sanitary facilities. Adequate sanitary facilities shall be provided. Cesspools and non-plumbing sanitary systems such as composting toilets, incinerating toilets, privies, and portable restrooms are prohibited. If the property is not served by public sanitary sewer, a Private Onsite Wastewater Treatment System (POWTS) in full compliance with this Article and in accordance with Chapter 70, Walworth County Code of Ordinances, and Wisconsin Administrative Code DSPS 383 must serve the property.
Sec. 26-339. Occupancy. If the property is served by public sanitary sewer, occupancy is limited to the number of occupants authorized by the State Tourist Rooming House License issued by the State of Wisconsin Department of Agriculture, Trade and Consumer Protection in accordance with Wisconsin Administrative Code ATCP 72. If the property is served by a POWTS, occupancy is limited to the number of occupants for which ...

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