Wednesday, January 19th, 2022

CDK drops claims in Arizona dealership data law case

CDK Global Inc. agreed to drop its legal challenge to a state law in Arizona that gives auto retailers more control of data inside dealership management systems, saying the company instead will focus on its software products.

U.S. District Judge G. Murray Snow last week signed an order dismissing CDK’s claims in the case following a stipulation by the parties, including CDK and DMS rival Reynolds and Reynolds Co., Arizona Attorney General Mark Brnovich and the Arizona Automobile Dealers Association, which intervened in the case, according to a court filing.

Privately held Reynolds and Reynolds Co. is the sole remaining plaintiff in the case. The two DMS giants brought the lawsuit in 2019.

“We want to focus our efforts on continuing to provide innovative software solutions to our dealers in Arizona and elsewhere,” CDK spokesman Tony Macrito said via email.

“The court has provided some direction as to how the statute is intended to and should operate,” Macrito wrote. “In the event any actual application of the statute threatens CDK’s intellectual property rights, the integrity or security of our DMSs, or the data entrusted to us that resides on those systems, CDK will take appropriate steps to protect its product offerings and its partners.”

Also last week, Snow denied a separate motion from Reynolds seeking to appeal the judge’s earlier dismissal of some of its claims, writing that its argument failed to meet the requirements for such an appeal.

Reynolds, though a spokesman, declined to comment.

Arizona’s data law was enacted in April 2019 and allows dealerships to share data stored within their DMS with third-party vendors considered authorized integrators, and prevents companies including CDK and Reynolds from charging fees or placing other restrictions on that data access. Other states have adopted similar laws, including Montana, Oregon and Hawaii.

CDK and Reynolds filed a lawsuit in July 2019 against Brnovich and John Halikowski, director of the state transportation department. Halikowski eventually was removed as a defendant and several of the DMS companies’ original claims were dismissed in May 2020. They later submitted a revised complaint.

CDK and Reynolds contended that the data law is unconstitutional and vague, and leaves consumers’ personal information potentially at risk for cyber threats and misuse. In the revised complaint, the DMS providers wrote that the law interferes with their contracts with dealerships and requires giving “free and unfettered access” to third parties, including potential malicious actors.

A three-judge panel of the U.S. Court of Appeals for the Ninth Circuit in October rejected efforts by CDK and Reynolds to block enforcement of the law, upholding a similar ruling by Snow in July 2020. Snow wrote then that the companies “have not proven a likelihood of success on the merits of their claims.”

Bobbi Sparrow, president of the Arizona Automobile Dealers Association, told Automotive News she remains “very confident” that the law ultimately will be upheld.

A scheduling conference in the case has been set for Jan. 28.