October 25, 2021 — This morning, the United States Court of Appeals for the Ninth Circuit affirmed Arizona’s District Court’s decision denying Reynolds and Reynolds’ and CDK Global’s motion requesting a preliminary injunction to prevent enforcement of Arizona’s Dealer Data Security Law, signed into law in 2019.

The legislation gives dealerships greater control over the data in their dealer management systems (DMS). Hawaii was the first state to pass essentially restricting the level of control a DMS may exert over a dealer’s data. North Carolina, Montana, and Oregon also passed similar laws in 2019.

Arizona’s law is considered to be the most restrictive, though. Key points in the legislation include:

• Vendors (DMS vendors) cannot charge for access to customer or other data housed in the dealer’s DMS. This provision is directed at CDK and Reynolds and Reynolds, about whom third-party vendors have complained for years about the gratuitous fees they charge for access to data housed on the systems they provide dealers.
• Third-party vendors need a dealer’s written permission prior to accessing data on their systems. This part of the law also is directed at CDK and Reynolds and Reynolds by giving dealers the control over which vendors can access their data.
• A third provision allows dealers to terminate vendor contracts following a 90-day notice.

The two DMS vendors filed a lawsuit in the summer of 2019 against Arizona’s attorney general and the state transportation director in an attempt to overturn the law. They also filed a motion requesting a preliminary injunction to prevent the state from enforcing the new law.

The plaintiffs argued the “Dealer Law is preempted by the Copyright Act and the Computer Fraud and Abuse Act, violates the Contracts Clause and the Takings Clause, and is void for vagueness.”

Arizona’s district court denied the injunction request on all three counts and also dismissed seven of the lawsuit’s 10 claims.

CDK and Reynolds appealed the decision with the Ninth Circuit in California, which today affirmed the district court’s ruling saying the plaintiffs were “unlikely to succeed on the merits of their claims, and thus were not entitled to a preliminary injunction.”

Today’s decision effectively slams the door on any hopes the DMS vendors may have for overturning the law.

Meanwhile, in 2017, CDK and Reynolds were both defendants in several lawsuits that eventually were combined into multi-district litigation in Illinois Northern District Court (several of the lawsuits have been individually settled by the two firms). Also in 2017, Federal Trade Commission began an investigation into the data and competitive practices of both companies. More than four years later, the investigation appears to be ongoing, based on CDK’s most recent earnings release. (NOTE: We’re not holding our breath waiting for a decision or announcement.)

For more information on the overall legal landscape involving dealership data and the DMS vendors Click: Legal and Legislative Update on the Ongoing War for DMS Data Access (Subscriber access only).

Stay tuned as TBR continues to cover this long-running story…