October 23, 2018 — Reynolds and Reynolds and CDK Global and their joint venture Computer Vehicle Registration (CVR) failed in their fourth attempt to dismiss the lawsuits alleging they engaged in several antitrust activities.
Late Monday, Judge Robert Dowd in Illinois’ Northern District denied the defendant’s motions to dismiss the lawsuits filed by Motor Vehicle Software Corporation (MVSC) in early 2017.
The lawsuit stem from allegations the two dealership management system (DMS) giants conspired to block MVSC’s access to data on the DMS in an attempt to force it from the market giving competitor CVR a decided advantage. MVSC also alleges Reynolds and CDK used an “unlawful” agreement in 2015 to force out companies providing independent data integration services to vendors and dealers eliminating another channel for MVSC to access data necessary to its business. MVSC also claims the two tech firms intimidated dealers in Illinois and California, it’s two primary markets, into using CVR.
The judge, in his ruling, stated that MVSC’s allegations are “sufficient to establish” that CDK and Reynolds directed CVR to “engage in anti-competitive conduct,” and as a result, themselves participated in such conduct. The judge also agreed with MVSC that the 2015 agreement between Reynolds and CDK provides sufficient cause to claim they engaged in illegal monopolization activity, including conspiracy to monopolize.
MVSC’s lawsuit is one of four current vendor suits alleging Reynolds and CDK engaged in anti-competitive behavior. Other vendors suing are Authenticom, Cox Automotive (only against CDK for now) and AutoLoop (also against CDK only). The plaintiffs are represented by Derek T. Ho, Michael N. Nemelka, Joshua Hafenbrack, and Christine A. Bonomo of Kellogg Hansen Todd Figel & Frederick PLLC.
Two other vendor lawsuits filed last year have been settled:
- Last fall, CRMSuite filed a lawsuit against CDK (alleging CDK had breached terms of an agreement regarding CRMSuite’s participation in its partner program) which was later settled. CRMSuite now is partnered with Dominion offering a CRM solution for dealers.
- Superior Integrated Solutions (parent to Darwin Automotive) settled its lawsuit against Reynolds earlier this year during an arbitration process.
The ruling this week shoots down the fourth attempt by CDK and Reynolds to get the lawsuits dismissed over the last year and a half.
- Authenticom Inc. v. CDK Global, LLC, 2017 WL 3017048 (W.D. Wis. July 14, 2017)
- Motor Vehicle Software Corp. v. CDK Global Inc. et al., 2017 WL 5643163 (C.D. Cal. Oct. 2, 2017)
- In re Dealer Management Systems Antitrust Litig., 313 F. Supp. 3d 931 (N.D. Ill. 2018) (applies to Authenticom, Inc. v. CDK Global, LLC, Case No. 18 CV 868)
Meanwhile, 16 dealerships also filed class action lawsuits against both Reynolds and CDK alleging antitrust violations. Pensacola Motor Sales withdrew its suit in May, while another 10 dealerships joined in June bringing the total to 25.
Reynolds reached a settlement earlier this month to settle the dealer class action suit. The proposed terms, filed yesterday, call for Reynolds to pay the dealers $29.5 million (attorney fees are approximately $3 million) with another $250 thousand to pay for notification costs, which will entail ads in Automotive News, Ward’s Dealer Edition newsletters and direct mail.
Once the the court approves the settlement, dealers will not be able to sue Reynolds using the current antitrust allegations (they will be able to sue for normal business disputes).
CDK is not party to the settlement. The reason the dealers settled with Reynolds may be in part due to the nature of its contracts which reportedly require clients and vendors to seek arbitration prior to going the lawsuit route.
All of the lawsuits are grouped into a multi-district litigation and assigned to United States District Court in Illinois’ Northern District’s Eastern Division. The MDL classification is a special civil procedure designed to streamline cases by consolidating pre-trial activity such as the discovery process, depositions and other court-related motions in civil cases involving similar issues and parties into one court. Once the pre-trial activity is completed, the cases then return to their original courts.
(For TBR’s complete coverage and analysis of the antitrust lawsuits, Click Here).