CDK, Reynolds challenge Ariz. dealer data law

CDK Global Inc. and Reynolds and Reynolds Co. are suing in federal court to overturn a new Arizona law that gives dealers more control over the data in their dealership management systems.

The lawsuit, filed July 29 in U.S. District Court in Arizona by co-plaintiffs CDK and Reynolds, the industry’s largest DMS providers, argues that the law is unconstitutional. The Arizona statute goes into effect Aug. 26, according to the complaint.

The suit names Arizona Attorney General Mark Brnovich and John S. Halikowski, director of the Arizona Department of Transportation, as defendants.

The Arizona law is similar to legislation passed this year in Montana, Oregon and North Carolina and enacted last year in Hawaii.

The laws give dealers more control over who data in the DMS is shared with and also reins in the fees DMS companies charge for access to such data.

The lawsuit by CDK and Reynolds says that Arizona’s law was framed as helping consumers but was “drafted and pushed through by the Arizona Automobile Dealers Association.” The law puts consumer data at risk by allowing unlicensed third parties to access the DMS, the complaint claims. It also argues that the law is unconstitutional, conflicts with federal requirements protecting consumer privacy and DMS companies’ proprietary data, and is generally vague.

The lawsuit further argues that Arizona’s law leaves sensitive information consumers give to dealerships — driver’s license and Social Security numbers, for example — exposed to third parties that do not have the same obligations to protect the data that dealerships have. It also leaves the DMS companies themselves more vulnerable to cyber crime, the suit says.

“Rather than protecting consumers, the DMS Law is a blatant attempt by car dealers to change the terms of freely negotiated, arms-length contracts with Plaintiffs and to interfere with Plaintiffs’ contracts with other parties, for short-term economic gain and at the expense of the people of Arizona,” the complaint states.

The defendants have not yet responded to the complaint. U.S. District Judge G. Murray Snow on Aug. 12 granted them a one-time extension to Sept. 18 to file their response.

The Arizona law, signed by Republican Gov. Doug Ducey on April 9, essentially allows dealers to share data with any third party they identify as an authorized integrator and prohibits fees for such access. It is part of a broader fight by dealers in several states over control of the data in dealer management systems.

Representatives for the Arizona Automobile Dealers Association could not immediately be reached for comment last week.

In an emailed statement, a Reynolds spokesman reiterated several claims made in the complaint and called the Arizona DMS law “unconstitutional.” The spokesman, Thomas Schwartz, said he couldn’t speculate on whether the company will respond to similar laws enacted in other states.

“What I can say is that we are evaluating whether or not these laws are also unconstitutional or present other legal issues,” Schwartz said in the email.

A spokeswoman for CDK said the complaint “articulates the rationale for the suit.” 

“CDK views the Arizona statute, and similarly structured legislation, as fundamentally flawed,” CDK spokeswoman Mary Goodrich said in an email. “Only one suit has been brought to challenge the Arizona law, but similar actions are not ruled out as needed to challenge other legislation.”