A federal judge has dismissed part of a lawsuit brought by dealership software giant CDK Global Inc. against a group of dealerships that alleges the retailers improperly allowed third parties to access CDK's dealership management system.
U.S. District Judge Robert Dow Jr., in an opinion issued last week, ruled that CDK has until the end of September to revise and resubmit its claim that the 17 dealerships violated the federal Computer Fraud and Abuse Act, which guards against computer hacking.
Aside from that claim, Dow's opinion sided mostly against the dealerships, which operate in six states and had asked the judge to dismiss CDK's suit filed in February. Dow's ruling allows CDK to continue pursuing claims that the dealerships committed breach of contract and that some of their allegedly unauthorized access also violated the federal Digital Millennium Copyright Act.
CDK declined to comment on pending litigation.
A lawyer for the dealerships expressed gratitude that the judge dismissed "some claims."
"[W]e are confident that the remaining claims against the dealerships are without merit," Peggy Wedgworth, a partner at Milberg Phillips Grossman in New York, told Automotive News via email.
CDK countersued the dealerships as part of an ongoing multidistrict litigation case in federal court in Illinois. Multiple antitrust lawsuits have been filed against CDK and its primary competitor, Reynolds and Reynolds Co., and have been consolidated in the Illinois court.
CDK contends that the dealerships "have repeatedly breached their contracts with CDK by handing out their DMS login credentials, directly or through their software vendors, to third party data extractors ... for the express purpose of enabling those third parties to use those credentials to repeatedly and relentlessly access CDK's DMS using sophisticated computer software that extracts (or 'scrapes') large volumes of data from the system," according to its counterclaims filed in federal court.
Those companies sell the data obtained from CDK's DMS without paying CDK for the access, CDK said in court filings, and those actions expose the DMS to security threats and corruption.
CDK said in court filings that its contracts with dealers prevent them from giving DMS access to outside companies. CDK claims the named dealerships provided login credentials to Authenticom, a data integration service vendor, and other third parties and, in some cases, also created new login information or restored credentials that had been deactivated.
In response, lawyers representing the dealerships told the court that "CDK should not be permitted to compound its illegal and anticompetitive behavior against its dealership customers through its facially deficient and fundamentally flawed Counterclaims," according to court records.
Dealers argued, among other things, that CDK failed to demonstrate that it suffered losses under the Computer Fraud and Abuse Act. The law stipulates that to be recovered, losses must be at least $5,000 in a year, lawyers for the dealerships said in court filings. They contend the statute doesn't allow CDK to combine losses from 17 dealerships into a single event.
Dow dismissed the portion of CDK's lawsuit related to violation of the federal anti-hacking statute on the basis of CDK's "failure to allege sufficient losses." He ruled that CDK has until Sept. 30 to file revised counterclaims against the defendants in keeping with his opinion.
The dealerships named in CDK's lawsuit are:
- ACA Motors Inc., which operates as Continental Acura in Naperville, Ill.
- Continental Classic Motors Inc., which operates as Continental Autosports in Hinsdale, Ill.
- 5800 Countryside, which operates as Continental Mitsubishi in Countryside, Ill.
- HDA Motors Inc., which operates as Continental Honda in Countryside, Ill.
- H & H Continental Motors Inc., which operates as Continental Nissan in Countryside, Ill.
- Continental Autos Inc., which operates as Continental Toyota in Hodgkins, Ill.
- Naperville Zoom Cars Inc., which operates as Continental Mazda in Naperville, Ill.
- NV Autos Inc., which operates as Continental Audi in Naperville, Ill.
- Baystate Ford Inc., which operates as Baystate Ford in South Easton, Mass.
- Cliff Harris Ford, which operates as Warrensburg Ford in Warrensburg, Mo.
- Marshall Chrysler-Jeep-Dodge in Marshall, Mo.
- Warrensburg Chrysler-Dodge-Jeep, which operates as Warrensburg Chrysler-Dodge-Jeep-Ram-Fiat in Warrensburg, Mo.
- Jaguar Cherry Hill, which operates in Cherry Hill, N.J.
- JCF Autos, which operates as Stevens Jersey City Ford in Jersey City, N.J.
- Jericho Turnpike Sales, which operates as Ford of Smithtown and Lincoln of Smithtown in Saint James, N.Y.
- Patchogue 112 Motors, which operates as Stevens 112 Ford in Patchogue, N.Y.
- Waconia Dodge Inc., which operates as Waconia Dodge-Chrysler-Jeep-Ram in Waconia, Minn.