An Arizona state law designed to give dealerships more control of the data contained in dealership management systems can take effect after a federal judge denied a request by DMS giants CDK Global and Reynolds and Reynolds to block it.
U.S. District Judge G. Murray Snow on Friday denied CDK's and Reynolds' requests for a preliminary injunction to prevent the Arizona statute, which was signed into law last year, from being enforced. The case is ongoing, but Katie Conner, a spokeswoman for the Arizona Attorney General Office, told Automotive News the law can go into effect with Friday's order. It has been on hold while the injunction request was pending in court.
Plaintiffs CDK and Reynolds, Snow wrote, "have not proven a likelihood of success on the merits of their claims."
The decision is an early win for Arizona dealerships, which have advocated for more control of data that is stored in DMS systems. CDK and Reynolds are the two largest DMS providers for U.S. franchised dealerships.
"We're thrilled, of course. We're absolutely thrilled," said Bobbi Sparrow, president of the Arizona Automobile Dealers Association, which intervened in the case.
Sparrow said the state law now has a judge's backing along with support from the state's legislators, governor and attorney general.
Arizona Gov. Doug Ducey signed the law in April 2019. The statute allows dealerships to share data stored within their DMS systems with third-party vendors deemed to be authorized integrators, and bars companies including CDK and Reynolds from charging fees or placing other restrictions on that access. Arizona's data law is similar to statutes in other states, including Montana, Oregon and Hawaii.
It was slated to take effect in August 2019, but CDK and Reynolds filed suit in July 2019 against Arizona Attorney General Mark Brnovich and John Halikowski, director of the state transportation department. Halikowski eventually was removed as a defendant, and several original claims were dismissed in May.
CDK and Reynolds filed a revised complaint in June. The companies claim the data law is unconstitutional and vague, and leaves consumers' personal information potentially vulnerable to cyber threats and misuse.
"Obviously, we're disappointed with the Judge's ruling on our claims and the preliminary injunction," Reynolds spokesman Tom Schwartz said in an email. "We still believe the DMS law violates a number of provisions of the U.S. Constitution."
"We are evaluating the decision closely to determine the next best steps, which could include filing an appeal or pursuing other potential legal options," Schwartz added. "At the same time, we recognize there are a number of complex legal and factual issues at play here, all of which we are evaluating in the decision."
CDK could not immediately be reached for comment late Friday.