CDK Global, LLC v. Tulley Auto. Grp., Inc., Civ. No. 15-3103 (KM) (JBC)

• Decision Date: 25 September 2020
• Docket Number: Civ. No. 15-3103 (KM) (JBC)
• Citation: 489 F.Supp.3d 282
• Parties: CDK GLOBAL, LLC, as successor-in-interest to ADP Dealer Services, Inc., Plaintiff, v. TULLEY AUTOMOTIVE GROUP, INC., and John Doe Corporations 1-5, Defendants.
• Court: U.S. District Court — District of New Jersey

489 F.Supp.3d 282

CDK GLOBAL, LLC, as successor-in-interest to ADP Dealer Services, Inc., Plaintiff,

v.TULLEY AUTOMOTIVE GROUP, INC., and John Doe Corporations 1-5, Defendants.

Civ. No. 15-3103 (KM) (JBC)

United States District Court, D. New Jersey.

Signed September 25, 2020

Regina Sara Elizabeth Murphy, Barnes & Thornurg LLP, Wilmington, DE, for Plaintiff.

Erin Nicole Teske, Lauren C. Dann, Hodgson Russ LLC, New York, NY, for Defendants.

KEVIN MCNULTY, U.S.D.J.:

This matter arises out of the contract to lease certain equipment and installation of computer software, also known as a dealer management system ("DMS"), designed to help car dealerships with their daily operations. The plaintiff, CDK Global, LLC ("CDK"), as successor-in-interest to ADP Dealer Services, Inc., sells DMS products and services associated with the installation, implementation, and maintenance of DMS. CDK sold DMS products and associated services to defendant Tulley Automotive Group, Inc. ("Tulley"), an automobile dealership with locations in New Hampshire. In essence, CDK alleges that Tulley breached the parties’ contract when Tulley terminated the agreement early, triggering various contractual provisions, including acceleration of payments owed, liquidated damages, and the return of leased equipment.

CDK filed a complaint against Tulley asserting four causes of action: breach of contract, replevin, contractual attorneys’ fees, and conversion. (DE 1.) Tulley answered the complaint and also asserted five counterclaims against CDK: fraudulent inducement, rescission, breach of contract, violation of New Jersey Consumer Fraud Act, § 56:8-1 et seq. ("NJCFA"), and unjust enrichment. Earlier in this case, CDK filed a motion to dismiss all of Tulley's counterclaims. (DE 86.) I granted the motion to dismiss as to Tulley's counterclaim for rescission (solely on grounds of superfluity), but otherwise denied it. (See DE 103, 104.)

Now before the Court are the following motions: (1) CDK's motion for summary judgment against Tulley's four remaining counterclaims (DE 265); (2) Tulley's motion for summary judgment on CDK's claims (DE 266); and (3) CDK's motion to voluntarily dismiss its own replevin and conversion claims against Tulley pursuant to Fed. R. Civ. P. 41(a)(2). (DE 290.) For the reasons set forth below, I will grant in part and deny in part CDK's motion for summary judgment on Tulley's counterclaims, deny Tulley's motion for summary judgment on CDK's claims, and grant CDK's motion to voluntarily dismiss its replevin and conversion counts.

I. Background¹

CDK provides integrated computerized transaction processing, data communications, and other information services to various industries throughout the United States. (Compl. ¶ 9.) It is incorporated in State of Delaware and has its principal place of business in Illinois. (Id. ¶ 1.) CDK sues as the successor-in-interest to ADP Dealer Services, Inc. ("ADPDS"), the entity that actually entered into the contract at issue. (For simplicity, references to CDK will be deemed to include the predecessor ADP entity.)²

Tulley is an automobile dealership that sells BMW, Buick, GMC, and Mazda vehicles in Manchester and Nashua, New Hampshire. (AC ¶¶ 1, 13.) Tulley is incorporated and has its principal place of business in New Hampshire.³ (Compl. ¶ 2.)

One of the products which CDK sells is a dealer management system or DMS called "Drive," which consists of hardware and computer software that supports the daily operations for automobile dealerships, such as payroll, accounting, inventory, and itemizing the costs of deals. (AC ¶¶ 7–8.) CDK sells its DMS system to automobile dealerships, but also to repair facilities and original equipment manufacturers in the agriculture, construction, marine, powersports, and recreational vehicle industries. (AC ¶¶ 20, 25.)

CDK first reached out to Tulley in late 2011 for a potential sale of CDK's DMS products. (Pl. Ex. A at 87:1–91:25.) At that time, Tulley was using another DMS system called Dealertrack (also referred to as Arkona throughout the record). (Id. ) In March 2012, two CDK sales representatives, Stephanie Manzoli and Joseph Zarra, met with Tulley representatives to discuss the possibility of having Tulley switch over to CDK Drive for their DMS software. (Pl. Ex. J at CDK015027–15119.) A month later, Mark Tulley from Tulley Automotive Group informed Stephanie Manzoli that after reviewing CDK's proposal, Tulley would not be moving forward with purchasing Drive due to Drive's installation and continuing monthly fees. (Pl. Ex. K at TULLEY0004460.0003.) Eventually, Mark Tulley stopped responding to Ms. Manzoli's emails.

In April 2013, CDK and Tulley resumed communication regarding the possibility of having Tulley switch to Drive for their DMS system. (Pl. Ex. K at TULLEY0003238.0001–0003238.0002.) The emails between Jeff Evans from CDK and Julie Loud, Tulley's Corporate Controller, emphasized the need for CDK to meet Tulley's operation requirements within Tulley's budget. (Id. ) On May 1, 2013, Jeff Evans met with various Tulley personnel, including Bryan Tulley, Mark Tulley, and John Murphy, Tulley's Director of Fixed Operations. According to Tulley's counterclaims, Jeff Evans had allegedly made various representations during this meeting that CDK Drive would create more efficiencies for Tulley and could configure a program that would meet Tulley's operating needs. (Def. Ex. K at 8–10; Def. Ex. UUU at 116:17–117:25, 118:3–119:1, Def. Ex. VVV at 61:7–20, 99:2–11.)

As discussions between Tulley and CDK continued, Bryan Tulley obtained the contact information of an individual named Jane Copeland who Tulley believed had knowledge in DMS systems, including CDK's Drive system. (Pl. Ex. M at API000206–207; Pl. Ex. A at 162:162:15–164:11).

Tulley, however, did not contact Ms. Copeland to assist them on the transaction between Tulley and CDK prior to entering into their contract with CDK. (Pl. Ex. A at 167:5–10; Pl. Ex. E at 69:22–70:8.)

After CDK provided Tulley a copy of their initial proposal, the parties engaged in a series of negotiations. (Pl. Ex B at 98:20–99:9; Pl. Ex. C at 106:7–107:14.) An email from Jeff Evans demonstrates that he reviewed line by line the items of the proposal with Tulley, however, neither Mark nor Bryan Tulley recall having this call with him. (Pl. Ex. J at CDK014980–14981, Pl. Ex B. at 92:6–93:1, Def. Ex. UUU at 139:10–14.) Tulley argues that the only thing they negotiated was the price that Tulley would have to pay for the CDK Drive program, and that they did not engage in discussions regarding the selection of specific software because they relied on CDK's expertise to do so. Regardless of whether Tulley negotiated any of the software included in its DMS system, it seems that Tulley was able to negotiate some of the terms of the Master Services Agreement ("MSA") that the parties eventually executed. For example, Bryan Tulley from Tulley Automotive testified that he negotiated the length of time in one of the MSA addendums signed by the parties. (Pl. Ex. A at 157:4–158:23.) Jane Copeland also testified during her deposition that based on her knowledge, dealerships do have the ability the negotiate the terms of an MSA. (Pl. Ex. E at 87:16–20.)

Eventually, the parties came to an agreement, embodied in the MSA. (Pl. Ex. J at CDK000001–28, DE 267-4.) Tulley signed the MSA, including all schedules and addenda, on June 26, 2013. The MSA states that the parties agree that Tulley would lease software from CDK⁴ for a non-cancellable five-year term, and that Tulley would pay both a start up fee and monthly fees to CDK during that term. (Id. ) The MSA also includes an integration clause, a section limiting CDK's liabilities, a provision that states that there are no express or implied warranties with respect to CDK's services and software, and that Tulley waives the right to rely on any representation or warranty not contained in the Agreement. (Id. ¶¶ 12, 13, 17.) The MSA also contains a section that provides CDK remedies in the event Tulley defaults on any of its contractual obligations. (Id. ¶ 16.)

CDK began installing Drive for Tulley in mid-August 2013. (Pl. Ex. J at CDK012792–12793.) Usually, the training and implementation process for Drive occurs in six steps. (Pl. Ex. J atCDK013021.) The first step is called "Implementation Discovery," which is when CDK personnel meet with a dealership's managers and key stakeholders in order to understand the dealership's specific needs from a DMS system. (Id. , Pl. Ex H at 57:8–18.) Tulley acknowledged receiving worksheets in connection with the Implementation Discovery process, which they filled out. The first day a dealership begins using the new DMS software is known as the "go-live date," which is another step in the implementation process. (Id. ) Prior to the "go-live date," CDK will verify with the client the specifications of the DMS system they installed. (Pl Ex. C at 149:5–10; Pl. Ex. E at 106:13–15.) During this time, a dealership is responsible for ensuring that all their employees complete CDK's Drive training before launching the new DMS system. Mark Tulley testified that he was aware of this requirement. (Pl. Ex. B at 145:14–21.) According to CDK's records, however, Tulley personnel only completed 68% of the Drive training prior to the go-live date. (Pl. Ex. J at CDK007474–7476.) Tulley contends that that percentage does not accurately reflect the amount of training Tulley employees undertook since CDK's training tracker was not accurately reflecting the training progress for some of Tulley's employees. (Def. Ex. AA.)

Tulley's new DMS system went "live" on December 3, 2013. Ms. Copeland testified that it usually takes approximately six months for a dealership to fully adjust to a new DMS system. (Pl. Ex. E at 70:10–15.) Soon after Drive launched, Tulley began experiencing issues with the system, which they communicated to CDK. In response, CDK began trying to address Tulley's issues through in person...