CDK Global LLC v. Brnovich, No. CV-19-04849-PHX-GMS
| Decision Date | 20 May 2020 |
| Docket Number | No. CV-19-04849-PHX-GMS |
| Citation | 461 F.Supp.3d 906 |
| Parties | CDK GLOBAL LLC, et al., Plaintiffs, v. Mark BRNOVICH, et al., Defendants, and Arizona Automobile Dealers Association, Intervenor Defendant. |
| Court | U.S. District Court — District of Arizona |
Andrew Tauber, Mark William Ryan, Pro Hac Vice, Mayer Brown LLP, Washington, DC, Brett E. Legner, Pro Hac Vice, Britt M. Miller, Pro Hac Vice, Daniel T. Fenske, Pro Hac Vice, Michael Anthony Scodro, Pro Hac Vice, Mayer Brown LLP, Chicago, IL, Brian Alexander Howie, Lauren Elliott Stine, Quarles & Brady LLP, Phoenix, AZ, for Plaintiff CDK Global LLC.
Amar Shrinivas Naik, Pro Hac Vice, Molly C. Lorenzi, Pro Hac Vice, Sheppard Mullin Richter & Hampton LLC, San Francisco, CA, Aundrea K. Gulley, Pro Hac Vice, Brice A. Wilkinson, Pro Hac Vice, Denise L. Drake, Pro Hac Vice, Gibbs & Bruns LLP, Houston, TX, Brian Alexander Howie, Lauren Elliott Stine, Quarles & Brady LLP, Phoenix, AZ, Jonathan Richard DeFosse, Pro Hac Vice, Thomas J. Dillickrath, Pro Hac Vice, Sheppard Mullin Richter & Hampton LLP, Mark William Ryan, Pro Hac Vice, Mayer Brown LLP, Washington, DC, for Plaintiff Reynolds and Reynolds Company.
Brunn Wall Roysden, III, Rusty Duane Crandell, Office of the Attorney General, William DeWitt Furnish, Mary Ruth OGrady, Osborn Maledon PA, Phoenix, AZ, for Defendant Mark Brnovich.
Bethan R. Jones, Pro Hac Vice, Brendan J. Crimmins, Pro Hac Vice, Christine Bonomo, Pro Hac Vice, Collin R. White, Pro Hac Vice, Daniel V. Dorris, Pro Hac Vice, David L. Schwarz, Pro Hac Vice, Derek T. Ho, Pro Hac Vice, Jayme Louise Weber, Joshua Hafenbrack, Pro Hac Vice, Michael N. Nemelka, Pro Hac Vice, Kellogg Hansen Todd Figel & Frederick PLLC, Washington, DC, Jeffrey Dale Gardner, Jimmie W. Pursell, Jr., John C. Norling, Jennings Strouss & Salmon PLC, Phoenix, AZ, for Intervenor Defendant.
G. Murray Snow, Chief United States District Judge Pending before the Court are Defendant Arizona Automobile Dealers Association ("AADA")’s Motion to Dismiss for Failure to State a Claim (Doc. 39) and Defendants Mark Brnovich and John S. Halikowski's1 Joint Motion to Dismiss for Failure to State a Claim (Doc. 40). The Motions are granted in part and denied in part.
Plaintiffs CDK Global LLC and Reynolds and Reynolds Company (collectively, "Plaintiffs") develop, own, and operate proprietary computer systems known as dealer management systems ("DMSs") that process vast amounts of data2 sourced from various parties. Automotive dealerships hold licenses to DMSs to help manage their business operations, including handling confidential consumer and proprietary data, processing transactions, and managing data communications between dealers, customers, car manufacturers, credit bureaus, and other third parties. Plaintiffs employ multiple technological measures—such as secure login credentials, CAPTCHA prompts, and comprehensive cybersecurity infrastructure, hardware, and software—to safeguard their DMS systems from unauthorized access or breach. Plaintiffs also contractually prohibit dealers from granting third parties access to their DMSs without Plaintiffs’ authorization.
In March 2019, the Arizona Legislature passed the Dealer Data Security Law ("the Dealer Law"), A.R.S. §§ 28-4651 – 28-4655. The Dealer Law went into effect on August 27, 2019.3 The Dealer Law regulates the relationship between DMS licensers like Plaintiffs and the dealerships they serve. Under the Dealer Law, DMS providers may no longer "[p]rohibit[ ] a third party [that has been authorized by the Dealer and] that has satisfied or is compliant with ... current, applicable security standards published by the standards for technology in automotive retail [ (STAR standards) ] ... from integrating into the dealer's [DMS] or plac[e] an unreasonable restriction on integration ...." A.R.S. §§ 28-4653(A)(3)(b), 28-4651(9). The Dealer Law also requires that DMS providers "[a]dopt and make available a standardized framework for the exchange, integration and sharing of data from [a DMS]" that is compatible with STAR standards and that they "[p]rovide access to open application programming interfaces to authorized integrators." A.R.S. § 28-4654(A). Finally, a DMS provider may only use data to the extent permitted in the DMS provider's agreement with the dealer, must permit dealer termination of such agreement, and "must work to ensure a secure transition of all protected dealer data to a successor dealer data vendor or authorized integrator" upon termination. A.R.S. §§ 28-4654(B)(1)-(3).
Plaintiffs filed the underlying complaint seeking declaratory and injunctive relief from the Dealer Law on July 29, 2019. These Motions to Dismiss followed on September 18, 2019.
To survive a motion to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6), a complaint must contain more than a "formulaic recitation of the elements of a cause of action"; it must contain factual allegations sufficient to "raise the right of relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson , 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) ). While "a complaint need not contain detailed factual allegations ... it must plead ‘enough facts to state a claim to relief that is plausible on its face.’ " Clemens v. DaimlerChrysler Corp. , 534 F.3d 1017, 1022 (9th Cir. 2008) (quoting Twombly , 550 U.S. at 570, 127 S.Ct. 1955 ). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ). When analyzing a complaint for failure to state a claim, "allegations of material fact are taken as true and construed in the light most favorable to the non-moving party." Smith v. Jackson , 84 F.3d 1213, 1217 (9th Cir. 1996). In addition, the Court must assume that all general allegations "embrace whatever specific facts might be necessary to support them." Peloza v. Capistrano Unified Sch. Dist. , 37 F.3d 517, 521 (9th Cir. 1994). However, legal conclusions couched as factual allegations are not given a presumption of truthfulness, and "conclusory allegations of law and unwarranted inferences are not sufficient to defeat a motion to dismiss." Pareto v. F.D.I.C. , 139 F.3d 696, 699 (9th Cir. 1998).
Plaintiffs’ claims concern five federal statutes and five provisions of the United States Constitution. Plaintiffs "object to [the Dealer Law] not in the context of an actual [prosecution], but in a facial challenge" prior to enforcement such that the State of Arizona "has had no opportunity to implement [the Dealer Law], and its courts have had no occasion to construe the law in the context of actual disputes ... or to accord the law a limiting construction to avoid constitutional questions." Washington State Grange v. Washington State Republican Party , 552 U.S. 442, 449–50, 128 S.Ct. 1184, 170 L.Ed.2d 151 (2008). "Facial challenges are disfavored for several reasons":
Claims of facial invalidity often rest on speculation. As a consequence, they raise the risk of "premature interpretation of statutes on the basis of factually barebones records." Sabri v. United States , 541 U.S. 600, 609 [124 S.Ct. 1941, 158 L.Ed.2d 891] ...(2004) (internal quotation marks and brackets omitted). Facial challenges also run contrary to the fundamental principle of judicial restraint that courts should neither "anticipate a question of constitutional law in advance of the necessity of deciding it" nor "formulate a rule of constitutional law broader than is required by the precise facts to which it is to be applied." Ashwander v. TVA , 297 U.S. 288, 346–347 [56 S.Ct. 466, 80 L.Ed. 688] ...(1936) (Brandeis, J., concurring) .... Finally, facial challenges threaten to short circuit the democratic process by preventing laws embodying the will of the people from being implemented in a manner consistent with the Constitution.
Id. at 450–51, 128 S.Ct. 1184.
To obtain relief, Plaintiffs must show "a genuine threat of imminent prosecution under the challenged statute to establish a justiciable case or controversy." (Doc. 40 at 6) (quoting Wash. Mercantile Ass'n v. Williams , 733 F.2d 687, 688 (9th Cir. 1984) ). The three factors courts consider when analyzing the genuineness of a threat of prosecution include: (1) "whether the plaintiffs have articulated a concrete plan to violate the law in question," (2) "whether the prosecuting authorities have communicated a specific warning or threat to initiate proceedings," and (3) "the history of past prosecution or enforcement under the challenged statute." Stormans, Inc. v. Selecky , 586 F.3d 1109, 1122 (9th Cir. 2009). Although Defendants have not communicated a specific warning or threat against Plaintiffs, Plaintiffs have plausibly pled that the Dealer Law criminalizes their current and longstanding practices. And when fear of criminal prosecution under an allegedly unconstitutional statute is "not imaginary or wholly speculative," a plaintiff need not "first expose himself to actual arrest or prosecution to be entitled to challenge the statute." Babbitt v. United Farm Workers Nat. Union , 442 U.S. 289, 302, 99 S.Ct. 2301, 60 L.Ed.2d 895 (1979). Here, as in Babbitt , "the State has not disavowed any intention of invoking the criminal penalty provision" against Plaintiffs, and "the positions of the parties are sufficiently adverse with respect to [the Dealer Law] ... to present a case or controversy within the jurisdiction of the District Court." Id. Plaintiffs’ claims present a ripe controversy.
Plaintiffs argue that the Dealer Law is preempted by the Computer Fraud and Abuse Act (CFAA), the Copyright Act, the Digital Millennium Copyright...
To continue reading
Request your trial