In re Dealer Mgmt. Sys. Antitrust Litig.

Decision Date21 January 2022
Docket NumberMDL 2817,Case No. 18-cv-864
CourtU.S. District Court — Northern District of Illinois

Robert M. Dow, Jr., United States District Judge

Pursuant to Federal Rule of Evidence 702 and the Supreme Court's decision in Daubert v. Merrell Dow Pharmaceuticals, Inc. , 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993), the parties have moved to exclude or limit the testimony of ten proposed expert witnesses: Edward M. Stroz [859]; Gordon Klein [863]; Daniel L. Rubinfeld [867]; Dr. Kevin Murphy [873]; Dr. Mark Israel [877]; Catharine Lawton [879]; Dr. Michael A. Williams [881]; Allan Stejskal [883]; Nancy Miracle [885]; and Brian Halpin [887]. For the following reasons, the motions to exclude Williams [881] and Stejskal [883] are granted in part and denied in part. The motions to exclude Klein [863], Rubinfeld [867], Murphy [873], Israel [877], Lawton [879], and Halpin [887] are denied. The motion to exclude Miracle [885] is granted in part, denied in part, and deferred in part. The motion to exclude Stroz [859] is denied in part and deferred in part. As noted in the minute entry issued today, the parties will be given an opportunity to (a) review this comprehensive opinion, (b) submit supplemental briefs on how, if at all, these rulings affect the briefing and proper disposition of the pending summary judgment motions, and (c) advise the Court on any other pertinent developments of which they believe the Court should be aware. The Court will then prepare and issue a second, comprehensive opinion disposing of the summary judgment motions in due course.

I. Background

The background of this MDL has been set forth in multiple opinions, knowledge of which is assumed here. See, e.g., [176], [425], [504], [505], [506], [507], [749], [857]. The Court briefly recounts this background here, to provide context for its analysis of the partiesDaubert motions.

A. The DMS Market

A data management system ("DMS") is software that automobile dealers use to help manage their businesses, including accounting, sales, inventory, service, customer information, and human resources functions. Dealers typically store a substantial portion of their data within their DMSs. Virtually every franchised new car dealership in the United States now uses a DMS. Defendants CDK Global, Inc. ("CDK") and The Reynolds and Reynolds Company ("Reynolds") both provide DMSs to auto dealerships throughout the United States. CDK and Reynolds each have significant market power in the DMS market. Together, they control approximately 75% of the United States market by number of dealers and approximately 90% when measured by number of vehicles sold.

B. The DIS Market

To effectively run their dealerships, dealers engage third-party software application providers—also known as "vendors"—to provide services such as inventory management, customer relationship management, warranty services, repair orders, and electronic vehicle registration and titling. Vendors need to access and use data located on dealers’ DMSs in order to provide their services to dealers. Vendors generally obtain access by engaging data integrators, which provide data integration services ("DIS") to vendors for a fee. Data integrators (also called "DIS providers") collect and standardize data stored on DMSs. Their DIS services allow vendors to access dealer data and extract, organize, and integrate it into a usable format. They may also provide value-enhancing services, such as putting data from different DMSs into a uniform format and correcting data errors.

CDK and Reynolds each offer data integration to vendors. CDK's DIS is called Third Party Access ("3PA") and Reynolds’ is called the Reynolds Certified Interface ("RCI"). 3PA and RCI only provide DIS for Defendants’ respective DMSs. There are also independent third-party data integrators—including Plaintiffs Authenticom, Inc. ("Authenticom") and Loop LLC ("Autoloop"), among others—that offer DIS to vendors. CDK owns two third-party data integrators: Digital Motorworks, Inc. ("DMI") and IntegraLink.

C. The Challenged Agreements

Historically, CDK and Reynolds had "open" DMSs, meaning that they did not take steps to prevent their dealer clients from authorizing third-party access to the dealers’ data. Over time, Reynolds began to "close" its DMS by selectively blocking third-party data integrators from accessing dealer data stored on the Reynolds DMS. As Reynolds allegedly reduced competition for DIS through its blocking activities, Reynolds increased the fees it charged for data integration through its own RCI product. CDK, by contrast, marketed its DMS as an "open" system.

Various Plaintiffs (which are specifically identified where relevant in this opinion) allege that by the summer of 2013, Reynolds was taking aggressive action to prevent independent DIS providers from serving dealers who obtained their DMSs from Reynolds. This hampered CDK's ability to provide DIS to those dealers. Around September 2013, CDK allegedly abruptly stopped trying to compete with Reynolds by emphasizing CDK's "openness"i.e. , the ease with which independent App vendors can access data in the dealer's DMS using any DIS service they choose (subject to dealer approval), and the cost of doing so. Plaintiffs posit that this was due to an agreement between Reynolds and CDK to drive independent DIS providers from the market by, among other things, agreeing to a common marketing message on "data security" to condition the market to accept that pretext for excluding independent DIS providers. In return, Plaintiffs allege, Reynolds allowed CDK access to Reynolds’ platform.

In February 2015, CDK and Reynolds entered into three written agreements: (1) the Data Exchange Agreement or "Wind Down" Agreement; (2) the 3PA Agreement; and (3) the RCI Agreement. In the Data Exchange Agreement, CDK agreed to wind down its data integration business on the Reynolds DMS, with Reynolds promising not to block CDK's access to the Reynolds system during the wind-down period (approximately 5 years). During that period, Reynolds agreed that CDK could continue to extract dealer data just as it had before, using login credentials provided by dealers. As for other independent data integrators, CDK and Reynolds each agreed not to take any steps to assist any person that it reasonably believed to have plans to access or integrate with the other party's DMS.

The other two written agreements, the 3PA Agreement and the RCI Agreement (collectively referred to as the Data Integration Agreements) provided CDK and Reynolds with reciprocal access to each other's DIS programs. Pursuant to the agreements, Reynolds received five free years of 3PA access. Reynolds also agreed to access CDK's DMS exclusively through 3PA and not to contract with any third parties to access the system. The agreements also provided that CDK and Reynolds would deny data integrators access to each other's DMSs.

In addition to written agreements, senior executives from the two Defendants also allegedly agreed to restrict access to dealer data and "destroy" data integrators like Authenticom. Plaintiffs allege that, by eliminating competition for data integration services, CDK and Reynolds have seized control over dealer data and thwarted dealers’ ability to control access to and the usage of their data. As a result, vendors have no choice but to access dealer data through CDK's and Reynolds’ own DISs, at much greater cost than they would incur if they purchased services from independent data integrators. Plaintiffs allege that shortly after CDK and Reynolds entered into the Data Exchange Agreement, CDK began renegotiating contracts with vendors for 3PA access and requiring vendors to use 3PA exclusively for all of their dealer-customers on CDK DMSs.

D. The EVR Market

Since 1992, CDK and Reynolds have also been parties to a joint venture that wholly owns Defendant Computerized Vehicle Registration, Inc. a/k/a CDK Vehicle Registration, Inc. ("CVR"). CDK owns 80% of CVR, while Reynolds owns 20%. CVR, like Plaintiff Motor Vehicle Software Corporation ("MVSC"), is a provider of electronic vehicle registration and titling services ("EVR"). EVR providers partner with state governments to issue the physical registration, license plates, and titles for vehicles sold at car dealerships. In order to process the registration and title with a state, EVR providers require basic information about the car sale, including the vehicle, buyer, and financing details. That data is stored on a dealership's DMS.

Plaintiff MVSC alleges that in January 2014, and possibly earlier, CDK and Reynolds entered into a horizontal agreement to block MVSC from participating in their third-party access programs (3PA and RCA). In addition to blocking MVSC from participating in their 3PA and RCI programs, CDK and Reynolds have allegedly cut off MVSC's ability to access car sales data through intermediaries. According to MVSC, CDK and Reynolds have intimidated dealers by threatening that they will be in breach of their DMS contracts if they provide MVSC with data from their DMSs.

E. Procedural Matters

Based on these facts, the parties have brought a variety of claims and counterclaims, which have been consolidated in this MDL. Some of the claims have been dismissed, while others have been resolved through settlement. The parties have engaged in extensive discovery and filed cross-motions for summary judgment, which are currently pending. See [777], [949], [954], [963], [964], [967], [970], [976]. Also pending are several motions by Defendants to bar certain claims and theories that, according to Defendants, were not timely disclosed. See [773], [787].

The claims that remain active include: Authenticom's claims against CDK and Reynolds for horizontal conspiracy and exclusive dealing in violation of Sherman Act § 1, monopolization...

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9 cases
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    • United States
    • U.S. District Court — Northern District of Illinois
    • June 29, 2023
  • In re Dealer Mgmt. Sys. Antitrust Litig.
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    • June 29, 2023
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