In re Dealer Mgmt. Sys. Antitrust Litig.

• Docket Number: MDL 2817,18 C 864
• Decision Date: 29 June 2023
• Parties: IN RE DEALER MANAGEMENT SYSTEMS ANTITRUST LITIGATION,
• Court: U.S. District Court — Northern District of Illinois

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IN RE DEALER MANAGEMENT SYSTEMS ANTITRUST LITIGATION,

MDL No. 2817

No. 18 C 864

United States District Court, N.D. Illinois, Eastern Division

June 29, 2023

MEMORANDUM OPINION AND ORDER

REBECCA R. PALLMEYER, United States District Judge.

Plaintiffs in these consolidated cases-Loop, LLC (“AutoLoop”); a group of retail automobile dealerships (the “Dealers”);^[1] and Motor Vehicle Software Corporation (“MVSC”)- have sued Defendants CDK Global, LLC (“CDK”) and the Reynolds and Reynolds Company (“Reynolds”) alleging antitrust violations. In short, Plaintiffs accuse Defendants of anticompetitive conduct in the market for “dealership management system” software and a related submarket for “data integration”-that is a service that renders the data stored in those systems commercially functional. Both AutoLoop and the Dealers, who comprise a large group of named Plaintiffs, bring putative class claims: AutoLoop on behalf of a group of automotive software application vendors and the Dealers on behalf of a nationwide class of retail automobile dealerships. (See Dealers Compl. [198] at 1 (listing “Dealership Plaintiffs”).) As discussed in greater detail below, this case originally included a fourth plaintiff-Authenticom, Inc. (“Authenticom”)-which has since settled with both Defendants but whose allegations and legal arguments remain relevant to Defendants' pending motions.

This memorandum opinion and order resolves several pending motions. In summary, the court holds as follows:

• Defendants' motion to bar what they call a “new ‘initial conspiracy' theory” offered by Plaintiffs' experts is denied.

• Reynolds's motion to bar MVSC's “newly disclosed claims” is denied.

• CDK's motion for summary judgment against AutoLoop is granted as to damages attributable Plaintiffs who have settled their claims (“Cox” Plaintiffs) and otherwise denied as to the Sherman Act § 1 conspiracy claim. CDK's motion is granted as to AutoLoop's Sherman Act § 1 exclusive-dealing claim. AutoLoop is directed to show cause why CDK's motion should not be granted as to AutoLoop's § 2 monopolization claim. CDK's motion on AutoLoop's state law claims is denied to the extent those claims are based on the alleged conspiracy but otherwise granted. AutoLoop's claims will be subject to rule-of-reason analysis at trial.

• CDK's motion for summary judgment against the Dealers is granted on all Sherman Act damages claims but denied as to the § 1 conspiracy claim for injunctive relief. CDK's motion on the Dealer's state-law claims is granted as to Counts IX, XLIV, XXXIX, XL, XLVI, and XLVIII and is otherwise denied.

• Reynolds's motion for summary judgment against MVSC is granted as to any claim based on MVSC's failure to breakinto the Wisconsin market for electronic vehicle registration services and as to damages MVSC sustained after settling with CDK in October 2019. Reynolds's motion is also granted as to MVSC's California Unfair Competition Law claim. Reynolds's motion is otherwise denied. MVSC's claims will be subject to rule-of-reason analysis at trial.

INTRODUCTION

The court has detailed the basic facts of this MDL in multiple opinions and assumes knowledge of those opinions here.^[2] Defendants CDK and Reynolds are automotive technology companies that offer “dealer management system” (“DMS”) software-complex enterprise computer systems employed by car dealerships to collect manage, and deploy data they generate.

Car dealers also use software applications (“apps”) to provide services like inventory management, customer relationship management, warranty services, repair orders and electronic vehicle registration and titling. Some apps are furnished by DMS providers-like Defendants-but most are created by third-party developers known as “vendors.” To create useful apps for dealerships, vendors need access to the data located on dealers' DMSs. But data stored on the DMS is raw and unprocessed, making it difficult for vendors to use. So, vendors hire intermediaries-known as “data integrators”-who process, standardize, and export data from the DMS to vendors' platforms. In other words, data integrators (as their name suggests) “integrate” data stored in the DMS to make it usable by vendors' apps.

Reynolds and CDK themselves provide data integration services, which they sell to vendors; vendors can also purchase such services from unrelated third-party providers. Reynolds's and CDK's offerings are known as “certified” integration, which provide vendors with automated, secure access to DMS data for a fee.^[3] Third-party data integrators, like Authenticom, provide a similar service, which is known as “independent”-as opposed to “certified”- integration.^[4] CDK owns two such independent integrators: Digital Motorworks, Inc. (“DMI”) and IntegraLink, which compete with companies like Authenticom.

Historically, both CDK and Reynolds provided dealers with “open” DMSs, meaning that- explicitly or implicitly-CDK and Reynolds permitted dealers to give third parties direct access to DMS data. Over time, however, Reynolds began to “close” its DMS by selectively blocking independent data integrators from accessing dealer data stored on the Reynolds DMS. As Reynolds's blocking efforts reduced vendors' ability to use independent integrators on dealerships with a Reynolds DMS, vendors who needed to access data from a Reynolds DMS were forced to turn to Reynolds, which profited by increasing the fees it charged for certified data integration through its own RCI program. CDK's system, by contrast, remained “open” to third parties-a feature that CDK used to market its service to current and prospective customers.

Plaintiffs allege that by the summer of 2013, Reynolds was taking aggressive action to prevent independent integrators from serving dealers with a Reynolds DMS. CDK's subsidiaries-DMI and IntegraLink^[5] -were, at that time, providing independent integration services to vendors who needed access to data stored on a Reynolds DMS. So Reynolds's “blocking” efforts began to undermine DMI's business. Then, in September 2013, Plaintiffs allege, CDK abruptly stopped emphasizing that its DMS was “open”-i.e., that vendors could, with dealer approval, access DMS data using an independent integrator. According to Plaintiffs, senior executives from CDK and Reynolds orally agreed at that time to restrict access to dealer data and to “destroy” independent data integrators like Authenticom and drive them from the market. Among other methods, CDK and Reynolds allegedly agreed to coordinate a message to the market: that, for “data security” reasons, they needed to block independent data integrators from accessing their respective DMSs. As CDK and Reynolds negotiated a formal written agreement along this line, CDK began planning its own effort to block independent integrators, while Reynolds significantly reduced the degree to which it had been blocking DMS access by DMI. In Plaintiffs' view, Defendants were acting according to a surreptitious agreement to help one another and suppress other competition.

In February 2015-following their alleged oral agreement-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 (collectively, the “2015 Agreements”). In the Wind Down Agreement, CDK agreed to wind down its data integration business on the Reynolds DMS within approximately five years. In other words, CDK agreed that DMI-the independent integrator owned by CDK-would transition away from offering integration services for dealers who used a Reynolds DMS. In return, Reynolds agreed not to block DMI's access to the DMS during the wind-down period. As a result, DMI could continue to extract dealer data just as they had before, using login credentials provided by dealers. But CDK and Reynolds both agreed not to assist any other independent data integrator in any effort to access or integrate with the other Defendant's DMS. At the same time, the parties agreed to the 3PA Agreement and the RCI Agreement, which provided CDK and Reynolds with reciprocal access to each other's certified integration programs. Plaintiffs allege that shortly after CDK and Reynolds entered into the Wind Down Agreement, CDK began renegotiating contracts with vendors for 3PA access. As part of that renegotiation, CDK required those vendors who used 3PA to access data on any CDK DMS to exclusively use 3PA for all customers with a CDK DMS.

By eliminating competition for data integration services, Plaintiffs claim that CDK and Reynolds have usurped control over dealer data and thwarted dealers' ability to control who can access and use their data. As a result, vendors have no choice but to access certified data integration from CDK and Reynolds, at a price much higher than they would pay to an independent integrator.

PROCEDURAL HISTORY

Dozens of parties, including independent data integrators and dealers, sued CDK and Reynolds for violations of the Sherman Act and a variety of state antitrust, consumer protection and other laws. The Judicial Panel on Multidistrict Litigation (“JPML”) consolidated the cases in this MDL. Some of the claims have been dismissed, while others have been resolved through settlement.^[6] For purposes of this opinion, the governing complaints include: (1) AutoLoop's amended complaint against CDK and Reynolds [194]; (2) the proposed Dealer class's consolidated complaint against CDK [198]; and (3) MVSC's second amended complaint against Reynolds, see Second Amended Complaint [76] Motor Vehicle Software Corp. v. CDK Global, Inc. et al, No. 2:17-cv-896 (C.D. Cal. Nov. 2, 2017). Not all of the claims asserted in those complaints are still live, however; the claims that remain active...