1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 CDK Global LLC, et al., No. CV-19-04849-PHX-GMS
10 Plaintiffs, ORDER
11 v.
12 Mark Brnovich, et al.,
13 Defendants,
14 and
15 Arizona Automobile Dealers Association,
16 Intervenor Defendant. 17 18 Pending before the Court is Defendant Arizona Department of Transportation 19 (“ADOT”) Director John S. Halikowski’s Motion to Dismiss for Lack of Subject Matter 20 Jurisdiction. (Doc. 38.) The Motion is granted.1 21 BACKGROUND 22 Plaintiffs CDK Global LLC, et al. (“Plaintiffs”) develop, own, and operate 23 proprietary computer systems known as dealer management systems (“DMSs”) that 24 process vast amounts of data2 sourced from various parties. Automotive dealerships hold 25 licenses to DMSs to help manage their business operations, including handling confidential
26 1 The parties have requested oral argument. Those requests are denied because the parties have had an adequate opportunity to discuss the law and evidence and oral argument will 27 not aid the Court’s decision. See Lake at Las Vegas Investors Group, Inc. v. Pac. Malibu Dev., 933 F.2d 724, 729 (9th Cir. 1991). 28 2 E.g., social security numbers, driver’s license numbers, and proprietary pricing data. 1 consumer and proprietary data, processing transactions, and managing data 2 communications between dealers, customers, car manufacturers, credit bureaus, and other 3 third parties. Plaintiffs employ multiple technological measures—such as secure login 4 credentials, CAPTCHA prompts, and comprehensive cybersecurity infrastructure, 5 hardware, and software—to safeguard their DMS systems from unauthorized access or 6 breach. Plaintiffs also contractually prohibit dealers from granting third parties access to 7 their DMSs without Plaintiffs’ authorization. 8 In March 2019, the Arizona Legislature passed the Dealer Data Security Law (“the 9 Law”). A.R.S. §§ 28-4651–28-4655. The Law went into effect on August 27, 2019.3 The 10 Law regulates the relationship between DMS licensers like Plaintiffs and the dealerships 11 they serve. Under the Law, DMS providers may no longer “[p]rohibit[] a third party that 12 has satisfied or is compliant with . . . current, applicable security standards published by 13 the standards for technology in automotive retail [(STAR standards)] . . . from integrating 14 into the dealer’s [DMS] or plac[e] an unreasonable restriction on integration . . . .” A.R.S. 15 §§ 28-4653(A)(3)(b), 28-4651(9). The Law also requires DMS providers to “[a]dopt and 16 make available a standardized framework for the exchange, integration and sharing of data 17 from [a DMS]” that is compatible with STAR standards and to “[p]rovide access to open 18 application programming interfaces to authorized integrators.” A.R.S. § 28-4654(A). 19 Finally, a DMS provider may only use data to the extent permitted in the DMS provider’s 20 agreement with the dealer, must permit dealer termination of such agreement, and “must 21 work to ensure a secure transition of all protected dealer data to a successor dealer data 22 vendor or authorized integrator” upon termination. A.R.S. §§ 28-4654(B)(1)-(3). 23 Plaintiffs filed the underlying complaint seeking declaratory and injunctive relief 24 from the Law on July 29, 2019. This Motion to Dismiss for Lack of Subject Matter 25 Jurisdiction followed on September 18, 2019. 26 27 3 However, Defendants stipulated on September 4, 2019 that they would “take no action to 28 enforce Arizona House Bill 2418 (2019) for the pendency of Plaintiffs’ Motion for Preliminary Injunction in this Court.” (Doc. 28 at 2.) 1 DISCUSSION 2 I. Legal Standard 3 “For a case or controversy to exist under Article III, a plaintiff must have standing 4 to assert his legal claims, those claims must be ripe for review, and the harm must be 5 redressable against the defendants.” Ariz. Contractors Ass’n, Inc. v. Napolitano, 526 F. 6 Supp. 2d 968, 977 (D. Ariz. 2007) (citing Renne v. Geary, 501 U.S. 312, 320 (1991), as 7 amended (Dec. 10, 2007), corrected, No. CV07-1355-PHX-NVW, 2007 WL 9723967 (D. 8 Ariz. Dec. 10, 2007), and aff’d sub nom. Chicanos Por La Causa, Inc. v. Napolitano, 544 9 F.3d 976 (9th Cir. 2008). Redressability in this context means that “it must be likely, as 10 opposed to merely speculative, that the injury will be redressed by a favorable decision.” 11 Planned Parenthood Ariz., Inc. v. Brnovich, 172 F. Supp. 3d 1075, 1086 (D. Ariz. 2016) 12 (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 561 (1992)). “It is well-established that 13 when a plaintiff brings a pre-enforcement challenge to the constitutionality of a particular 14 statutory provision, the causation element of standing requires the named defendants to 15 possess authority to enforce the complained-of provision,” Ariz. Contractors, 526 F. Supp. 16 2d at 983 (quoting Bronson v. Swensen, 500 F.3d 1099, 1110 (10th Cir. 2007)); “a 17 generalized duty to enforce state law or general supervisory power over the persons 18 responsible for enforcing the challenged provision will not subject an official to 19 suit,” Planned Parenthood, 172 F. Supp. 3d at 1086 (quoting Coalition to Defend 20 Affirmative Action v. Brown, 674 F.3d 1128, 1134 (9th Cir. 2012)). 21 II. Analysis 22 The Plaintiffs have failed to demonstrate any harm that could be redressable against 23 Defendant Halikowski. Although the Director is generally “responsible for the 24 administration of the department,” A.R.S. § 28-331(B), nothing authorizes him to 25 prosecute or enforce all of the laws contained within the thirty chapters of Title 28, see, 26 e.g., A.R.S. §§ 28-363(A), 28-364, 28-367. Instead, in areas where the legislature intended 27 the director to have enforcement authority, it expressly provided for such authority. See, 28 e.g., A.R.S. §§ 28-3411 (“The director shall administer and enforce this article,” regarding 1 traffic survival school); 28-4002 (“The director shall . . . [a]dminister and enforce this 2 chapter,” regarding vehicle insurance); 28-5602 (“The following persons have authority to 3 enforce this article: 1. The director of the department of transportation,” regarding fuel 4 taxes). Those provisions would be superfluous if the Director had comprehensive authority 5 to enforce all aspects of Title 28. See Boise Cascade Corp. v. U.S. EPA, 942 F.2d 1427, 6 1432 (9th Cir. 1991) (“Under accepted canons of statutory interpretation, we must interpret 7 statutes as a whole, giving effect to each word and making every effort not to interpret a 8 provision in a manner that renders other provisions of the same statute inconsistent, 9 meaningless or superfluous.”).
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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 CDK Global LLC, et al., No. CV-19-04849-PHX-GMS
10 Plaintiffs, ORDER
11 v.
12 Mark Brnovich, et al.,
13 Defendants,
14 and
15 Arizona Automobile Dealers Association,
16 Intervenor Defendant. 17 18 Pending before the Court is Defendant Arizona Department of Transportation 19 (“ADOT”) Director John S. Halikowski’s Motion to Dismiss for Lack of Subject Matter 20 Jurisdiction. (Doc. 38.) The Motion is granted.1 21 BACKGROUND 22 Plaintiffs CDK Global LLC, et al. (“Plaintiffs”) develop, own, and operate 23 proprietary computer systems known as dealer management systems (“DMSs”) that 24 process vast amounts of data2 sourced from various parties. Automotive dealerships hold 25 licenses to DMSs to help manage their business operations, including handling confidential
26 1 The parties have requested oral argument. Those requests are denied because the parties have had an adequate opportunity to discuss the law and evidence and oral argument will 27 not aid the Court’s decision. See Lake at Las Vegas Investors Group, Inc. v. Pac. Malibu Dev., 933 F.2d 724, 729 (9th Cir. 1991). 28 2 E.g., social security numbers, driver’s license numbers, and proprietary pricing data. 1 consumer and proprietary data, processing transactions, and managing data 2 communications between dealers, customers, car manufacturers, credit bureaus, and other 3 third parties. Plaintiffs employ multiple technological measures—such as secure login 4 credentials, CAPTCHA prompts, and comprehensive cybersecurity infrastructure, 5 hardware, and software—to safeguard their DMS systems from unauthorized access or 6 breach. Plaintiffs also contractually prohibit dealers from granting third parties access to 7 their DMSs without Plaintiffs’ authorization. 8 In March 2019, the Arizona Legislature passed the Dealer Data Security Law (“the 9 Law”). A.R.S. §§ 28-4651–28-4655. The Law went into effect on August 27, 2019.3 The 10 Law regulates the relationship between DMS licensers like Plaintiffs and the dealerships 11 they serve. Under the Law, DMS providers may no longer “[p]rohibit[] a third party that 12 has satisfied or is compliant with . . . current, applicable security standards published by 13 the standards for technology in automotive retail [(STAR standards)] . . . from integrating 14 into the dealer’s [DMS] or plac[e] an unreasonable restriction on integration . . . .” A.R.S. 15 §§ 28-4653(A)(3)(b), 28-4651(9). The Law also requires DMS providers to “[a]dopt and 16 make available a standardized framework for the exchange, integration and sharing of data 17 from [a DMS]” that is compatible with STAR standards and to “[p]rovide access to open 18 application programming interfaces to authorized integrators.” A.R.S. § 28-4654(A). 19 Finally, a DMS provider may only use data to the extent permitted in the DMS provider’s 20 agreement with the dealer, must permit dealer termination of such agreement, and “must 21 work to ensure a secure transition of all protected dealer data to a successor dealer data 22 vendor or authorized integrator” upon termination. A.R.S. §§ 28-4654(B)(1)-(3). 23 Plaintiffs filed the underlying complaint seeking declaratory and injunctive relief 24 from the Law on July 29, 2019. This Motion to Dismiss for Lack of Subject Matter 25 Jurisdiction followed on September 18, 2019. 26 27 3 However, Defendants stipulated on September 4, 2019 that they would “take no action to 28 enforce Arizona House Bill 2418 (2019) for the pendency of Plaintiffs’ Motion for Preliminary Injunction in this Court.” (Doc. 28 at 2.) 1 DISCUSSION 2 I. Legal Standard 3 “For a case or controversy to exist under Article III, a plaintiff must have standing 4 to assert his legal claims, those claims must be ripe for review, and the harm must be 5 redressable against the defendants.” Ariz. Contractors Ass’n, Inc. v. Napolitano, 526 F. 6 Supp. 2d 968, 977 (D. Ariz. 2007) (citing Renne v. Geary, 501 U.S. 312, 320 (1991), as 7 amended (Dec. 10, 2007), corrected, No. CV07-1355-PHX-NVW, 2007 WL 9723967 (D. 8 Ariz. Dec. 10, 2007), and aff’d sub nom. Chicanos Por La Causa, Inc. v. Napolitano, 544 9 F.3d 976 (9th Cir. 2008). Redressability in this context means that “it must be likely, as 10 opposed to merely speculative, that the injury will be redressed by a favorable decision.” 11 Planned Parenthood Ariz., Inc. v. Brnovich, 172 F. Supp. 3d 1075, 1086 (D. Ariz. 2016) 12 (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 561 (1992)). “It is well-established that 13 when a plaintiff brings a pre-enforcement challenge to the constitutionality of a particular 14 statutory provision, the causation element of standing requires the named defendants to 15 possess authority to enforce the complained-of provision,” Ariz. Contractors, 526 F. Supp. 16 2d at 983 (quoting Bronson v. Swensen, 500 F.3d 1099, 1110 (10th Cir. 2007)); “a 17 generalized duty to enforce state law or general supervisory power over the persons 18 responsible for enforcing the challenged provision will not subject an official to 19 suit,” Planned Parenthood, 172 F. Supp. 3d at 1086 (quoting Coalition to Defend 20 Affirmative Action v. Brown, 674 F.3d 1128, 1134 (9th Cir. 2012)). 21 II. Analysis 22 The Plaintiffs have failed to demonstrate any harm that could be redressable against 23 Defendant Halikowski. Although the Director is generally “responsible for the 24 administration of the department,” A.R.S. § 28-331(B), nothing authorizes him to 25 prosecute or enforce all of the laws contained within the thirty chapters of Title 28, see, 26 e.g., A.R.S. §§ 28-363(A), 28-364, 28-367. Instead, in areas where the legislature intended 27 the director to have enforcement authority, it expressly provided for such authority. See, 28 e.g., A.R.S. §§ 28-3411 (“The director shall administer and enforce this article,” regarding 1 traffic survival school); 28-4002 (“The director shall . . . [a]dminister and enforce this 2 chapter,” regarding vehicle insurance); 28-5602 (“The following persons have authority to 3 enforce this article: 1. The director of the department of transportation,” regarding fuel 4 taxes). Those provisions would be superfluous if the Director had comprehensive authority 5 to enforce all aspects of Title 28. See Boise Cascade Corp. v. U.S. EPA, 942 F.2d 1427, 6 1432 (9th Cir. 1991) (“Under accepted canons of statutory interpretation, we must interpret 7 statutes as a whole, giving effect to each word and making every effort not to interpret a 8 provision in a manner that renders other provisions of the same statute inconsistent, 9 meaningless or superfluous.”). By contrast, § 28-4303, governing Chapter 10 where the 10 Law is housed, designates that the Director “shall supervise and regulate all persons 11 required by this chapter to be licensed” (emphasis added), a provision that is irrelevant to 12 the Law, which has nothing to do with licensing. If the legislature had intended for the 13 Director to enforce the Law, it could have amended this provision to simply instruct the 14 Director to enforce the entire chapter. 15 Nor have Plaintiffs demonstrated that the ADOT Director has the authority to 16 initiate and supervise an investigation for a violation of the Law through the ADOT 17 Inspector General; indeed, Plaintiffs have cited no statute—within the Law or otherwise— 18 that defines the duty of the Inspector General. The ADOT Office of the Inspector General 19 was created through Executive Order 2004-23 to provide the Governor with “independent, 20 objective, and timely information on ADOT programs and services.” Ariz. Exec. Order 21 2004-23, https://azmemory.azlibrary.gov/digital/collection/execorders/id/2247/rec/1. 22 Nothing about the Executive Order gives the ADOT Director the power to direct the 23 activities of the Inspector General. Indeed, the Executive Order emphasizes that the 24 Inspector General, while placed within ADOT, is independent and serves at the pleasure 25 of the Governor. Regarding the ADOT Director, the Executive Order instructs only that 26 the Inspector General must “[a]dvise the Director of ADOT and the Governor’s Office and 27 make recommendations on ways to strengthen and improve program procedures and 28 operations” and “[f]ile a written report no less than annually with the Governor and the 1 ADOT Director on all matters related to the duties of the position.” Id. Separately, the 2 Executive Order notes that the Inspector General is appointed to “[c]onduct case 3 investigations and audits designed to prevent and deter fraud, abuse, and misconduct in 4 ADOT programs” and “[c]oordinate with law enforcement agencies on case investigations 5 and enforcement actions,” id.; neither of these duties mention the ADOT Director. 6 The Inspector General’s website states that investigators for the Office of the 7 Inspector General “are uniquely trained and qualified to pursue regulatory compliance and 8 criminal prosecution of motor vehicle and criminal laws, particularly those related to 9 vehicle dealers,” including “complaints concerning both licensed and unlicensed 10 automobile dealers as regulated by Arizona Revised Statutes, Title 28, Chapter 10,” OFFICE 11 OF INSPECTOR GENERAL, https://azdot.gov/motor-vehicles/enforcement/office-inspector- 12 general (last visited March 20, 2020), the chapter that includes the Law. However, 13 Plaintiffs have cited no source other than this website indicating that the Law could be 14 enforced by the Inspector General. And even if the Inspector General could enforce the 15 Law, there is no indication in Executive Order 2004-23 or any other source cited by 16 Plaintiffs that the ADOT Director would be involved in that enforcement. “[G]eneral 17 supervisory power over the persons responsible for enforcing the challenged provision will 18 not subject an official to suit.” Planned Parenthood, 172 F. Supp. 3d at 1086 (quoting 19 Coalition to Defend Affirmative Action v. Brown, 674 F.3d 1128, 1134 (9th Cir. 2012)). 20 CONCLUSION 21 With respect to Defendant Halikowski, Plaintiffs have not shown a “substantial 22 likelihood that the relief requested will redress [their] injury.” Ariz. Contractors, 526 F. 23 Supp. 2d at 985 (quoting Nova Health Systems v. Gandy, 416 F.3d 1149, 1158 (10th Cir. 24 2005)). The Motion is granted. 25 IT IS THEREFORE ORDERED that Defendant Arizona Department of 26 Transportation Director John S. Halikowski’s Motion to Dismiss for Lack of Subject 27 Matter Jurisdiction (Doc. 38) is GRANTED. 28 1 IT IS FURTHER ORDERED directing the Clerk of Court to dismiss all claims 2|| asserted against Defendant Arizona Department of Transportation Director John S. 3 || Halikowski. 4 Dated this 2nd day of April, 2020. ° Wars ) ‘ A Whacrsay Fotos 7 Chief United States District Judge 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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