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CDK Global LLC v. Brnovich

The panel affirmed the district court’s order denying plaintiffs’ motion for a preliminary injunction against enforcement of the “Dealer Law,” an Arizona statute aimed at strengthening privacy protections for consumers whose data is collected by car dealers and restricting anti-competitive business practices by technology companies that provide database services for dealers.

The Dealer Law prevents database providers such as plaintiffs from limiting access to dealer data by dealer-authorized third parties and requires providers to create a standardized framework to facilitate such access. Plaintiffs sought declaratory and injunctive relief on the basis that the Dealer Law is preempted by the Copyright Act and the Computer Fraud and Abuse Act, violates the Contracts Clause and the Takings Clause, and is void for vagueness.

The panel held that it had jurisdiction under 28 U.S.C. § 1292(a)(1) to review the district court’s order denying injunctive relief, but it lacked pendent appellate jurisdiction over the CFAA and vagueness claims, which the district court dismissed before ruling on the preliminary injunction.

The panel affirmed the district court’s conclusion that plaintiffs were unlikely to succeed on the merits of their claims, and thus were not entitled to a preliminary injunction. As to the Copyright Act preemption claim, the panel held that there was no conflict preemption because the state and federal laws were not irreconcilable. Plaintiffs brought a facial challenge to the Dealer Law but could not establish that every possible application of the statute would conflict with the Copyright Act. In addition, the Dealer Law did not conflict with 17 U.S.C. § 106(1), which grants the owner of a copyrighted work the exclusive right “to reproduce the copyrighted work in copies.”

The panel further concluded that plaintiffs were unlikely to succeed on their Contracts Clause claim. First, plaintiffs forfeited their claim that the Dealer Law impaired their contracts with third-party vendors. Second, plaintiffs did not show that the Dealer Law impaired their ability to discharge their contractual duty to keep dealer data confidential. Third, assuming, without deciding, that the Dealer Law substantially impaired contractual third-party access restrictions, the statute did not violate the Contracts Clause because it was reasonably drawn to serve important public purposes of promoting consumer data privacy and competition.

Finally, the panel held that plaintiffs were unlikely to succeed on their takings claim because the Dealer Law did not effect a per se physical taking, and it did not constitute a regulatory taking.

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