Automotive Risk Management Partners ARMP

Lessons for Dealers From the CDK and Finley Class Action Lawsuits

Terry Dortch President, Automotive Risk Management Partners

Key takeaways

  • The CDK and Finley class action lawsuits show that dealers are not immune from being sued or harmed by such situations regardless of fault.
  • Dealers need a compliance process and program designed to support an affirmative defense if they are sued.
  • A partial or incomplete compliance program can be used against a dealer by an attorney rather than protecting them.
  • The goal of a proper compliance program is to let a dealer demonstrate to a judge or attorney that they did everything humanly possible to defend against a claim.
  • Automotive Risk Management Partners positions its program as one meant to support an affirmative defense rather than disrupt existing dealership processes.

Summary

Class action lawsuits recently filed against CDK and Finley highlight a risk every dealership faces, regardless of who caused the underlying breach or failure. Dealers are not immune from being named in litigation tied to vendor or data incidents, and fault is largely irrelevant once a suit is filed. The real question is whether a dealership has a compliance program strong enough to support an affirmative defense, or whether gaps in that program will be exposed and used against them by opposing counsel.

A half-built or partially implemented compliance program can do more harm than good, since it shows an attorney that the dealership knew what was required and simply didn't finish the job. Dortch argues that Finley's situation, a large company with resources that still faces a costly class action, proves this can happen to any dealer. He urges principals and GMs to assess their current compliance setup, including any vendors they're relying on, and to build a program genuinely capable of holding up in court rather than one that only looks compliant on paper.

Transcript

Introducing the CDK and Finley lawsuits

Hi, my name's Terry Dortch. I'm with Automotive Risk Management Partners. I'm here today to talk to you a little bit about the ongoing, or recently, recently put out, lawsuits against CDK and Finley. Both of them have class action lawsuits against them right now. I've been talking about this for a long time now. Dealers have to prepare themselves. You're not immune. You're not immune to being sued. You're not immune to being ravaged by the situation, and whether it's your fault or not, it's irrelevant.

Why an incomplete compliance program backfires

What you need to do as dealers is you need to put together a process and a program that's going to protect you and set you up so that if these lawsuits come about, you can wage an affirmative defense against them. If you're not doing the proper things to put you in that situation, you're hurting yourself. If you're spending money right now on a compliance program that's half, it's not going to do you any good, because you know what an attorney's going to do is they're going to look at it and they're going to say, wait a second, you know what you were supposed to do, you obviously started something here, and you only did it half ass.

Building a program for affirmative defense

So the bottom line here is that when you get into a program, you need to get into a program that's going to afford you the ability to defend yourself. We do that at Automotive Risk Management Partners. That's our whole goal, our whole goal. It's not to come in and change processes and procedures and disrupt everything, it's to set you up so that you can wage that affirmative defense, so that you can look at a judge or an attorney and you have a way of saying, wait a second, I've done everything humanly possible to defend against this.

Finley's exposure and lessons for other dealers

Because trust me, the last thing Finley wanted was a class action lawsuit. Yeah, they're a big group, yeah, they've got some cash behind them, they don't want to spend it, come on. And really what's going to happen is that they're going to look at the checkbook that Finley has and they're going to go after some big, big money for this.

I guess I can't stress this enough. If it can happen to Finley, it can happen to anyone else out there. Please take some time to assess what your compliance program is, how it's structured, and what it's doing for you. Most of you may be doing business with two different companies. I'm telling you, you need to assess it. If you have any questions, you want to discuss it, call us, Automotive Risk Management Partners. Thanks, bye.

Questions this video answers

Does a dealer need to worry about lawsuits like the CDK and Finley cases if the breach wasn't their fault?

Yes. Whether or not the situation is the dealer's fault is irrelevant; dealers are not immune from being sued or from being harmed by these types of situations, so preparation is necessary regardless of fault.

What is the point of putting together a compliance program?

The point is to give the dealership the ability to wage an affirmative defense if a lawsuit occurs, so the dealer can show a judge or attorney that everything humanly possible was done to defend against the claim.

Is a partial or half-done compliance program good enough?

No. A half-done compliance program can hurt a dealer because an attorney will point out that the dealer knew what they were supposed to do, started it, and only did it halfway, which weakens any defense.

Read more on this

  • Dealership Compliance Software

    Dealership compliance software tracks a store's obligations under the FTC Safeguards Rule, OSHA, EPA, and F&I regulations in one system, with audit findings, em...

  • How to Choose a Dealership Compliance Vendor

    Choose a dealership compliance vendor by testing four things: whether their own auditors come on site or the assessment is a questionnaire, which of the nine FT...

Covered in this video

  • CDK lawsuit
  • Finley lawsuit
  • class action lawsuits
  • affirmative defense
  • dealership compliance programs