Daimler lawsuit: IL board won't allow it to cut off dealership that admitted to hacking Daimler's system

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Cook County Record  /  June 30, 2016

Calling a state agency’s recent decision akin to “saying a criminal is innocent of burglary if he breaks into a house but does not succeed in stealing anything,” truck maker Daimler Trucks North America has asked a Cook County judge to determine the Illinois Motor Vehicle Review Board was wrong to determine Daimler was not justified in cutting off a dealership group which admitted to stealing information from Daimler to gain a competitive advantage over a rival Daimler dealer.

On June 14, DTNA filed a complaint against the IMVRB in Cook County Circuit Court.

Daimler is a manufacturer of commercial trucks including Freightliners.

Court documents state the company has a proprietary computer system which dealers can access with unique user names and passwords. Each dealer uses the system to generate quotes, order trucks and store such information as customer lists and past and pending truck sales.

In 2014, the sales manager at Northwest Trucks, a dealership with a franchise agreement with Daimler, acquired the user name and password of a competing dealership, TransChicago Truck Group. According to court documents, other officials in the Northwest dealership knew the sales manager had obtained TransChicago’s credentials and was using them to access DTNA’s system and obtain information about TransChicago’s business.

In a hearing before the Motor Vehicle Review Board, TransChicago testified the company had lost several large sales because Northwest contacted customers after the order had already been placed and offered an identical order at a lower price. From 2013 to 2014, Northwest’s operating profit from new truck sales purportedly grew from less than $10,000 to more than $1 million – an increase of 10,249 percent. Net profits rose 1,667 percent, according to court documents.

Northwest officials admitted to the conduct at the hearing and said they knew it violated Northwest’s agreements with Daimler, court documents said.

However, when Daimler terminated the agreements, Northwest filed a protest with the review board. A hearing examiner found the conduct did breach the agreements, but said Daimler lacked good cause to terminate the agreements because it had not shown the competitive advantage Northwest gained by hacking the system.

In the suit brought against the review board in Cook County court, Daimler’s attorneys argued this decision flies in the face of state law, which permits termination if a dealer breaches its agreements, regardless of whether the breach gave the dealer a competitive advantage.

“Even if the Hearing Examiner was correct that a manufacturer must show that the dealer obtained a monetary benefit from breaching its dealer agreement, the Hearing Examiner erred by ignoring DTNA’s evidence of harm,” the suit states. “DTNA submitted evidence … showing specific instances where Northwest was able to secure truck sales based on hacking into DTNA’s system.”

The suit claims the review board “rubber stamped” the hearing examiner’s decision that the agreements could not be terminated.

Through its suit, Daimler is hoping the court will reverse the review board’s decision and will require that the board file the entire record of the administrative hearing, including the transcript.

Cook County Case No. 2016-CH-7997 was filed June 14 by attorneys Theresa A. Nickels and Jena L. Levin of Foley & Lardner LLP, representing Daimler.