Nessel
LANSING, Mich. – Michigan’s Democrat-heavy supreme court has overturned decades of precedent issued by conservative predecessors, leading to new threats of lawsuits against businesses whose products are regulated by officials.
The issue involved state Attorney General Dana Nessel’s effort to investigate Eli Lilly and Co. over allegedly inflated prices of insulin. Her probe was blocked by lower courts that found the Michigan Consumer Protection Act didn’t apply to conduct authorized by a regulatory board or a state or federal officer.
This exemption was interpreted broadly in 1999 and 2007 decisions, known respectively as Smith and Liss, wrote Justice Noah Hood, a recent appointee by Democrat Gov. Gretchen Whitmer. The court once held a Republican majority but that flipped in 2020, and now six of the seven justices are Democrats.
“Today’s decision upends decades of settled case law, exposing workers and job providers alike to abusive litigation, duplicative red tape, and higher costs that will ultimately be passed along to Michigan consumers,” said Zach Rudat, Director of the Michigan Alliance for Legal Reform.
“The Legislature must act now to codify the regulatory compliance exemption and restore clear, predictable standards for those already operating under extensive government oversight.”
House Bill 5725 was introduced in March but still sits in the House Judiciary Committee. It would nullify the Supreme Court’s ruling, which now allows new enforcement actions by consumers and the attorney general.
The MCPA also grants the AG subpoena power to investigate potential violations. That’s where Nessel is with her look into insulin prices, which was fought by Eli Lilly as subject to the regulatory compliance exemption.
In Liss, the court considered a lawsuit against a contractor that alleged violation of the MCPA. It said the exemption applied to residential home builders thanks to the licenses they obtain from state officials. Years earlier, the court said a life insurer couldn’t be sued because of its certificate from the State Commissioner of Insurance. Both courts were 5-2 Republican.
“Smith and Liss were wrongly decided because they inappropriately broadened the scope of the exemption, contrary to the plain language, structure and purpose of the statute,” Justice Hood wrote. “We hold that the… exemption should be applied narrowly in cases where the specific transaction or conduct at issue is authorized by law.”
Trial lawyers supported Nessel’s cause and legislation last year that would have had the same effect as the Supreme Court’s ruling. In an amicus brief, the Michigan Association for Justice pointed to a 1982 decision that established the AG’s power to enforce the MCPA when administrative remedies, like complaints with regulatory bodies, were insufficient.
Detroit-based General Motors also jumped into the fray at the Supreme Court, writing that it has relied on the balance established by lawmakers and the Liss and Smith courts for certainty. Vehicle sales are regulated by the state and federal governments, going through a process that covers every part of the car (even the vehicle's label and warranty).
"And despite the Attorney General's (unrealized) parade of horribles, the authorized-transaction prong of the exemption does not allow Michigan companies to avoid accountability for their actions," GM wrote.
"Far from it. GM answers ever day to federal regulators and state licensing boards, not to mention national standards, product-liability lawsuits, and warranty claims. Beyond that... GM's independent, authorized dealerships answer to Michigan's secretary of state as a condition of their license to sell vehicles."
Nessel has testified that she is hamstrung by “one of the most limited protection acts in the country.” That’s no longer the case thanks to the 4-3 decision that drew a dissent from Kyra Harris Bolden, a Democrat joined by Richard Bernstein and Republican Brian Zahra. Bolden wrote that Nessel lacked standing because she has failed to plead any unfair or deceptive practices.
“Until today, a plaintiff in this state was always required to show that there was an actual case or controversy before a court could resolve their issue,” Bolden wrote. “This requirement served the important purposes of protecting innocent parties against lawsuit and acting as a check on our own authority to resolve hypothetical problems. Today, the majority overturns two opinions after overhauling our standing doctrine.”
