Michigan Consumer Protection Act Rekindled?
In this edition of Take a Second, we're looking at a recent Michigan Supreme Court decision in Attorney General v. Eli Lilly and Co. You might be wondering what a case involving a pharmaceutical company has to do with credit unions. As it turns out, the decision could have significant implications for businesses across Michigan, including credit unions. So, pull up a seat and let's break it down.
Quick Background on Attorney General v. Eli Lilly (Eli Lilly)
At the center of this case were two insulin products sold by Eli Lilly. Although both reportedly had the same composition, one was sold in Michigan as a brand-name product at a significantly higher price than a comparable generic version sold in other countries.
The Attorney General felt that this practice violated the MCPA and filed a petition for the issuance of civil investigative subpoenas. Concurrently, the Attorney General also filed an action arguing that Smith v. Globe Life Ins Co and Liss v. Lewiston-Richards, Inc. were wrongly decided.
Now that we have the facts out of the way, let’s dig into the MCPA a bit as we connect all the dots.
What is the MCPA?
The Michigan Consumer Protection Act or MCPA was originally enacted in 1976. At the time it was enacted, it provided a private right of action for consumers to file lawsuits against businesses for violations under the MCPA to recover damages and reasonable attorneys’ fees. It also provided the Attorney General with broad power to investigate and prosecute violations of the Act including “unfair, unconscionable, or deceptive methods, acts, or practices in the conduct of trade or commerce.”1
These violations could include things like “(j) making false or misleading statements of fact concerning the reasons for, existence of, or amounts of price reductions or (o) causing a probability of confusion of or misunderstanding as to the terms and conditions of credit if credit is extended in a transaction.”2 These are only two examples of specific violations on this list but there are many others.
Now that you have a general understanding of the MCPA, let’s dive into the two cases that limited its reach over the past couple of decades until the recent Eli Lilly decision.
Impact of Smith v. Globe Life Ins Co and Liss v. Lewiston-Richards, Inc on the MCPA?
The year was 1999. We were approaching a new millennium, Adidas tear-away track pants were the latest fashion trend and playing Snake on your Nokia cellphone was all the rage. And all the while the Michigan Supreme Court was issuing their decision in the Smith v. Globe Life Ins Co. case (Globe Life). The Globe Life decision was pivotal as it significantly limited the MCPA’s reach. Specifically the Court looked at the exemption within the Act that stated, “this act does not apply to either of the following: (a) a transaction or conduct specifically authorized under laws administered by a regulatory board or officer acting under statutory authority of this state or the United States.”3
The court held that the relevant question was whether the general transaction was specifically authorized by law, not whether the particular misconduct alleged was authorized. That interpretation allowed the exemption to apply broadly to transactions authorized by state or federal law, even when the specific conduct that was being challenged under the MCPA was not authorized. As a result, since most transactions are authorized by law, this created an exemption for large swaths of businesses and business activity even if the action would be considered a violation under the MCPA.
The year is now 2007. You’re updating your Myspace Top 8, waiting in line for the debut of the first iPhone and rocking layered polo shirts—collars popped of course. The Michigan Supreme Court was hearing another MCPA case, Liss v. Lewiston-Richards Inc. (Liss). In this decision, the Supreme Court explained that “specifically authorized” meant that the general transaction at issue was explicitly sanctioned by law. This decision further reinforced the broad general-transaction approach, making it more difficult to pursue MCPA claims against licensed or regulated businesses, even when the alleged misconduct itself was not expressly authorized by law.
As a result of the decisions in these two cases, for decades, the MCPA has been, for all intents and purposes, dormant. Consumer attorneys have tried albeit mostly unsuccessfully to bring litigation against businesses for violations of the MCPA. Until now…
Credit Unions and the MCPA
For credit unions, an important qualification remains. The MCPA separately provides that, except for an action brought by the Attorney General under Section 11, the MCPA does not apply to or create a cause of action for an unfair, unconscionable, or deceptive practice that is made unlawful by the Michigan Credit Union Act (MCUA) (MCL 445.904(2)(e)). The decision under Eli Lilley did not address the exemption under this section only the one under MCL 445.904(1)(a); therefore, it did not eliminate this separate statutory protection.
This means that the effect on credit unions will depend on the specific conduct alleged, whether that conduct is made unlawful by the MCUA, and the nature of the claim being brought.
To sum it up…
In a 4-3 decision, the Michigan Supreme Court decision in Eli Lilley significantly narrows that previous exemption created through the decisions in Globe Life and Liss. The Court overruled the two cases and held that courts must determine whether the specific transaction or conduct at issue. Courts can no longer simply consider whether a business’s general type of transaction is authorized by law. Instead, they must determine whether the specific transaction or conduct being challenged is authorized by law.
For credit unions, an important qualification remains. The MCPA separately provides that, except for an action brought by the Attorney General under Section 11, the MCPA does not apply to or create a cause of action for an unfair, unconscionable, or deceptive practice that is made unlawful by the Michigan Credit Union Act (MCUA) (MCL 445.904(2)(e)).
The decision under Eli Lilley did not address the exemption under this section only the one under MCL 445.904(1)(a); therefore, it did not eliminate this separate statutory protection. This means that the effect on credit unions will depend on the specific conduct alleged, whether that conduct is made unlawful by the MCUA, and the nature of the claim being brought.
We will continue to keep an eye on this as cases are filed and as always keep you all updated on what we are seeing on the legal front.
As always, this article is intended for general information only and does not constitute legal advice. If you have any questions about this topic and/or possible implications, you should contact your attorney for advice.
Hope to see you next time when we take a second to break down another trending legal topic!
1. MCL 445.903(3)(1) et seq.
2. MCL 445.903(3)(1)(j) and (m)
3. MCL 445.904(1)(a)
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