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Is the Michigan Consumer Protection Act Dead?      
By Lorray S.C. Brown and Joseph Ferrentino, MPLP Law Clerk

In its recent opinion (Liss v Lewiston-Richards, 478 Mich 203 (June 6, 2007)), the Michigan Supreme Court confirmed that the Michigan Consumer Protection Act (MCPA) is indeed unavailable to Michigan consumers.

The MCPA was enacted to protect consumers from “unfair, unconscionable, or deceptive methods, acts, or practices in the conduct of trade or commerce.”  MCL 445.903.  However, the MCPA exempts any “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.”  MCL 445.904(1)(a).

The demise of the MCPA began in 1999 in Smith v. Globe Life Insurance Co., 460 Mich 446 (1999).  In Globe, the Michigan Supreme Court, when interpreting the MCPA exemption, held that the focus of the exemption “is not whether the specific misconduct alleged by the plaintiffs is ‘specifically authorized’”.  Instead, “it is whether the general transaction is specifically authorized by law, regardless of whether the specific misconduct alleged is prohibited.” Globe, 460 Mich at 465.  Under the Globe Court’s interpretation, all industries whose general conduct was specifically authorized were now exempt from the MCPA.  After Globe, consumer advocates tried to limit Globe to the insurance industry.  However, the lower courts began applying the Globe interpretation to other regulated industries.

Now the Supreme Court has effectively eviscerated the MCPA.  In Liss, the homeowners entered into a contract with the defendant residential builders for the construction of a new home.  The builders, however, failed to complete the home on time.  Moreover, the construction that was completed was “not done in a workman-like manner.” Thus, the homeowners filed an action alleging breach of contract, breach of warranty, and other causes of action.  They also alleged that the builders violated the MCPA.  The builders argued that the transaction, residential home building, was exempt from the MCPA.

In Liss, the Supreme Court held that “under MCL 445.904(1)(a), residential home builders are exempt from the MCPA because the general transaction of residential home building, including contracting to perform such transaction, is ‘specifically authorized’” by law.  In reaching this conclusion, the Court has now confirmed that the MCPA exempts licensed and regulated businesses from the Act.

Unfortunately, the majority was not persuaded by dissenting Justices Cavanagh and Kelly. In his dissent, Justice Cavanagh stated:
 

"I believe that Smith [v Globe] should be overruled . . . . the test adopted in Smith [v Globe] is so broad that it precludes many permissible claims under the Michigan Consumer Protection Act . . . . Moreover, not only was Smith [v Globe] wrongly decided, the Smith [v Globe] decision defies practical workability because it disallows numerous claims that are actually allowed under the relevant statutory language."

Justice Kelly believed the conduct at issue was not exempt from the MCPA and the holding of Smith [v Globe] should be limited strictly to cases involving the insurance industry. Justice Kelly stated that with this decision, "the majority has essentially decided that merely being a licensee in a regulated industry qualifies one for the exemption." She correctly concludes that "the result may well be that a large number of Michigan businesses will be able to engage in unfair or deceptive practices without running afoul of the MCPA."

This ruling is unfortunate for Michigan’s consumers.  Our only hope now is in the Legislature.  Long live the MCPA!

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