Article courtesy of MIRS for SBAM’s Lansing Watchdog newsletter
In a decision expected to significantly expand Michigan’s consumer protection law, a divided 4-3 Michigan Supreme Court Friday cleared the way for Attorney General Dana Nessel to continue investigating Eli Lilly’s insulin pricing practices.
By overturning two decisions dating back more than two decades that narrowed the use of the Michigan Consumer Protection Act against corporations regulated by a state or federal agency, the act been “restored to its true original purpose,” Nessel said.
“Today’s decision sets the foundation for a fair marketplace where honest businesses won’t lose their customers to competitors who use deception and unfair tactics to game the system.
“We can once again protect parents being price gouged for baby formula, milk and eggs at the grocery store or swindled by deceptive used car contracts,” she added.
Zach Rudat, director of the Michigan Alliance for Legal Reform, said the decision “upends decades of settled case law, exposing workers and job providers alike to abusive litigation.” He urged the Legislature to “act now to codify the regulatory compliance exemption and restore clear, predictable standards for those already operating under extensive government oversight.”
The high court overturned the 1999 Smith v. Globe Life and the 2007 Liss v. Lewiston-Richards rulings, which held that if a business or industry is generally regulated by a state or federal agency, it is effectively exempt from the MCPA, even when accused of unfair or deceptive conduct.
The court held that those prior rulings improperly expanded the exemption beyond what the Legislature intended.
“Smith and Liss essentially nullify all MCPA claims against swaths of industry sectors that would otherwise be subject to consumer-protection claims, contrary to the intent of the MCPA,” Justice Noah Hood wrote for the majority.
Justice Kyra Bolden, the court’s only former legislator, dissented, holding that Nessel lacked standing to bring her complaint because she has yet to file an enforcement action. As a result, Bolden said, there was no actual legal controversy for the court to resolve.
“Plaintiff has made a persuasive case that insulin products are expensive in the United States as compared to other nations and that the system of pharmaceutical production and marketing results in pharmaceutical prices that are harmful to Americans in need of insulin,” wrote Bolden, who was joined by Justices Brian Zahra and Richard Bernstein.
“However, plaintiff has not shown with any specificity that defendant has violated the MCPA,” she noted.
The majority disagreed, noting that Nessel petitioned for civil investigative subpoenas, and Eli Lilly hasn’t challenged the probable-cause finding a court made to authorize those subpoenas.
Nessel, who previously argued the rulings misinterpreted a narrow exemption in the law and had blocked the state from investigating wrongdoing, launched an investigation in January 2022 into whether Eli Lilly engaged in price gouging for insulin, a life-saving medication used by diabetics.
An Ingham County judge ruled later that year that the MCPA could not apply to Lilly because insulin sales are regulated by the U.S. Food and Drug Administration. The Michigan Court of Appeals upheld that decision.
Friday’s decision doesn’t decide whether Eli Lilly violated the MCPA, but allows Nessel’s investigation to continue.
Reaction to Ruling Mixed
Sen. Sam Singh (D-East Lansing), who has led the way on legislation to protect consumers, called Friday’s ruling “a major win” for the state and its citizens.
“Today, the Michigan Supreme Court affirmed what we’ve known for a long time – that Michigan Republicans’ previous efforts to gut our consumer protection laws are illegal and unconstitutional,” he said, encouraging the House to pass his SB 134, which would remove the exemptions created by the Smith decision.
Brian Calley, president and CEO of the Small Business Association of Michigan, said Friday’s ruling “places a significant burden on Main Street business” across the state, and he encouraged restoring the exemptions to preserve small businesses’ ability to grow and compete.
Justin Winslow, CEO of the Michigan Restaurant & Lodging Association, and Dr. Tom George, CEO of the Michigan State Medical Society, also called for codification of the exemptions.
Hood acknowledged that overturning Smith and Liss “may open the door to increased litigation” against businesses, but that, he noted, “is not a compelling reason to retain” the Smith and Liss rulings.
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