The Michigan Consumer Protection Act is back: The Supreme Court resurrects the MCPA Attorney General v Eli Lilly

Two Michigan Supreme Court cases, Smith v Globe Life Ins Co¹ and Liss v Lewiston-Richards, Inc,² rendered the Michigan Consumer Protection Act (MCPA) virtually useless.³ Many interested parties have waited a very long time for something, anything, whether by legislative action⁴ or a Supreme Court decision, to cure the damage to the MCPA caused by these two cases. The long-awaited Supreme Court case has finally come. After more than a quarter century, the Michigan Supreme Court in Attorney General v Eli Lilly and Co⁵ has brought the MCPA back to life. Eli Lilly is a complex case involving issues of standing, declaratory relief, and stare decisis.⁶ This article, however, will concentrate on how the Court went about overruling Smith and Liss.⁷ First, the history of the MCPA leading to Eli Lilly needs to be discussed to understand the setup before the Court.

THE HISTORY

When the Michigan Consumer Protection Act (MCPA) became effective in 1977, “It was one of the most powerful consumer-protection statutes in the United States.”⁸ As written, the MCPA is a broad consumer protection statute with only a few narrow exceptions.⁹ The act prohibits “[u]nfair, unconscionable, or deceptive methods, acts, or practices in the conduct of trade or commerce.”¹⁰ It gives the Attorney General (AG) power to investigate and prosecute such acts¹¹ and lists 30 or so specific acts or failures that would violate the act.¹²

More importantly, the MCPA created a private right of action authorizing consumers to recover a minimum amount of damages together with reasonable attorney fees.¹³ This private right includes declaratory judgments and injunctions¹⁴ and specifically provides for class actions.¹⁵ By including a private right of action, the Legislature intended to motivate attorneys to become private attorneys general, thereby assisting in the enforcement of the act.¹⁶ And it did. During the more than two decades when the act was operating as intended, in addition to cases that were brought by the AG,¹⁷ many MCPA cases were brought by consumers represented by private attorneys.¹⁸

This golden age of the MCPA came to a screeching halt in 1999 with the Michigan Supreme Court’s decision in Smith. The Smith Court eviscerated the act by broadly interpreting the act’s main exemption section, MCL § 445.904(1)(a), which exempts from coverage of the act: 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.¹⁹

Without conducting any reasoned statutory analysis or reviewing the definite legislative intention of the MCPA to broadly protect consumers, the Smith Court virtually destroyed the act with its conclusion that “specifically authorized” does not focus on “a transaction” but on whether the general transaction is authorized by law.²⁰

As the “general transactions” of most businesses are authorized by one law or another, under Smith’s interpretation, it appeared that whole areas of business activity were now exempt from MCPA coverage. It was unclear what was left of the MCPA after Smith,²¹ and a number of articles were written on how to cure the damage done to the act by Smith.²²

In 2007, the Supreme Court again addressed MCL § 445.904(1)(a) in Liss.²³ Liss followed and, if anything, exacerbated the effect of Smith’s holding²⁴ by interpreting “specifically authorized” to mean “explicitly sanctioned”²⁵ so that all regulated businesses were now exempt from the MCPA.²⁶ After Smith and Liss, it was abundantly obvious that there was very little left of the MCPA. Even so, many people were confused as to the state of the law, including legislators who enacted new sections of the MCPA that, under Smith and Liss, were nullities.²⁷ Without legislative action to revive the MCPA, the hope was that a case would come along where the Supreme Court would reverse Smith and Liss. Eli Lilly is that case. We can now take a look at the facts.
 

THE RELEVANT FACTS OF ELI LILLY

At issue are two insulin products sold by Eli Lilly with the same chemical composition. One was sold in Michigan at a higher price under the brand name, and the second was sold at a lower price as a generic drug. The AG believed this practice to be a violation of the MCPA. The AG filed and was granted a petition in the circuit court for the issuance of civil investigative subpoenas. At the same time, the AG filed an action for a declaratory judgment arguing that Smith and Liss were wrongly decided and that the issue should be ruled on before the subpoenas were served. Eventually, both parties stipulated to refrain from further action until the AG’s declaratory judgment action was decided. Both parties moved for summary disposition.²⁸

The circuit court, as expected, granted Eli Lilly’s motion on the basis of Smith and Liss, and the Court of Appeals affirmed on the same grounds. The Supreme Court granted leave instructing the parties to address several issues including “whether this Court’s decisions in [Smith and Liss] correctly interpreted MCL 445.904(1)(a).”²⁹ We can now discuss how the Court went about reversing Smith and Liss.
 

THE COURT’S ANALYSIS REVERSING SMITH AND LISS

In short, the task of a court in determining the meaning of words in a statute is to discern the intention of the legislature in including those words to accomplish the objective of the statute itself. Yet, one reading the MCPA should conclude that Smith, and later Liss, were wrongly decided. These cases’ interpretations of MCL § 445.904(1)(a) are illogical. No reasonable legislature would take the time to write a broad consumer protection statute and include therein a short exemption provision that all but destroys the very purpose of the statute.³⁰ The objective of the Eli Lilly Court was to show this obvious truth through careful, unimpeachable legal reasoning. The Court succeeded in accomplishing that objective.

The Eli Lilly Court starts its challenge to Smith and Liss with the wording of the statute noting that if the language is clear and unambiguous, judicial construction is not permitted.³¹ The Court finds the language of MCL § 445.904(1)(a) unambiguous.³² The Court concludes that as the section refers to “a transaction” singularly, it was intended to be a narrow exception applying to “MCPA claims involving transactions or conduct that defendants are specifically authorized by law to do.”³³

A primary principle of statutory interpretation is for the court to give the statutory words their plain and ordinary meaning without adding to them or subtracting from them. The Eli Lilly Court next demonstrates how Smith and Liss violated this principle in two ways: first, by inserting a new word — “general” — into the statute and second, by essentially taking the words “specifically authorized” out by changing the focus of those words.³⁴ As to the insertion of the word “general,” the Court states that Smith and Liss broadened the exemption “in a manner that was contrary to legislative intent. This exceeded the judiciary’s duty to interpret statutory law as written, not make it.”³⁵

Next, the Court turns to the improper manipulation of “specifically authorized” by the Smith and Liss Courts. Under the wording of MCL § 445.904(1)(a), the focus of “specifically authorized” is on a specific transaction or a type of conduct by the actor — the defendant. Smith shifts the focus to the “general transaction” that the defendant is involved in, for example, building houses — a totally different point of reference. Liss exacerbated Smith’s error “by focusing its analysis on the licensure of or overall regulatory burden on the actor, rather than on the actions of that actor.”³⁶

The logic of Eli Lilly on the statutory wording is compelling. The stated purpose of the MCPA as a whole is to protect consumers. Smith and Liss, by adding the word “general” to MCL § 445.904(1)(a) and changing the focus of that section from the defendant’s conduct to whether the defendant is regulated in some way or another, penned an interpretation that would all but destroy the statutory goal of protecting consumers. Eli Lilly makes it clear that such a misinterpretation of MCL § 445.904(1)(a) cannot stand and requires reversal.

Eli Lilly goes on to examine how the misinterpretation of MCL § 445.904(1)(a) by Smith and Liss relates to other parts of the MCPA. The Court notes that an interpretation of a part of a statute that makes that part inconsistent with, or makes a nullity of, another part of the same statute must be incorrect. The Eli Lilly Court finds Smith and Liss are faulty here as well.

The Court first points out that at least one type of prohibited conduct under MCL § 445.903(1) is a nullity under the interpretation of Smith and Liss. That subsection, MCL § 445.903(1)(dd)(ii), prohibits representing that certain regulated container-holding devices are degradable, contrary to the Environmental Protection Act. Since this conduct applies to people already regulated under the Environmental Protection Act, they would be exempt from the MCPA under Smith and Liss.³⁷ The Court next rounds out this area of argument by showing that the interpretation of Smith and Liss is inconsistent with a number of other MCPA provisions. For example, since the MCPA provides for investigations of several heavily regulated industries, it would make no sense for the legislature to provide for investigations of industries that were already exempt.³⁸ “Neither Smith nor Liss addressed this incongruence.”³⁹
 

CONCLUSION

During the 20 plus years between its enactment in 1977 and the holding in Smith in 1999, the MCPA was the premier consumer protection statute in Michigan, as it was intended to be. Smith and later Liss changed all that by interpreting an MCPA exemption, MCL § 445.904(1)(a), so broadly that it virtually ate up the rest of the act. With those two cases, Michigan consumers were pretty much left in the dark waiting and hoping for a case like Eli Lilly to come along and breathe life back into the MCPA. Eli Lilly went about putting the world back on its axis. The Eli Lilly opinion is well reasoned and extensively supported. Consumers and consumer advocates are entitled to rejoice in the MCPA’s resurrection.