LANSING — The Michigan Supreme Court will hear arguments Thursday in a case with potential ramifications for a slew of businesses that for 25 years have been shielded from certain lawsuits under an interpretation of the state’s consumer protection law.
Attorney General Dana Nessel is asking the court to overturn 1999 and 2007 rulings so she can investigate drugmaker Eli Lilly’s pricing of insulin medicines. Those decisions were issued by conservative justices, but liberals have the majority now.
Nessel, a Democrat, said earlier this year that the cases were wrongly decided and “today are weaponized by corporations evading scrutiny into how they treat consumers.” A reversal, she said, “would have widespread ramifications for our ability to investigate, litigate, and enforce the (Michigan Consumer Protection Act) all across the consumer marketplace, where oftentimes the state law is rendered toothless and the vulnerable customer defenseless.”
The 1976 law prohibits unfair, unconscionable or deceptive business practices; authorizes investigations by the attorney general and county prosecutors; and allows for lawsuits seeking financial damages, injunctions and declaratory judgements. But it exempts transactions or conduct “specifically authorized” under federal or state laws administrated by regulatory boards or officers.
The high court in 1999 and again in 2007 interpreted the exemption to apply “regardless of whether the specific misconduct alleged is prohibited.” That, according to critics, effectively gutted the law’s protections.
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The Michigan Association for Justice, which advocates for trial lawyers, has filed a brief in support of Nessel’s arguments. So have 16 county prosecutors — a mix of Democrats and Republicans — the State Bar of Michigan’s Consumer Law Section and legal aid groups that assist low-income people.
They say the exemption should be narrowly construed, so companies’ “specifically” authorized conduct is safeguarded from litigation but businesses also do not have carte blanche to engage in practices “generally” barred by the consumer protection law.
Washtenaw County Prosecutor Eli Savit, writing for the local prosecutors, said the past rulings have hampered the ability to protect consumers. He said from 1976 to 2007, when the most recent decision was handed down, consumer protection filings averaged 9.3 per year in the county. The average fell to 1.2 cases annually from 2007 to present, he said.
Nessel sued Indianapolis-based Eli Lilly in 2022 and, anticipating the company’s contention that the consumer protection law does not cover drug pricing, asked that the exception not be applied and that her office get civil investigative subpoenas. The state lost in Ingham County Circuit Court and the Michigan Court of Appeals.
Lilly’s lawyers call it a “test case” and say the attorney general has not cited a single patient who cannot get insulin for $35 a month or less.
The Supreme Court will hear “mini” arguments on the appeal application. It could decide not to rule. Or it could eventually issue a full opinion or order on that matter.
Separately, Nessel and others are asking the Democratic-controlled Legislature to clarify that the law does not exempt consumer transactions solely because businesses or professions are regulated — a backstop in case the court declines to get involved.
The Senate Finance, Insurance and Consumer Protection Committee heard testimony Wednesday on Senate Bill 1021, including from the attorney general. She said her office is powerless to investigate price gouging at grocery stores, deceptive misrepresentations by used-car dealerships, and contractors and furnace-repair specialists who do not finish work they are paid for.
The sponsor, Sen. Sam Singh, D-East Lansing, said the legislation would “put us in line to … the true intention” of the law in Michigan and other states.
“We are going after people who are actively creating fraud and trying to take advantage of people,” he said. “If somebody is doing their business in a normal fashion — they’re not breaking the law — this will never impact that industry, that association.”
Tiffany Ellis, a Detroit-based partner with the Peiffer Wolf Carr Kane Conway & Wise law firm, said the “disastrous” 1999 and 2007 decisions have hampered or blocked lawsuits against opioid manufacturers, mortgage companies, hospitals and insurance companies.
“It’s simply common sense that when one company doesn’t follow the rules and gains an unfair advantage and profit, it’s not just their customers who are deceived, injured or paid too much who are harmed,” she said. “All of its competitors, the honest, hard-working business owners who do things the right way, they suffer as well.”
Various business organizations submitted written objections to the bill but did not testify. The panel did not immediately vote on it or other legislation aimed at cracking down on price gouging during state emergencies and combatting data breaches.
Similar House measures to essentially negate the earlier court rulings and strengthen the consumer protection law were introduced in 2023 but have not been taken up by the Democratic-led House Regulatory Reform Committee.
“There is no need to preempt a legislative process that may reconfirm the existing law, alter the existing law, or moot the issue,” Lilly attorneys wrote in an April brief.
Full Story: Crain’s Detroit Business October 10 2024
