Oct. 11, 2024 | This Week in Government: Supreme Court Hears Consumer Protection Act Arguments in Eli Lilly Case

The state and defendants sparred during oral arguments before the Michigan Supreme Court on Thursday, over whether the high court should reverse a quarter century of precedent related to the Michigan Consumer Protection Act.

The Supreme Court is being asked whether those past decisions – Smith v. Globe Life Insurance Company (1999) and Liss v. Lewiston-Richards, Inc. (2007) – were correctly decided. If not, the court is being asked if they should otherwise be retained.

The Department of Attorney General argued that the two cases largely gutted the Michigan Consumer Protection Act and leaves consumers with little chance for remedy.

Counsel for the defendant in Attorney General v. Eli Lilly and Company (MSC Docket No. 165961) contended that the cases were decided correctly and should stand while the Legislature continues to weigh bills that might enact changes to the act.

The case involves Attorney General Dana Nessel, who has been seeking to have the high court consider her case and possibly reverse past decisions. She has expressed a desire for the Department of Attorney General to investigate insulin pricing at Eli Lilly and Company.

In June 2023 the Court of Appeals ruled that only the Supreme Court can reverse its decisions.

Lower courts have ruled that two previous Supreme Court decisions mean Eli Lilly is authorized by law to manufacture and sell insulin, so therefore that practice cannot be investigated under the Michigan Consumer Protection Act.

“The present dynamic would bewilder any Michigan consumer who finds that they cannot rely upon the Consumer Protection Act,” Assistant Attorney General Darrin Fowler said. “Smith and Liss were wrongly decided. The act’s narrow exemption was transformed into a gaping hole, and the test in these decisions was moved from being one looking at a transaction or conduct that is specifically authorized to merely looking for some general authorization under a regulatory scheme.”

John O’Quinn, arguing for Eli Lilly, countered that the Michigan Consumer Protection Act has been revised 23 times by the Legislature since its initial adoption, including the addition of the language from the Smith case into a section of the act verbatim.

“That unbroken chain is powerful evidence that … Smith (was) correct in their interpretation of Section 4 1(a) as exempting entire transactions and the language of Section 4 1(a) than the exemptions found in most other states’ consumer protection laws,” O’Quinn said.

He said other states exempt “specific aspects” or “specific activity within transactions.”

O’Quinn also pointed to bills before the Legislature that seek to remove the transaction exemption and change the act’s language to mirror “what the attorney general asked this court to do by fiat.”

“This court should not short-circuit the ongoing legislative process, particularly in the context of a case that is not actually about consumer protection at all, it is just about overturning precedent,” O’Quinn said.

He was referring to legislation, including bills heard before a Senate panel Wednesday, that would amend the act. Nessel was among those who testified in support of the bills (See Gongwer Michigan Report, Oct. 9, 2024).

Justice David Viviano repeatedly questioned Fowler for clarification on the argument the department was trying to make.

He asked how the exemption would apply going forward if the court accepted the department’s interpretation of the act.

“Our argument is not that every aspect of the transaction has to be articulated in the regulatory scheme,” Fowler said. “The argument is that the appropriate focus in each individual case is the specific aspect that is being alleged as unlawful.”

He explained that they are not alleging Eli Lilly is wrong to sell insulin writ large, but that they are selling it at an excessive price.

Later, Viviano continued to press Fowler for clarification.

“All I can come up with is that you do not believe that the statute exempts a transaction unless the entire transaction and every bit of it is approved by a regulatory authority. Is that correct?” Viviano said.

Fowler said no. Viviano responded that in the state’s brief, it appears the department only wants the exemption to apply to elements of a transaction.

“I’m trying to figure out when it says: ‘the act doesn’t apply to either the following, a transaction,’ I don’t, it seems to me you’ve written that word right out of the statute,” Viviano said.

Fowler said an example in its briefing dealt with the Michigan State Housing Development Authority’s approval of consumer specific lease transactions, stating that if MSHDA approves a particular lease with a consumer, there is no way the person can use the Consumer Protection Act “to attack any aspect of that transaction.”

Fowler further explained his position upon further questioning.

“When a government agency specifically authorizes a specific consumer transaction, no aspect of that transaction can be attacked under the Consumer Protection Act, regardless of whether that aspect was considered by the agency or not,” Fowler said.

Viviano said it sounded like they were speaking about the same thing, to which Fowler disagreed.

Fowler said in the example given that MSHDA may not review every component, but the act would not be able to be applied simply because the agency approved the transaction.

O’Quinn questioned what he called two different arguments being made before the court.

The first, O’Quinn said, was that the specific aspects of the transaction must be authorized, which he said is not the language of the statute.

Second, he said the department appeared to suggest if a specific, particularized transaction is authorized that all aspects of it would be exempt. The statute does not refer to specific transactions, he said.

“It refers to transactions, and that is what this court interpreted,” O’Quinn said.

Chief Justice Elizabeth Clement asked if there are aspects or components of aspects of a transaction that were not specifically authorized but are illegal.

“If there are other aspects that are illegal, then there are other laws that can address that,” O’Quinn said.

He listed the occupational code, construction law, law of contracts, and federal law as examples of this.

“How specific do you think the authorized transaction needs to be?” Clement said.

O’Quinn said no one is arguing, and no court has ever suggested, that a mere business license issued by the Department of State exempts any and all transactions.

“Our modest point … is that you simply need specific authorization to engage in a type of transaction, and that is the way the case law has been applied in intervening years,” O’Quinn said.

He added that most other states do not have a transactional exemption and instead to either conduct or an act or practice. O’Quinn also stated that the bills before the Legislature seek to remove the transactional language completely.

“We respectfully submit that it’s the wrong case in the wrong vehicle at the wrong time for revisiting precedent,” O’Quinn said.

Former President Donald Trump talked up his economic plans for a potential second administration if he wins the November contest as he continued to blanket Michigan with visits.

Those plans included a 15% corporate tax rate if companies can commit to building American products at home with American labor, expanded research and development tax credits for businesses to write off heavy equipment and machinery for new factories, and making interest on car loans fully deductible.

Trump spoke to the Detroit Economic Club at the Motor City Casino’s Sound Board events hall, addressing a mix of business and political leaders. Crowd members included U.S. Rep. Debbie Dingell (D-Ann Arbor), Secretary of State Jocelyn Benson, Senate Minority Leader Aric Nesbitt (R-Porter Township), and House Minority Leader Matt Hall (R-Richland Township).

The former president addressed the Detroit Economic Club in 2016, which he said Thursday “may have brought a little luck, and we’re looking to do it again.”

This time around, he’s facing a tight race against Harris in Michigan. During the speech, Trump also took several swipes at the city’s economic and cultural renaissance, saying it wasn’t quite good enough – but could be so under a second Trump presidency.

“The goal is to see U.S. auto manufacturing at the center of the action,” he said. “I’ve been reading for so many years that it’s coming around, it’s coming around, but it never got there. If you make your auto industry bigger, better, stronger, you won’t have to worry about Detroit. It will be very good. It will come by its own. … You make the auto industry thrive, bring it back to where it was 50 or 60 years ago. That’s my goal.”

A key part of the economic policies discussed Thursday include Trump’s reliance on tariffs, similar to those he implemented during his first term on foreign nations. Trump said that if he didn’t impose those tariffs, which were eventually rescinded by President Joe Biden, Detroit wouldn’t have an auto industry, and the Detroit Three automakers would be out of business.

“Michigan, you’re welcome, because we have a good place to start on,” Trump said.

He also claimed that corporate interests want to sell U.S. steel to foreign countries, but any such deal would not see the light of day under his watch, with a warning of potential conflict with China.

“We have to make army tanks even without wars,” Trump said. “I don’t want to be in a position where we have a problem and we need China to help us out with steel. Do you think they would sell us steel in the middle of a conflict?”

Trump also said he believed the auto industry was failing under Biden, but that it hadn’t failed under his leadership.

On his renewed call for tariffs, Trump said he was willing to tax other nations on their goods as much as possible to make the deal work for the American economy.

“I want American companies to dominate the foreign market,” Trump said. “I want foreign nations to worry about losing their jobs to America. It’s going to happen. We’ll get it done … one way or another.”

He added that if these companies don’t take the deal, they’ll have to pay a tax or tariff if they want to send their products into the U.S.

The deal, Trump said, would be a commitment to make American products on American soil, and if those companies agreed, their corporate tax rate would fall to 15%.

Trump said much of the reason American companies were leaving to build elsewhere had to do with those countries’ own tariffs on products. One example, he said, was Harley-Davidson, which he claimed came to him during his presidency to address concerns about their dealings with nations like India.

Trump said Harley-Davidson told him India was particularly tough on tariffs and that they didn’t sell many units in the nation for that reason, but the nation’s leaders were willing to drop the tariffs if they built units inside India. Trump said Harley-Davidson then took that deal.

“We’re not doing that crap anymore,” he said before referring to U.S. leaders and state politicians as stupid. “Biden let them do what they’re doing. The guy doesn’t have a clue. … That’s the real threat to democracy, stupid people.”

Another plan Trump announced was his goal to make interest on car loans fully deductible, which he said would revolutionize the industry,” but did not get heavy into the details of how it would work.

Touching more directly on Vice President Kamala Harris, he reupped his attacks on her intelligence, calling her “dumb as hell.”

He also again attacked Detroit’s noted comeback story by saying that if Harris wins in November, “our whole country will be like Detroit,” the city in which he was giving the remarks.

Democrats panned Trump’s remarks about the city.

“Detroit is the epitome of ‘grit,’ defined by winners willing to get their hands dirty to build up their city and better their communities — something Donald Trump could never understand,” Gov. Gretchen Whitmer said in a statement. “Detroit’s hard work and hustle built the best cars and trucks in the world. This city defined art, music, and culture for decades, from Aretha and Diana to Eminem and Stevie, who all called Detroit home. And Detroit is growing by the minute as people fall in love with this special place.”

Price gouging laws in Michigan require teeth, lawmakers told a Senate panel Wednesday, saying a proposal to strengthen them for times of declared emergency would beef up protections for consumers.

Members of the Senate Finance, Insurance, and Consumer Protection Committee for testimony only took up SB 954, SB 955, and SB 956.

Collectively, SB 954, SB 955, and SB 956 would set a 10% cap on price increases during a state of emergency before an individual or business would be liable for price gouging, with exceptions. The bills focus on lodging, the cost of goods and emergency supplies, as well as energy products including gasoline.

Currently, 34 states and Washington, D.C., have some form of price gouging laws in place.

Sen. Jeremy Moss (D-Southfield) pointed to recent hurricane activity in Florida, where he said strong anti-price gouging laws are in place for times of declared emergencies.

“We obviously don’t have hurricanes here in Michigan, but we do have extreme weather events like winter storms and summer flooding that we have to protect our consumers here against price gouging,” Moss said. “Unfortunately, we do not have the same laws that are enacted right in this very moment in those states with declared emergencies.”

He outlined the story of a hotel increasing its rates to hundreds of dollars per night after a major storm that led to widespread power outages several years ago.

“It’s unfortunate that we have had a business, and that there are businesses that would want to profit off of that type of misery,” Moss said. “This law triggers during that period of emergency that prevents bad apples from spoiling a whole bunch.”

There are exceptions under the bills. For lodgings, there is an exception when the owner of the lodging can prove the increase is due to the increased cost of goods and labor in conducting business or a regularly scheduled seasonal adjustment. For the other products, there is an exception if the person selling the items can prove the cost increase is based on the cost of bringing goods to market.

Individuals who commit violations under the bills would face a maximum misdemeanor penalty of one year’s imprisonment and a civil fine of $10,000, while business owners would face a maximum misdemeanor penalty and civil fine of $1 million.

The bills would also allow the attorney general to bring a class action lawsuit on behalf of those affected by price gouging to recover actual damages or $100, whichever is greater.

Sen. Mary Cavanagh (D-Redford Township) said complaints for alleged price gouging rose about 4,000% between 2019 and 2022.

“A state of emergency is the last situation in which we should ask residents to pay more,” Cavanagh said.

Jason Evans with the Department of Attorney General said the bills were commonsense measures to address consumers being taken advantage of during emergencies.

“It doesn’t matter what state you’re in, the politics of that state, but this is the type of work that the attorney general … needs to be able to do to protect consumers,” Evans said.

He pointed to a report of someone in Florida seeking to rent out a room at a home for $6,000 per night as people are evacuating from Hurricane Milton, which is expected to hit the west coast of the state late Wednesday.

Evans then used the example of doing the same during a natural disaster with a rental home in northern Michigan.

“To do this, by victimizing folks who need a place to stay, whose home may be destroyed, is terrible,” Evans said.

Legislation that supporters said would add teeth to the Michigan Consumer Protection Act after previous court decisions largely rendered it ineffective is long overdue was taken up for testimony Wednesday by a Senate panel.

Before the Senate Finance, Insurance, and Consumer Protection Committee was SB 1021, which would amend the Michigan Consumer Protection Act to specify that it would not apply to a specific method, act, or practice that was authorized under the law of the state or the United States or an agency, board, or official administering state or federal laws.

Bill sponsor Sen. Sam Singh (D-East Lansing) told lawmakers Wednesday this would strengthen the state’s consumer protection laws after the 1999 Michigan Supreme Court ruling in Smith v. Globe “gutted” the law.

Prior to Michigan’s law being upended by the 1999 ruling, the state had one of the strongest in the country, Singh said. Now, Michigan ranks at the bottom nationally.

“All 50 states have consumer protection laws that are already on the books,” Singh said. “Most of those states are in line with what we are proposing here, and so their industries have survived and done effective work in those existing laws.”

Singh told the committee that businesses that are following the law have nothing to worry about with the proposed changes.

Attorney General Dana Nessel said the bills would help residents who are “really helpless” against predatory and deceptive business practices. As the law currently stands, businesses or individuals cannot be prosecuted if they are licensed by a state or federal agency.

She pointed to a later 2007 ruling that held residential builders were exempt from the act as well, further undermining the statute.

“The court didn’t just change our protections, it rendered the act largely toothless and ineffective,” Nessel said.

Nessel said her office receives daily requests for help who cannot be helped due to the upending of the act.

Also before the panel for testimony only was SB 1022, which deals with violations of the Michigan Consumer Protection Act dealing with the targeting of elderly or vulnerable adults.

The bill would allow the attorney general or a prosecuting attorney to bring actions against anyone that violates the act against elderly or vulnerable adults.

It would also create a Consumer Protection and Antitrust Revolving Enforcement and Education Fund, which would require the costs and proceeds from legal actions taken under the act to be placed into the fund. The Department of Attorney General would use the funds for enforcement of the act.

As Election Day approaches and messaging surrounding election protocols ramps up, new statewide polling from the Glengariff Group shows that although some 78% of Michiganders trust their local and county elections are run fairly and accurately, over half don’t feel the same about other parts of the state.

Commissioned by the Michigan chapter of the Defend Democracy Project, which is headed by a bipartisan group of former public officials, the poll results offer insight into the trust – and lack thereof – Michiganders have in their democracy as they prepare to head to the polls. Although some of the results were of concern to the DDP, others marked the potential for increased faith in elections.

Pollster Richard Czuba said the partisan divides within the data are telling as to which voters struggle the most with trusting Michigan’s elections.

“Seventy-five percent of strong Democrats think elections in other counties or communities are fair and accurate. Independents trust other communities by a margin of 44.1 to 21.5% trust them,” Czuba said. “But Republican voters distrust other local elections by a margin of 26 to 46%, and in that case, 26% of those face Republican voters just don’t know.”

By and large, the polling indicates that Michiganders believe the November general election will be fair and accurate. However, after breaking those numbers down based on confidence, Czuba said the trust is more tenuous.

“By a margin of 77 to 18%, Michigan voters believe that the upcoming November election is going to be fair and accurate,” he said. “It’s not a really great number, but we also asked people, ‘are you very confident or just somewhat confident?’ 37 percent are very confident. 39 percent are somewhat confident. And we start to see the party differences again in that level of confidence.”

The poll, which was conducted amongst 800 likely voters in September, showed only 11% of Republicans are “very confident that the upcoming election will be fair and accurate,” compared to 60% of Democrats.

“So, we asked them, ‘why are you not confident?’” Czuba said. “Twenty-nine percent cited the 2020 election. Ten percent told us elections are rigged. Nine percent said they don’t trust government, and 7% said absentee ballots are too easy to manipulate.”

One portion of the poll revealed that when presented with 12 different measures local clerks could take to further election security, voters’ confidence increased at a rate of 75% higher at the idea of these measures being taken. However, a majority of the voters thought only two of the 12 measures were current election policy in Michigan, when in fact, all of them are either currently law or considered best practices.

Nineteen percent of respondents thought it was not the state’s policy to require identification for in person voting, while 17% didn’t know. Thirty-eight percent said it was not policy to require absentee ballot drop boxes to be monitored by video and for ballots to be collected daily by authorized personnel. Both of these measures are current Michigan law.

Ingham County Clerk Barb Byrum said the results of the poll were largely unsurprising to her.

“I cannot say that I am surprised that to see the mistrust in our elections over the last several years, especially before respondents hear about the safeguards we have in practice,” she said. “Election administration is an area that has seen an incredible amount of misinformation being disseminated in the press, on social media and at campaign rallies over the last four years. The fact is that most people have never thought about the safeguards that we have in place, and so they may have been open to misleading or untrue information.”

Kent County Clerk Lisa Posthumus Lyons said local clerks have been working to dispel false or misleading information for years, and that progress can be made when people are educated about the safeguards in place.

“This is what we’ve been doing for four years. And even beyond educating folks and talking about how the process works is inviting them to come on in, and don’t just take my word for it, see it for yourself,” she said. “But it’s also been really great leading up to this election to have organizations such as this. There are so many of these groups that are really focused and passionate about the democratic process and want to partner with us as election officials to get that message out. The media is a partner as well, making sure that the information you’re covering is involving the process from start to finish.”

Former Governor John Engler, who is one of the DDP’s board members, said combatting misinformation must be a top priority for people who hope to preserve the integrity of American democracy.

“The conclusion is that while there are threats to our democracy from without, including from Russia and others, the threat of disinformation and misinformation is more likely to come from within,” he said. “It is why we have to make sure that we are ready to push back on any of those who claim our elections aren’t safe, not accurate, not fair.”