Arguing Class Actions is a monthly column by Adam J. Levitt for the National Law Journal.
Reprinted with permission from the September 8, 2025, edition of the National Law Journal. © 2025 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.
Twenty-five years ago, an act designed to fiercely defend Michigan consumers was rendered toothless by judicial fiat. The Michigan Consumer Protection Act, Mich. Comp. Laws §§ 445.901, et seq., broadly prohibits “unfair, unconscionable, or deceptive methods, acts, or practices in the conduct of trade or commerce.” § 445.903(1). Section 4 of the MCPA contains an ostensibly narrow exemption: The act does not apply to “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.” Id. § 445.904(1)(a). A 1999 Michigan Supreme Court decision, however, interpreted that exemption so broadly that it swallowed the act entirely. Today, the state court and legislature are concurrently considering whether to restore the MCPA to its former glory, and its intended scope.
The MCPA was intended to be liberally construed in favor of consumers. See Dix v. American Bankers Life Assurance Co. of Florida, 429 Mich. 410, 417, 415 N.W.2d 206, 209 (1987). In its official analysis of the originating Senate bill, the 1976 Legislature stated that the MCPA was a response to “the need for comprehensive consumer protection in Michigan.” Mich. House Legis. Analysis Sec., S.B. 1 (Dec. 7, 1976). Consumers throughout the state were being victimized by “unscrupulous business practices” against which “existing laws [we]re not broad enough to adequately protect consumers,” and governmental agencies “could rarely act swiftly enough to halt.” As enacted, the MCPA was among the strongest consumer protection acts anywhere in the United States—prohibiting 29 types of conduct, broadly defining “trade or commerce,” and establishing extensive consumer remedies. Mich. 1976 P.A. No. 331 (1976). The 1976 Legislature also explicitly designed the MCPA as a vehicle for class actions. Mich. House Legis. Analysis Sec., S.B. 1 (Dec. 7, 1976), supra. The provisions supporting that purpose endure today. See Mich. Comp. Laws § 445.911, § 445.920.
For 23 years, the MCPA served as a bulwark against unfair and deceptive business practices in Michigan, and courts construed the “specifically authorized” exemption narrowly. In Attorney General v. Diamond Mortgage, 414 Mich. 603 (1982), the attorney general sued a real estate broker under the MCPA regarding certain convoluted interest rate and brokerage fee terms in its home loan financing plans; as well as using confusing and inconsistent forms to detail those terms. Defendant Diamond Mortgage Co. argued that because it was licensed by a state regulatory body to engage in the real estate brokerage business generally, it was exempt from the MCPA claim. The trial court agreed and dismissed the action. Id. at 609–09, 616. The Court of Appeals affirmed.
On appeal to the Michigan Supreme Court, the attorney general argued the exemption was much narrower, stating: “[A] license to engage in an activity is not a basis for concluding that one is ‘specifically authorized’ to employ deceptive practices in that activity. … If every person or business which engages in an activity authorized by some statute or regulation were exempt from the [MCPA] pursuant to § 4(1), then the [MCPA] would be a cruel hoax on the many legislators.” Id. at 616. Persuaded, the Supreme Court unanimously reversed, stating, “While the license generally authorizes Diamond to engage in the activities of a real estate broker, it does not specifically authorize the conduct that plaintiff alleges is violative of the [MCPA], nor transactions that result from that conduct.” Id. at 617. See also Attorney General v. Michigan National Bank, 110 Mich. App. 106 (1981), rev’d in part on other grounds 414 Mich. 948 (1982) (no exemption for particular accounting method used by bank for escrow accounts, where Federal Real Estate Settlement Procedures Act did not specifically authorize that method).
The Diamond Mortgage court’s narrow construction of the exemption was faithful to legislative design. A former assistant attorney general who authored much of the MCPA confirmed that the exemption was never intended to shelter entire industries by virtue of their being generally regulated, stating that: “All persons regardless of their form or regulatory status were intended to be covered under the act. Section 4(1)’s exemption for ‘a’ specifically permitted transaction or conduct was to be ascertained by reference to the regulatory law which the defendant claimed allowed the particular transaction or occurrence. … The exemption applies only when the particular transaction or conduct being challenged is specifically permitted by the regulatory statute governing the defendant.” Edwin Bladen, “How and Why The Consumer Protection Act Came To Be,” State Bar of Mich, Consumer Law Section (2005).
Two decades after its enactment, however, the Michigan Supreme Court gutted the MCPA in Smith v. Globe Life Insurance, 460 Mich. 446 (1999). In Smith, the private plaintiff claimed that an insurance company made certain misrepresentations about the benefits and terms of its life insurance policy. Id. at 449. Globe Life argued that by virtue of it being regulated by the state commissioner of Insurance, the relevant transaction—sale of credit life insurance—was “specifically authorized” and thus it was exempt. Id. at 462–63. Recasting Diamond Mortgage and the statutory text, the court concluded that “the relevant inquiry is not whether the specific misconduct alleged by the plaintiffs is ‘specifically authorized’” but “whether the general transaction is specifically authorized by law.” Id. at 466. Armed with this new logic, the court determined Globe Life was exempt from the MCPA because it was subject to an “extensive statutory and regulatory scheme” under state law. Id. at 464–65.
The court transformed a narrowly stated exemption into a near total shield for businesses, excluding entire industries from the MCPA’s reach so long as their general business activity is subject to some regulation. If any doubt remained that Smith functionally killed the MCPA, Liss v. Lewiston-Richards, 478 Mich. 203 (2007), was the final blow. Id. at 210–13 (holding that, under Smith, because the licensed home builder’s “general transaction” of building a residential home was “specifically authorized,” the MCPA could never be enforced against it while engaging in any activity related to building residential homes, regardless of the challenged conduct). In a sharp dissent, Justice Marilyn Kelly stated, “It is apparent to me that the decisions in Diamond Mortgage and Smith cannot be squared. … Because the two interpretations are inconsistent, this Court should determine which was intended by the Legislature.” Id. at 220 (Kelly, J., dissenting).
Since the court’s decisions in Smith and Liss, consumers have paid the price. In Lucas v. Awaad, 299 Mich. App. 345 (2013), for example, private plaintiffs alleged certain commercial practices of a doctor and hospital violated the MCPA, specifically, coding and billing practices predicated on intentional misdiagnoses of epilepsy and seizure disorders for financial gain. Id. at 353. The Court of Appeals, relying on Smith and Liss, concluded that because the general practice of medicine was authorized and regulated by law, defendants were exempt from the MCPA’s reach, regardless of the specifically challenged conduct. Id. at 366–69. More recently, in Chapman v. Gen. Motors LLC, 531 F. Supp. 3d 1257 (E.D. Mich. 2021), private plaintiffs brought a putative class action against General Motors regarding an allegedly inadequate fuel injection pump in its pickup trucks. Id. at 1267. General Motors argued that because the general transaction—automobile sales—was state regulated, it was exempt from the MCPA claim. Id. at 1301. Relying on state case law, the federal district court stated that the exemption was “broad,” and concluded General Motors was exempt by virtue of automobile sales being authorized by law. Id. at 1301–02. Chapman illustrates that Michigan is an outlier. Indeed, of the 49 state consumer protection acts plaintiffs invoked, only the MCPA claim was dismissed under a regulatory exemption provision.
Now, the Michigan Supreme Court is considering whether Smith got it wrong. In 2022, Attorney General Dana Nessel sought to investigate pharmaceutical manufacturer Eli Lilly under the MCPA regarding its insulin pricing scheme, on behalf of a potential class of diabetic Michiganders. Nessel v. Eli Lilly & Co., 2022 WL 20580525, at *1 (Mich. Cir. Ct. July 20, 2022). She also sought a declaratory judgment that Eli Lilly would not be exempt from such an action. The Court of Appeals conceded it was bound to apply precedent: “Simply put, the Court in Smith and Liss concluded that if a general category of conduct or a general transaction is specifically authorized by law, the § 4(1)(a) exemption applies, even if the granular transaction or conduct might otherwise be improper.” Attorney General v. Eli Lilly & Co., 2023 WL 4141169, at *1 (Mich. Ct. App. June 22, 2023). Because Eli Lilly is authorized by law to manufacture and sell insulin generally, it was held exempt from the MCPA.
On appeal, the attorney general urges the Michigan Supreme Court to overrule Smith and Liss for defying Diamond Mortgage and wrongly expanding the MCPA exemption. Attorney General v. Eli Lilly & Co., No. 165961, 2024 WL 1394213 (Sup. Ct. Mich. Mar. 13, 2024). The court heard oral arguments on Oct. 10, 2024, and ordered the parties to submit additional briefing on the issue, which concluded last month. Businesses that have evaded MCPA liability since Smith and Liss are doubtlessly watching with bated breath. Indeed, the National Association of Manufacturers, the Home Builders Association of Michigan, Michigan Realtors, and General Motors submitted amicus briefs in favor of preserving a broad exemption.
While the Supreme Court considers restoring the MCPA to its former glory, the legislature may moot the issue. In March, Democratic Sen. Sam Singh introduced Senate Bill 134 to amend the MCPA. As passed by the Senate in June, the proposed amendments would unambiguously abrogate Smith and its progeny. Now, the bill awaits a vote in the House of Representatives, where Republicans have a slim majority.
Whether by judicial correction or legislative clarification, Michigan consumers may soon regain the protection of the MCPA as the legislature originally intended. In either case, companies that have enjoyed the shelter of a wrongfully expanded statutory exemption could once again be held accountable for unscrupulous business practices through attorney general investigations, individual litigation, and class actions.
Adam J. Levitt is a founding partner of DiCello Levitt, where he heads the firm’s class action and public client practice groups. He can be reached at alevitt@dicellolevitt.com.
Thank you to DiCello Levitt associate Madeline Hills for contributing to this column.