DISTRICT COURT UPDATE
Summons Article, September, 2007
written by
Hon. M. Randall Jurrens

District  Court  Update

            Recent judicial confirmation of the limited availability of the Michigan Consumer Protection Act (MCPA) is the subject of this month’s update.

            As you may know, the MCPA, MCL 445.901 et seq., was enacted 30 years ago “to prohibit certain methods, acts, and practices in trade or commerce” but, by including MCL 445.904(1)(a), the legislature expressly exempted “[any] 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.”

            In Liss v Lewiston, 478 Mich 203 (2007), without waiting for the Court of Appeals to even consider a pending interlocutory appeal, the Supreme Court recently granted a bypass application and reaffirmed its opinion in Smith v Globe Life Ins Co, 460 Mich 446 (1999):  the relevant inquiry in MCPA claims “is whether the general transaction is specifically authorized by law, regardless of whether the specific misconduct alleged is prohibited.” 

            In Liss, the plaintiffs entered into a contract for construction of a new home with a licensed residential builder.  Alleging the contractor did not complete construction on time and failed to perform in a workmanlike manner, the plaintiffs sought relief under the MCPA.

Recognizing that home builders are licensed under the Michigan Occupational Code (specifically authorizing persons to engage in construction of residential structures) and regulated by the Residential Builders’ and Maintenance and Alteration Contractors’ Board (which oversees licensing and handles complaints filed against builders), the 5-justice Liss majority applied the Smith test and concluded the transaction was exempt from the MCPA; and, in doing so, overruled any holding to the contrary in Forton v Laszar, 239 Mich App 711 (2000) and Hartman v Eichhorn Bldg Co, Inc v Dailey, 266 Mich App 545 (2005).

            Conversely, consistent with their dissents in Smith, Justices Cavanagh and Kelly argued that the majority’s continued application of the exemption turns the MCPA on its head:  “[a] transaction or conduct that is actually prohibited by law cannot be deemed to be specifically authorized.”  According to the dissenters, at a minimum, the focus of an MCPA claim should be whether the discrete transaction/conduct at issue is “specifically authorized”, not in such broad terms so as to exempt entire industries.  Arguably, by extending the Smith test to every licensee in every regulated industry, “a large number of Michigan businesses will be able to engage in unfair or deceptive practices without running afoul of the MCPA.”

            Whether or not you agree, until the legislature amends the MCPA (or the Supreme Court experiences a marked collective change of mind) one sentence of the MCPA substantially negates 22 sections of legislation otherwise intended “to prohibit certain methods, acts, and practices in trade or commerce”

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