MCPA Ruling Shields Builders

July 23, 2007
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GRAND RAPIDS — A recent ruling by the Michigan Supreme Court has settled the matter once and for all: Licensed residential builders are exempt from lawsuits brought under the Michigan Consumer Protection Act, which prohibits certain methods, acts and practices in trade and commerce and provides for remedies, damages and penalties.

The ruling stems from a lawsuit brought by Arthur and Beverly Liss against Lewiston-Richards Inc. in 2003. The Lisses had entered a contract with Lewiston-Richards for construction of a home. In their suit, the couple charged that the builder did not complete construction on time and that the construction that was completed “was not done in a workman-like manner.” They alleged breach of contract, breach of warranty and violation of the MCPA.

Residential builders are licensed and regulated under the Michigan Occupational Code and by the Residential Builders’ and Maintenance and Alteration Contractor’s Board. For years, there has been a section of law in the MCPA that states that people in trades or professions governed by a state regulatory agency are exempt from lawsuits under the MCPA for activities that are authorized, explained Lee Schwartz, executive vice president of government relations for the Michigan Association of Home Builders. That exemption is written into the law; it’s nothing new, he noted. When builders asserted that defense, some of the lower courts agreed that they couldn’t be sued under MCPA.

But in other cases, the courts held that by Forton v Laszar, residential builders could be sued under the MCPA. That’s when all the confusion started, Schultz said. When Liss v Lewiston-Richards came up in the Michigan Supreme Court, the MCPA exemption defense was asserted, and the court acknowledged the long history of exemptions for regulated trades and professions under the MCPA.

The court concluded that building a residential home is an activity specifically authorized by Michigan Occupational Code regulations, therefore a residential builder is exempt from being sued under the MCPA.

The state home builders association had been involved with Liss v Lewiston-Richards for some time and had actually filed an amicus brief on the defendants’ behalf, Schwartz noted. The association has a very active legal action committee that takes legal action on cases it believes will have statewide significance or cases that have the potential to break new ground, Schwartz said.  

He lauds the new ruling.

“We think it’s a good decision,” Schwartz said. “We think it corrects an error by the Court of Appeals panel in Forton v Laszar back in 2000 that was still causing some problems. It clears up some of the confusion that Forton and other cases caused about whether or not, in fact, the failure of one builder to assert the MCPA exemption defense meant that no builder could assert the defense — that’s clearly not what the state Supreme Court decided in this case.”

Judy Barnes, executive vice president and CEO of the Home & Building Association of Greater Grand Rapids, said she’s very much aware of the ruling — it means that licensed trades are not under double jeopardy. But she doesn’t see the ruling as that significant to residential builders in this area.

“In our area, we’re blessed with many fine, fine contractors that take care of their problems if they have any,” she remarked. “Where it becomes a challenge is where you have a contractor who doesn’t take care of his issues. With a licensed trade, consumers also have the ability to go after the person’s license, and that’s a pretty solid threat for someone who makes a living under that license.”

In Barnes estimation, the threat of losing one’s license is the most serious one, and it’s what holds builders accountable. Protection for the consumer is needed, and that is good protection, she said.    

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