A Michigan Court of Claims judge denied a request from Carvana to grant a temporary restraining order against Michigan Secretary of State Jocelyn Benson for suspending operations at its dealership in Novi.
Judge Thomas Cameron ruled that the decision to suspend the dealership’s license was “statutorily permitted and therefore declines to find a violation of the plaintiff’s due process rights.” The judge also said Carvana failed to offer evidence supporting its claims that the suspension caused “irreparable injury to its goodwill” or affected its “overall economic well-being.”
“Plaintiff states it ‘is the second largest used car retailer in the United States and has sold over 1 million vehicles,” Cameron wrote. “Thus, plaintiff’s assertion that it suffered loss of goodwill due to suspension is insufficient to show irreparable harm, in particular because plaintiff’s Michigan-based sales are a subset of its overall operations.”
The judge also pointed out that the suspension only affected sales from the Novi dealership’s vending machine, not its overall online sales, which the state said could continue while the matter is addressed. Carvana offered no details on how deliveries from those online sales would occur.
Carvana’s Thwaites said, “We are disappointed by the court’s decision, and we are considering all legal options to protect our customers and ensure the Secretary of State is held accountable for their illegal actions.”
Carvana accused the state of violating the Michigan Vehicle Code, which mandates that a hearing be held before a dealer’s license is suspended. The motions also said that the state deprived consumers of promptly getting their previously purchased vehicles.
This comes after a Carvana dealership in Novi, Michigan, had its license suspended after numerous violations. According to the Michigan Department of State, the Carvana outlet in southeast Michigan failed to maintain proper vehicle records, improperly issued temporary registrations, and violated the terms of an existing probation agreement over a hundred times, as well as committing other “fraudulent acts.”
Angela Benander, a spokesperson for MDOS, said the office does not comment on pending litigation. However, she said that state officials met with the dealership multiple times to explain the law and find ways for it to comply, but that “Carvana continued selling vehicles without titles to scores of Michigan families, putting the residents at risk of legal violations, fines, and other penalties.”
According to MDOS, the Carvana dealership employees admitted to destroying title applications and other documents about the sale of three vehicles. The agency called the violations “an imminent threat” to public health and said emergency action was required.
In February 2021, regulatory staff noted multiple reports of non-compliance from the dealership, prompting a preliminary conference between the state and employees of Carvana to address the violations. The dealership then entered into an 18-month probation agreement with a $2,500 administrative fine and a stipulation that employees who handle the paperwork would attend a dealer training program.
A second meeting was held in January 2022 after further violations. Additional fines were assessed, and the probation agreement was extended. After several no-title complaints from consumers, the department wants to revoke the dealership’s license at an administrative hearing.
Carvana initially responded to the suspension in a letter sent to 7 Action News, an ABC affiliate station in Detroit:
“The State’s action represents another example of gross regulatory overreach that in no way benefits the state’s consumers. Over 98% of our Michigan customers receive their registration in a timely manner and the state’s suspension is based on isolated incidents representing 1% of our Michigan sales. The suspension papers were served without notice and in violation of Carvana’s due process. Carvana is ready and willing to discuss a swift resolution with the state, as we’ve already solved the concerns outlined in the notice. In the meantime, Carvana will continue to fulfill orders for Michigan customers who are on our schedule.
Carvana pioneered online car buying by providing exceptional customer experiences, and we’ve grown faster than any used car retailer in U.S. history to become the second largest in the country while achieving an industry-leading Net Promoter Score (NPS) and a 4.7 out of five star customer experience rating average. We look forward to continuing to make the best car buying and shopping experience available even better.
We plan to file a lawsuit against the state to block the suspension, as we successfully did in Illinois. We also note that late title transfers are based on the state’s 15-day deadline, which Michigan recently recognized was too short, passing a new law that extended the deadline to 21 days.”
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