Michigan officials ask state court to deny Carvana’s injunction bid in licensing dispute

The state of Michigan is asking a court to deny Carvana Co.’s bid to prevent state regulators from suspending its operating license, saying the online used-vehicle retailer is unlikely to prevail in its case.

In a filing Monday in the Michigan Court of Claims, lawyers for the Michigan Department of State and Secretary of State Jocelyn Benson argued that the state was authorized when it suspended Carvana’s license Oct. 7, citing titling and registration issues. Carvana filed a lawsuit Oct. 13 against Benson, seeking a temporary restraining order to block the state from suspending or revoking Carvana’s license.

The suspension is not a final decision, according to the state’s filing. Carvana, the filing said, will have an opportunity to show that it is complying with state law at a preliminary conference set for Thursday and, if needed, at an administrative hearing in November to determine whether the company’s license should be revoked.

That Carvana “is entitled to a preliminary conference and a prompt administrative hearing demonstrates that the alleged harm is not irreparable,” lawyers for the state wrote.

The Michigan Department of State said Carvana’s license was suspended for multiple violations of the Michigan Vehicle Code, including failing to make application for title and registration within 15 days of delivery, failing to maintain odometer records, improperly issuing temporary registrations and failing to have records available for inspection, among other violations.

The state said the issues at hand date to at least February 2021. Carvana entered an 18-month probation with the state in May 2021, followed by a six-month probation extension reached in February 2022. Since then, the department said, it has received additional titling complaints from consumers, which led to the current actions.

The state’s Monday filing said that roughly 90 consumer complaints about Carvana have been received since Oct. 10.

“The Michigan Department of State protects consumers when they make what are often among their family’s most significant purchases and buy a car,” a department statement issued Oct. 10 said. “The department does this in strict accordance with state and federal laws and does not provide special treatment to any dealership, including large, national corporations. Department staff met with Carvana on multiple occasions to explain Michigan law and suggest pathways to compliance. But instead Carvana continued selling vehicles without titles to scores of Michigan families, putting the residents at risk of legal violations, fines, and other penalties.”

A Carvana spokesperson, in a statement Tuesday to Automotive News, said that the state’s actions “are an illegal and reckless attempt to shut down a growing Michigan business with tens of thousands of customers over what amounts to technical paperwork violations involving title and transfer issues.”

“We believe the evidence will show the Secretary of State has brazenly violated its own rules, regulations and due process requirements while making false and reckless statements through press releases rather than engaging in constructive dialogue to remedy these technical paperwork issues,” the statement continued. “The arbitrary and abrupt actions of the State have angered and disappointed our customers, some of whom have literally been stranded without a vehicle they had counted on to get them to work, doctors’ appointments or the grocery store. We are hopeful through the court process the facts and truth will come to light and the court will hold state bureaucrats accountable, halt their disruptive actions and compel them to work collaboratively with Carvana and our customers to remedy these technical issues as quickly as possible.”

It’s not immediately clear how far-reaching the state’s order is regarding Carvana’s retail operations in Michigan. Carvana has one physical car vending machine location in Novi, a suburb of Detroit. It also operates additional logistics hubs in the state. The state’s Monday filing says that while Carvana “cannot conduct dealership activities out of its brick-and-mortar location in Novi, Michigan” while the suspension is effective, its customers “can still purchase Plaintiff’s vehicles online.”

Carvana, however, said in its motion last week for a temporary restraining order that the state’s suspension order forced the company to halt operations at its Novi location and delayed customer pickups and deliveries. Its Novi location and Grand Rapids logistics hub “have since resumed some operations to facilitate sales originating from Carvana’s out-of-state dealerships,” according to the company’s initial complaint.

In its filing, Carvana’s lawyers wrote: “The Secretary’s summary suspension has forced Carvana to cease all sales pursuant to its Michigan license, bringing the entirety of its business and operations in Michigan to a grinding halt.”

Carvana said in a court filing that 71 customers were awaiting delivery of purchased vehicles as of Oct. 11, and 48 customers’ deliveries had been delayed.

“The Secretary originally advised Carvana that it may proceed with these previously-scheduled deliveries,” the retailer’s lawyers wrote. “However, the Secretary has since refused to allow Carvana do so because paper titles had not yet been signed over to the customers.”

Carvana has faced similar regulatory scrutiny in Illinois and elsewhere related to titling and registration issues.

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