Carvana's Michigan license remains suspended after court ruling

A Michigan court denied Carvana Co.'s request to block the state's Oct. 7 suspension of its operating license over titling and registration issues.

In an opinion filed Wednesday, state Court of Claims Judge Thomas Cameron wrote Carvana's bid for a temporary restraining order against Michigan Secretary of State Jocelyn Benson failed to demonstrate "sufficient danger" of the suspension causing irreparable harm to its reputation and operations. Cameron wrote it was unlikely Carvana would lose its market foothold or see its competitors attempt to "replicate" its purchasing process in the short time span covered by a temporary restraining order.

He also concluded the state did not deny Carvana due process in the matter. Because the Michigan Department of State found Carvana's purported violations of the Michigan Vehicle Code to be a risk to public safety, it was "statutorily permitted" to suspend the company's license without a hearing, Cameron wrote in his opinion.

A Carvana spokesperson, in a statement Thursday to Automotive News, said the company was "disappointed by the court's decision" and was considering its legal options.

"The Secretary of State has agreed we can continue selling online to our Michigan customers and we plan to continue doing so while this matter is addressed," the statement said. "Despite a judge's ruling, we maintain the Secretary of State's recent 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. The Secretary of State has brazenly violated its own rules, regulations and due process requirements while making false and reckless statements rather than engaging in constructive dialogue to remedy these technical paperwork issues. As we consider next steps, we will continue serving extraordinary online car buying and selling experiences to our Michigan customers, and we will continue collaboratively working with state bureaucrats to remedy these issues as quickly as possible."

The Michigan Department of State reiterated Thursday that its role was protecting consumers in the car-buying process.

"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," a department statement said. "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."

Carvana filed its request for the restraining order against Benson on Oct 13. The state countered Monday by asking the court to deny the request.

The suspension is not a final decision, according to the state's Monday filing. Carvana and the department met Thursday for a preliminary conference, and it was determined that the matter should now go to an administrative hearing, according to Jake Rollow, a spokesman for the Michigan Department of State. Carvana provided some information the department had requested for consideration ahead of that hearing, which is scheduled for Nov. 22, he said.

The Michigan Department of State said Carvana's violations of the Michigan Vehicle Code include failing to apply 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.

Carvana's licensed vending machine site in the Detroit suburb of Novi, its only retail location in the state, remains suspended. Carvana can't conduct any licensed dealer activities at the location, according to Jake Rollow, a spokesman for the Michigan Department of State. That includes test drives, displaying vehicles for sale, completing paperwork and more, he said.

However, Carvana still holds licenses in other states, which means Michigan residents may purchase a vehicle from a Carvana location outside the state through its online site, according to Rollow.

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

Lindsay VanHulle contributed to this report.