Opponents said the law was irrational because license suspensions made it harder for poor people to commute to work, reducing their ability to pay their debts.
A divided federal appeals court ruled on Wednesday that Michigan may suspend the driver's licenses of poor people with unpaid traffic fines, saying it did not violate their constitutional rights to due process and equal protection.
By a 2-1 vote, the 6th U.S. Circuit Court of Appeals said Michigan had legitimate interests in promoting compliance with court orders and collecting traffic debt.
The appeals court set aside a Dec. 2017 injunction blocking Michigan from enforcing a law allowing the suspensions.
"Michigan's choice to wield the cudgel of driver's-license suspension for nonpayment of court debt dramatically heightens the incentive to pay," Circuit Judge Alice Batchelder wrote for the majority. "Such a policy is rationally related to the government's interest in prompt assessment and collection of civil penalties."
It is unclear whether they will appeal.
"This issue affects hundreds of thousands of people in Michigan alone, and millions more across the country," Phil Telfeyan, who argued the opponents' appeal, said in an interview. "I'm surprised and disappointed by the ruling."
The office of Michigan Attorney General Dana Nessel did not immediately respond to requests for comment.
In a Sept. 2017 report, the nonprofit Legal Aid Justice Center said 43 U.S. states and Washington, D.C. allowed license suspensions because of unpaid court debt, and 40 states allowed suspensions without regard to drivers' ability to pay.
Washington, D.C. ended its suspension practice last year.
In October, U.S. District Judge Aleta Trauger in Nashville ordered Tennessee to halt license suspensions based on unpaid traffic fines, with exceptions. Tennessee appealed that ruling.
Michigan's law was challenged by two Detroit women, each the sole caretaker of a young daughter.
Adrian Fowler said she could not find a job accessible by public transit to help her pay US$2,121 she owed, while Kitia Harris said her inability to pay US$276 left her struggling to attend regular medical appointments.
Circuit Judge Bernice Bouie Donald dissented from Wednesday's decision, faulting Michigan for imposing a "harsher sanction" on indigent drivers than other drivers.
Batchelder, an appointee of President George H.W. Bush, was joined by Circuit Judge Amul Thapar, an appointee of President Donald Trump. Donald was appointed by President Barack Obama.
The Michigan case was returned to U.S. District Judge Linda Parker in Detroit, who issued the injunction.
The case is Fowler et al v Benson, 6th U.S. Circuit Court of Appeals, No. 17-2504.