Small Businesses Can Avoid Expensive Problems Up Front with Thoughtful Formation Documents

All too often, entrepreneurs do not put enough thought into formation issues when forming their small business.  When unforeseen circumstances later arise, what seemed a quick and easy way to form a business can be revealed as an unexpected source of aggravation, expense, and worry.  

The first formation issue that must be considered is, of course, what form of business entity to create.  There are two kinds of mistake here, each of which can be costly.  On the one hand, entrepreneurs may simply begin and continue operating without any formalities, in which case the law treats the business as a sole proprietorship or partnership.  This can be appropriate depending on the nature of the business, but if personal liability is a concern, it could be very expensive, as these default organizational forms provide no protection against personal liability for the business's debts or torts.  On the other hand, many entrepreneurs assume that some particular form, such as a corporation or an LLC, is appropriate, without considering the need for the form, its sustainability, its long-term appropriateness, or the expense of setting it up.  For some businesses, sole proprietorship or partnership is perfectly appropriate and there is little to nothing to be gained by forming a corporation or LLC and thus incurring filing fees and annual franchise taxes.  A corporation, though cheaper to form than an LLC, may be less appropriate if there are going to be issues with maintaining the formality of a corporation, or if the organizational and management flexibility of an LLC is desirable.  A brief discussion with an attorney and a tax professional could result in significant savings if it avoids an inappropriate form decision.

The second common formation issue is the failure to provide for the dissolution of the business.  There is an old saying:  hope for the best, prepare for the worst.  Business partners that get along today may not tomorrow.  Every partnership should have a written partnership agreement to, at the very least, address what happens if the partners have a falling out.  The LLC form provides great flexibility to structure the management of the business and to provide for the admission of new active or passive members and the exit of existing members.  If you are forming an LLC and not preparing an LLC Agreement that addresses these issues, you are not making the most of the form.  If you've settled on a corporation as the form of your entity, executing a shareholder agreement and/or a buy-sell agreement now could save you a lot of trouble and money in the event new shareholders buy in, or an existing shareholder dies, exits the business, or is terminated.

My firm advises on and handles small business formation and dissolution issues and disputes.  Contact us if you require such services.

Car Dealers Must Disclose Reliance on Negative Credit History to Raise Car Loan Interest Rate

On May 31, 2012, the U.S. District Court for the District of Columbia held that the Fair Credit Reporting Act requires a car dealer to disclose to a car buyer that negative credit history resulted in a higher interest rate on the buyer's car loan - even if the dealer was not the one that reviewed the credit history because only a bank or finance company did so.  The case is National Automobile Dealers Association v. Federal Trade Commission, Civ. A. No. 11-1171 (ESH). 

The National Automobile Dealers Association (NADA) filed the case to challenge the Federal Trade Commission's rule that required such disclosures.  The Fair Credit Reporting Act has long required creditors to notify consumers of "adverse actions" taken based on information in a credit report, such as when credit is denied.  In 2003, Congress amended the FCRA to additionally require users of credit reports to provide a "risk based pricing notice" when negative credit history results in a higher interest rate.  Reasoning that because the dealer is who the buyer directly interacts, the FTC, charged with interpreting the FRCA, held that a car dealer is a "user" of credit reports that must provide this notice.  

NADA sued seeking to have this rule overturned, arguing that a car dealer is not actually a "user" of the credit report if it is a bank or finance company that actually determines the higher interest rate.  To understand the context of NADA's position, one must consider how the typical car financing works.  Dealers selling cars on credit are lenders, and so subject to laws such as the Truth in Lending Act that impose disclosure and other obligations on creditors.  Dealers thus prepare contracts setting forth the loan interest rate, and execute such contracts as lenders as part of the car sale.  Dealers generally then assign the car loan to a bank or finance company immediately after selling the car.  NADA argued that when the bank or finance company reviews a credit report and communicates to the dealer, which in turn inserts the higher interest rate into the contract, the dealer is not a "user" of the credit report.  The FTC rejected that position, and the federal court upheld the FTC's interpretation as reasonable.

NADA's position appears somewhat bold.  Car dealers have long had a hard time accepting the fact that when they sell cars on credit, they are creditors.  Thus one still occasionally sees outright TILA violations where the dealer doesn't even disclose a finance charge or interest rate.  In the "risk based pricing notice" scenario, even if the dealer didn't look directly at the buyer's credit report, it executed a contract containing the interest rate and so relied on the report one way or the other.  The scenario in which NADA's position actually would make sense would be one where the dealer inserts an interest rate and only later contacts a bank or finance company which then pulls the report.  In that situation, one often finds that the dealer can't unload the paper because the bank or finance company demands a higher rate.  The law's response to that situation is to say, too bad so sad.  The dealer made a bad loan and is stuck with it.  But practically, this is where one sees the classic "auto fraud" fact patterns, the "yo-yo sale" and "spot sale."  The dealer prepares new contracts with the higher rate and talks the buyer into signing them, threatening to take the car back if not.  Don't do it!  This is fraud, deception, and an outright TILA violation - an expensive one for the dealer because damages under TILA are double the total finance charge over the course of the loan, which could be tens of thousands of dollars.  


My firm handles lawsuits addressing car dealer or lender misconduct.  If you have been the victim of any fraud or abuse  by a car dealer or lender, contact us to discuss your options.

Telephone Consumer Protection Act: The Federal Courts Giveth and They Taketh Away

Two federal courts recently issued decisions in cases construing the Telephone Consumer Protection Act (TCPA), 47 U.S.C. 227.  The more important decision, out of the Seventh Circuit and written by Judge Easterbrook, held that a consumer's consent to be contacted at a cell phone number by an autodialer or pre-recorded voice does not authorize such calls to be made to individuals other than the consumer, such as if the phone number has subsequently been assigned to a different individual than originally made such consent.  Therefore, individuals who have no relationship with a creditor and who innocently receive misdirected collection calls may sue and recover potentially very large sums of money to compensate them for the inconvenience such calls create.  The other decision, from the Eastern District of Pennsylvania, addresses what happens if the person being called actually did have a relationship with the creditor.  The court there held that a consumer who has consented to be called may not thereafter revoke that consent.  Although this is not a very consumer-friendly decision, consumers make take some solace in the fact that the bulk of other federal court decisions disagree, and hold such revocation effective.

The TCPA generally prohibits the making of a call with an automatic dialer or pre-recorded voice to any phone number unless there is an emergency purpose or the caller has the prior express consent of the "called party."  47 U.S.C. 227(b)(1).  The TCPA provides that for each violation (i.e. each call) the aggrieved consumer is entitled to a least $500 damages, and this is to be increased to $1500 per call if the violations are willful.  The FCC has opined since 2008 that a consumer's provision of a phone number to a creditor in a credit application or otherwise constitutes such "express consent."  These two recent cases address wrinkles in the operation of this "express consent" exception.

In the Seventh Circuit decision, Soppet v. Enhanced Recovery Company, LLC, No. 11-3819 (decision dated May 11, 2012), AT&T hired the defendant debt collector to collect a phone bill.  The debt collector used a predictive dialer to call a cellular number, at which its customer had consented to be called in his or her contract with AT&T.  However, the phone number had since been assigned to an unrelated individual, the plaintiff.  The lower court held that the "called party" whose consent must be obtained before autodialed calls may be placed is the party who is actually called, i.e., the current subscriber to the phone number.  The calls here were thus violations of the TCPA.

The Seventh Circuit affirmed, and in doing so, rejected the various statutory construction arguments put forward by the debt collector.  In effect, the collector argued that the court should not read the statute as Congress wrote it, because this would make it too hard to collect debts.  The court noted that it was conceded that the TCPA would be violated if the original customer had provided a false telephone number - whether on purpose or by mistake.  Similarly, were the collector to dial an erroneous number by mistake, it seems clear the TCPA would be violated.

Many people have had the experience of receiving collection or other annoying and potentially expensive autodialed calls directed to a former subscriber to their cellular telephone number.  Under Soppet it is clear that a remedy may be had for such annoyance and expense.  In a lawsuit against the caller, the TCPA makes available substantial minimum damages.

While the Seventh Circuit clarified the broad scope of TCPA liability in Soppet, the Eastern District of Pennsylvania meanwhile issued a particularly narrow decision in Gager v. Dell Financial Services, LLC, No. 3:11-cv-2115 (Mariani, J) (filed May 29, 2012).  

In Gager, the court addressed whether a consumer who has given express consent to be called at a cellular number may revoke that consent.  Numerous courts have held that the consumer can do so, differing only over how - orally or in writing.  Many courts addressing TCPA claims brought in conjunction with claims against debt collectors under the Fair Debt Collection Practices Act have held that because the FDCPA imposes liability for violation of requests to "cease and desist" contact only where those requests are written, withdrawals of consent to receive collection calls must also be in writing.  Starkey v. Firstsource Advantage, LLC, 2010 WL 2541756 (W.D.N.Y. 2010); Cunningham v. Credit Mgmt., L.P., 2010 WL 3791104 (N.D. Tex. 2010); Moore v. Firstsource Advantage, LLC, 2011 WL 4345703 (W.D.N.Y. 2011); Moltz v. Firstsource Advantage, LLC, 2011 WL 3360010 (W.D.N.Y. 2011).

Other courts have rejected this position, holding - sensibly - that one's interpretation of the TCPA should not vary depending on whether the defendant is a debt collector.  The TCPA either allows oral withdrawal of consent or it doesn't.  If it allows withdrawal of consent, nothing in the TCPA suggests it has to be in writing.  Adamcik v. Credit Control Services, Inc., 2011 WL 6793976 (W.D. Tex. 2011) (so holding in case also involving FDCPA claims); Gutierrez v. Barclays Group, 2011 WL 579238 (S.D. Cal. 2011) (so holding in creditor case without FDCPA claims). 

Decisions finding that consent may be revoked - by whatever means - have generally relied on a 1992 FCC order that stated that a customer's release of his or her phone number constitutes authorization to call only "absent instructions to the contrary."  7 FCC Rcd. 8752, 8769 (1992). 

The court in Gager disagreed with both sets of decisions, and held that express consent, once given, cannot be revoked at all, by any means.  In doing so, the court read the 1992 FCC order as referring to instructions to the contrary given at the same time the phone number is provided.  The court acknowledged that consent may be revokable where debt collectors are concerned, because the FDCPA expressly allows a written cease-and-desist request; thus, the court's logic apparently will not apply to TCPA suits against debt collectors.  However, because a creditor, and not a debt collector, was at issue, the court held that consent was irrevokable.

Whatever may be the merit of this reading of the 1992 order, the order certainly doesn't say that consent, once given, is irrevokable, and such an interpretation seems inconsistent with the very idea of consent and so appears an unnaturally strict construction of the statute itself, particularly where the statute being construed is one that Congress intended to protect consumers from having undesired costs and inconvenience imposed on them by undesired cellphone contacts.  The most natural reading of the TCPA "express consent" language seems to be that once a consumer communicates expressly a lack of consent, there is no longer express consent to receive calls.  If the 1992 order clarifies anything, it is that the mere fact of the creditor having the consumer's phone number, alone, cannot be treated as consent where the creditor knows otherwise.  If consent was to be irrevokable, one would expect that to be noted in the statute.

As noted, the Gager court itself distinguished cases against debt collectors.  Thus, consumers receiving autodialed calls or calls with a pre-recorded voice from debt collectors who have sent a written cease-and-desist request may still be able to obtain substantial minimum damages as compensation.  To the extent non-debt collectors are making the calls, the bulk of extant authority continues to hold consent revocable, and so consumers aggrieved by such calls from a business they have had some relationship with will still find it advisable to communicate, ideally in writing, a revocation of their consent to such calls.

My firm handles TCPA claims against debt collectors, creditors, or other abusive companies.  If you have received such calls, contact us.

Credit-Card Plaintiffs Are Often Unable or Unwilling to Prove Their Debt Collection Case at Trial

Recent experiences around the country suggest that even original creditors, such as credit-card companies, are unable or unwilling to go to trial and actually prove their cases.

In Florida, Chase Bank actually went to trial on a case in September 2011 in which it sought about $15,000 on a consumer credit card.  The consumer had a substantial defense in that she had opened the account as a zero-interest account, and Chase later raised the interest rate, allegedly without notice to her.  The consumer won the case at trial.  

As is common, the Bank called the consumer as its first witness and attempted to prove up its case through her.  While this is common, creditors often will neglect to actually ensure the consumer's presence by serving a trial subpoena.  The collection attorney's intention in doing this is to bully the consumer into admitting she received the account statements in the mail.  In this particular case, Chase attempted to do so with account statements that were such obvious frauds that the tactic seems to have monumentally backfired.  The consumer ultimately testified that she calculated the amount she actually owed as about $80. 

As I have discussed before, the use of obviously fraudulent account statements in debt collection lawsuits is common.  The fraudulent nature of the statements is often detectable when, for example, the consumer has moved to a new address during the life of the account, yet the statements attached to creditor motions or introduced at trial bear the current mailing address even when they pre-date the address by years.  In this particular Chase case, the Bank did exactly that, submitting statements that had an address that was a vacant lot as of the time of the statements.  However, they also apparently submitted some statements that contained a fictional address (1234 Main Street, Anytown, USA 00000).  This was unusually sloppy, but in principle, par for the course. 

In the Florida case, the consumer was, of course, all too willing to testify, because she strongly believed in her defense.  Having given the Bank nothing it could use, the Bank called its putative document custodian as its only other witness.  As is to be expected, the witness - unable to identify her own employer - acknowledged that Chase's records were all computerized, and admitted to having absolutely no knowledge whatsoever of how that computer system worked.  She was thus incapable of authenticating Chase's documents.  Ultimately the court entered judgment against the consumer for the $80 she admitted she owed.

I have previously written about the recent revelations about Chase Bank's credit card records, which an internal audit revealed to have numerous errors, apparently due to the keeping of separate databases for active as opposed to defaulted accounts, and an error-prone method to transfer data from one to the other.  Although the kind of whistleblowing that brought the Chase revelations to light has not happened with other banks, there is every reason to believe that unreliable record-keeping plagues the industry.  In a follow-up article after its piece about the Chase revelations, American Banker magazine discussed indirect evidence that other banks' account information is riven with errors.  According to American Banker, when Bank of America sells its credit card accounts to debt buyers, it expressly represents that it does not possess original account documents, and will not guarantee accuracy of the information at all.  US Bancorp will apparently guarantee accuracy to within 10% of the asserted account balance, but no better. 

Just this last April American Express went to trial in a case in Kings County Civil Court in which it sought to collect about $16,000.  The case is American Express Bank v. Tancredo, CV-24043-11/KI, NYLJ 1202551841663, at *1, 3 (N.Y.C. Civ. Ct. Kings County Apr. 27, 2012).  Here, the defendant had no attorney.  However, judges of the New York City Civil Court have in recent years been conscientious about ensuring that pro se defendants are not run roughshod over by represented creditors.  Here, American Express started its case with a putative document custodian that sought to introduce account statements and a cardmember agreement through formulaic recitation of no more than the elements of the business records rule exception to the hearsay rule.  The custodian did not identify the entity that issued the credit card.  AmEx called the consumer as a witness, and she indicated she did not know which American Express company issued her card.  In an opinion published in the New York Law Journal, Judge Dear, describing this as "robo-testimony," found it insufficient to establish that the documents were admissible as business records.  In particular, the witness described no office policy at American Express with respect to mailing account statements or cardmember agreements that would suggest these documents were actually mailed to the defendant.  Judge Dear dismissed AmEx's case.  

Notwithstanding that they do not actually want a trial and are not capable of winning at trial, some collection law firms in New York have begun to routinely serve a "notice of trial" early in the case, sometimes doing so improperly while discovery is still pending.  The logic of doing so against a self-represented consumer is plain.  If the consumer misses the court appearance, the creditor may obtain a default judgment.  If not, the consumer will likely be pressured by the judge and creditor attorney to settle the case for a payment plan on 100% of the claimed balance, notwithstanding that the balance may, for numerous reasons unknown to the consumer, be something that, in whole or in part, is not owed.  The logic of serving such a thing on a represented consumer's attorney, however, is mysterious.  It seems to be the product of nothing more than a mindless collection-firm bureaucracy that has decided to serve the same papers in every case.

To illustrate, I recently appeared for trial in a $3800 Citibank case.  Although the trial had been scheduled months in advance and I had served motions in limine seeking to exclude all of its evidence, Citibank did not send, or plan to make available, any witness, nor did it serve a trial subpoena to secure the consumer's attendance; and Citibank sent a local attorney to cover the trial who had no knowledge of the case and no documents to use as exhibits.  Citibank's strategy in its entirety was to have the case adjourned through a request made on the day of trial - not something that made the Judge happy.  Having been given the rest of the day to arrange a witness, Citibank ultimately offered to settle that account and a much larger account not at issue in the case for a small and affordable payment plan.  Although I was looking forward to voir dire-ing Citibank's witness, in the event that it procured one, my client was happy with the result.  

Past success does not guarantee success in any future matter.  Do, however, contact me should you have a debt case in need of defending.

New York Civil Procedure Roundup

No "prevailing party" attorneys' fees unless party prevailed with respect to "central relief sought."  On April 27, 2012, the Fourth Department issued a decision in Chainani v. Lucchino addresing the availability of "prevailing party" attorneys' fees.  Here the plaintiffs sued the defendants alleging that defendants breached a 2000 agreement granting a parking easement, by modifying its lot in a way that prevented their parking.  Plaintiffs brought two causes of action, one seeking damages and a prospective injunction prohibiting defendants from interfering with plaintiffs' parking rights, and another seeking a more limited order that defendants modify the lot to enable them to park there.  The parties settled for a stipulated order requiring the modifications, and dismissal of the claim for a broader injunction and damages.  Plaintiffs then sought attorneys' fees under the 2000 agreement, which contained a provision giving fees to a "prevailing party" in an action to enforce the agreement.  The lower court denied fees, and the Fourth Department affirmed, over a dissent from Justice Carni.  The court noted that in determining who is a "prevailing party" it considers whether the party obtained the "central relief" sought, "consider[ing] the true scope of the dispute litigated, followed by a comparison of what was achieved with that scope."   Because plaintiffs did not obtain damages, a finding that the 2000 agreement was breached, or the broader injunctive relief sought in their first cause of action, the court held that the comparison favored finding that they were not prevailing parties.

This case has some potential relevance to consumer-debt cases that have an attorney fee-shifting provision. One strategy in such cases is to argue that because interest was not authorized by any contract, plaintiff is limited to obtaining the balance of principal remaining when all payments are applied against principal.  Even if this amounts to something, where it amounts to far less than the demanded amount, a debtor defendant should be able to argue that the plaintiff is not the prevailing party.  More importantly, if this was the position taken all along by the defendant, the latter should be able to argue that he or she is the prevailing party and so entitled to attorneys' fees.  (General Obligation Law 5-327 provides that any time a consumer contract provides for attorneys' fees to be awarded against the consumer, the consumer is automatically reciprocally entitled to fees if he or she prevails.)

Party may request change of venue in amended complaint.  In Valley Psychological, P.C. v. GEICO, the Third Department on May 10, 2012, held that where a defendant failed to request change of venue before or with the original answer as required by CPLR 511(b), but served an amended answer as of right, the party could request change of venue in the amended answer.  The amended answer supersedes the original answer and so including the request in it satisfies the CPLR 511(b) requirement.  CPLR 511(b) further provides that the request is waived if a motion to change venue is not made within 15 days of serving the demand to change venue, which the defendant here did.  Although the lower court granted change of venue in its discretion under forum non conveniens principles, finding that Nassau County was more convenient than Albany County, the Third Department held that defendant was entitled to change of venue as a matter of right because the demand was properly served and Albany County was not a proper venue since neither party had its principal place of business there.

This decision is likely to come in handy for attorneys who take over cases that had been litigated by self-represented defendants that may have neglected to assert a venue defense in the original answer.  Courts liberally allow amendment of the answer under such circumstances.  See Renaissance Equity Holdings, LLC v. O’Neil, Index No. 098946/08, 2009 N.Y. Misc. LEXIS 2416, at *3 (Sup. Ct. Kings County Apr. 27, 2009).  Although CPLR 513 absolves consumers from any need to affirmatively request change of venue in consumer debt-collection cases, individuals defending commercial debt-collection cases may benefit from this rule.


My firm handles appeals, both directly for clients and for attorneys that need legal writing and research.  Contact us if you need such services.

Should Judges Write Their Own Opinions?

In a recent New York Times Op-Ed, attorney William Domnarski excoriates the practice of having law clerks "ghostwrite" judges' legal opinions, calling it a "crisis in the federal judiciary."  Mr. Domnarski asserts that "ghostwritten" opinions are less intellectually rigorous and carry less imprint of a judge's personal style than opinions personally drafted by the judge, and that they encourage opinions that reach dishonest and opaque conclusions.

As a former law clerk to a federal appellate judge, as well as an attorney with experience working in law offices big and small, I view Mr. Domnarski's assertions as both wrong and unrealistic.  Indeed, as Mr. Domnarski acknowledges, judges who rely on clerks to prepare first drafts are only doing what attorneys at any large, private law firm do, and so what they themselves have likely done during the entire career that resulted in their promotion to the federal bench.  In support of his assertion that this somehow undermines the rigor of the opinion-writing process, Mr. Domnarski cites nothing other than his own impressionistic perception that the handful of "great" opinion-writers "go it alone."

There is a reason that law firms across the country have adopted a division of labor in which substantive pleadings are drafted in the first instance by a junior attorney.  This division of labor is efficient and, if anything, encourages the intellectual rigor that Mr. Domnarski seeks.  Particularly among federal appellate clerks, the new attorneys tasked with this drafting are well trained and experienced in intellectually rigorous research and analysis through courses at top law schools, and often MBA or Ph. D programs, and service on law reviews.  Senior attorneys or judges signing their names to the final work product inevitably put their own stamp on it - and rightly so, as broader experience provides a sense of the contours of the field and what arguments work and don't worn that a junior attorney lacks.  This iterative and dialogic process is highly conducive to rigor and allows the "personal style" of the signatory to fully flourish.

It is in the nature of Mr. Domnarski's argument that it cannot be supported.  A judge's body of work is that judge's personal style.  If Judge Posner's opinions are to be compared with those of judges that use "ghostwriters," how about including self-drafters who lack the silver tongue and academic credentials of a Judge Posner?  But there is simply no way to know who does and does not write some or all of their own work.  In effect, Mr. Domnarski chooses to evaluate the entire judiciary by comparison with the work of a handful of its leading lights.  To attribute the difference to the drafting process, though, defies logic.  The difference is one among the judges he chooses to compare.

One thing that does seem patently wrong in Mr. Domnarski's argument is the suggestion that "ghostwriting" has somehow reduced the intellectual rigor of the judiciary's body of work.  A comparison of today's opinions with those of 100 years ago, when "ghostwriting" was less common, refutes that notion.  Back in Chief Justice Marshall's day, the federal caseload was low enough that judges could spend the time necessary to produce comprehensive, reasoned opinions on their own - though one can question whether this actually improved the "honesty and transparency" of the conclusions of such strategically obscurantist opinions as Marbury v. Madison or Johnson v. McIntosh (talk about pounding the table).  

But by the turn of the last century, the federal court caseload had reached a level where, notwithstanding the literary merit of opinions drafted by the likes of such luminaries as Holmes, Brandeis, Cardozo, Friendly, or Hand, certainly the bulk of what came out was thinly researched and argued and often simply ideological.  Or compare the law office history of Justice Black's First Amendment opinions with the dueling historical analyses of Justices Souter and Rehnquist in Seminole Tribe v. Florida.  To suggest that a return to the practices of the 30s or earlier would increase rigor is simply fantasy.

Tenth Circuit Issues Justiciability Decision in FCRA Pre-Emption Case

On May 7, 2012, the Tenth Circuit Court of Appeals issued a decision reversing the District of New Mexico in a case involving federal pre-emption of a New Mexico state law addressing identity theft.  Consumer Data Industry Association v. King, No. 11-2085.  

Congress amended the federal Fair Credit Reporting Act in 2003 to add protections specifically addressing identity theft.  These new provisions made it much easier for a consumer to remove information from a credit report where the consumer's dispute is grounded in identity theft as opposed to, say, a merchant dispute.  Under narrow circumstances, the credit bureaus may keep information in a report notwithstanding the consumer's request, if they conclude the consumer's request is fraudulent or mistaken.  Because this exception threatens to absorb the rule, the New Mexico Legislature passed that state's Fair Credit Reporting and Identity Security Act in 2010, requiring that credit bureaus keep such information removed unless a court, or the consumer him- or her-self, concludes that the request was fraudulent or mistaken.  Although well-meaning, such a provision is likely to be held pre-empted by the federal FCRA provisions.  In the event of a violation of this requirement by the bureaus, the New Mexico law permits any aggrieved consumer, or the state Attorney General, to sue to enforce its provisions.

In this case, a credit bureau industry association sued the New Mexico Attorney General to enjoin enforcement of the New Mexico law.  The district court dismissed the case, holding it not justiciable under Article III of the U.S. Constitution.

To be justiciable under Article III, the suit must address a real injury, caused by the defendant, which the court is capable of redressing by ordering some relief.  The district court held, essentially, that because the law permits any aggrieved consumer to sue the bureaus, an injunction directed only at the New Mexico Attorney General would not redress the bureaus' threatened injury of being sued.

The Tenth Circuit, unsurprisingly, reversed, essentially holding that an order at the Attorney General would redress some injury, and so satisfies Article III requirements, which the district court read too stringently.  In effect, the court held that Article III does not make the perfect the enemy of the good.  Here, the injunction sought was "good enough" to satisfy Article III justiciability.

As a practical matter, it seems unlikely that the credit bureaus will be deluged by consumer suits under the New Mexico law.  The district court on remand will likely hold the law pre-empted and enjoin enforcement, and such a decision is likely to be followed by state courts; the very prospect should deter many consumers from filing such suits.  

This is a shame.  New Mexico is in a perfect position to act as a "laboratory of democracy" testing an alternative approach to identity-theft protection that may better serve consumers than the current federal regime, which New Mexico citizens obviously felt granted too much unsupervised discretion to the credit bureaus.  Citizens there and elsewhere may still lobby Congress to similarly amend the FCRA - or to amend the FCRA to permit states to adopt stronger identity-theft protections.