DENVER (Legal Newsline) - A federal appeals court has sent a lawsuit filed over a new identity theft law in New Mexico back to a district court.
On Monday, the U.S. Court of Appeals for the Tenth Circuit vacated the judgment of the U.S. District Court for the District of New Mexico.
The district court had dismissed the case, filed against New Mexico Attorney General Gary King, as non-justiciable.
In 2010, the New Mexico Legislature enacted its own identity theft requirements for consumer reporting agencies in the state.
The law, the Fair Credit Reporting and Identity Security Act, or FCRISA, makes it easier for victims of identity theft to expunge negative information from their credit reports.
Before it took effect, the Consumer Data Industry Association, a trade group made up of hundreds of consumer data companies, filed a pre-enforcement challenge.
The CDIA contends the New Mexico law is preempted by the federal Fair Credit Reporting Act.
Congress enacted the FCRA in 1970 with the aim of protecting the banking system from inaccuracy and abuse in credit reporting. The act creates a uniform set of rules governing the content of consumer reports and the responsibilities of those who maintain them.
In 2003, Congress amended the FCRA to add safeguards for victims of identity theft.
Under the amendments, CRAs must, upon a good-faith request from a consumer, include a fraud alert in the consumer's file limiting the extent to which creditors can extend credit to an applicant using the consumer's name without first verifying the applicant's identity.
They also must block the reporting of any information identified by the consumer as resulting from identify theft.
However, as a concession to the consumer data industry, Congress allowed CRAs to override the block if they reasonably determine it was requested in error or on the basis of a misrepresentation.
The New Mexico law contains several conflicts with the FCRA. Most notable are the sections that govern CRAs' required response when presented with requests to remove information resulting from identity theft.
Federal law, for example, permits a CRA to decline such a request if it reasonably determines the request to be fraudulent or erroneous. The New Mexico law, on the other hand, requires a CRA to oblige the request until a court or the affected consumer says otherwise.
In its challenge to the New Mexico law, the CDIA sought declaratory and injunctive relief against King.
Concluding equitable relief against the attorney general would not adequately redress the CDIA's injuries, the district court dismissed the case. It asserted that the CDIA had failed to prove redressability, an element of constitutional standing.
The court also reasoned that enjoining King from enforcing the law would redress only part of the CDIA's injury; CDIA members would still be exposed to consumer-driven suits, and therefore would still face the dilemma of either paying the costs of complying with the state law or exposing themselves to liability for violating it.
The Tenth Circuit disagreed, finding that the CDIA had standing to sue King for injunctive relief.
In particular, Judge Terrence L. O'Brien said the district court wrongly relied on a Tenth Circuit opinion in 2005, Nova Health Sys. v. Gandy.
"That holding does not apply here because the attorney general does have special enforcement authority and can be distinguished from the garden-variety private litigant," O'Brien wrote in the Tenth Circuit's 15-page ruling.
"The chief distinctions are obvious: The attorney general is the state's most powerful litigant and, in this case, the only one authorized to sue on behalf of New Mexico. His office has the resources to outlast private consumers and the manpower to prosecute dozens of cases at a time.
"More importantly, his right to sue is broader than the consumer's, and not only in the sense that he can sue on their behalf or join in actions arising under the FCRISA. Unlike consumers, the attorney general can sue without regard to whether the violation caused injury -- an entire category of cases in his exclusive domain."
The same goes for the CDIA's standing to seek declaratory relief, the Tenth Circuit said.
"Here, the CDIA's members are faced with the imminent threat of the FCRISA's enforcement," O'Brien explained.
"A declaration that the challenged provisions are preempted by federal law would redress the threat of enforcement in two respects: directly, because once the declaration has issued, the court could issue follow-up relief to enjoin enforcement of the preempted provisions should the attorney general decide to sue in state court; and indirectly, because the declaratory judgment would have binding collateral effect in the New Mexico state courts, thereby frustrating a subsequent attempt by the attorney general to enforce the FCRISA."
From Legal Newsline: Reach Jessica Karmasek by email at email@example.com.