CHICAGO - A group of customers today filed a class-action lawsuit against DaimlerChrysler's (Chrysler) (NYSE: DCX) financing subsidiary accusing the company of denying credit to customers in the Chicago area based on race, and repossessing vehicles of customers living in predominantly black neighborhoods without justification or proper notification.

The suit claims Chrysler management systematically and intentionally denied low-interest vehicle financing to creditworthy blacks in two Chicago neighborhoods, based on the neighborhood in which they lived and the dealership they selected to purchase the car. The suit also contends that the practice continues today in the Chicago area and Chrysler?s Illinois sales zone.

Filed in U.S. District Court in Illinois on behalf of six black purchasers of Chrysler vehicles, the suit seeks to represent all people of color in Chrysler's Illinois sales zone who have been denied financing from Chrysler despite their creditworthiness.

The suit names DaimlerChrysler Services North America, LLC, d/b/a Chrysler Financial Company, LLC, a wholly owned subsidiary and captive financing arm of DaimlerChrysler, as the defendant.

The suit describes meetings between Chrysler and its dealerships in which Chrysler executives disclosed - using racist slurs and derogatory comments - that Chrysler did not want to finance car purchases by blacks, claiming they are inherently higher credit risks.

"We intend to show that Chrysler is using race in a most repugnant way - to deny creditworthy blacks financing based solely on the color of their skin," said Steve Berman, managing partner of Hagens Berman, one of the law firms representing the plaintiffs. "To think that one of the world's largest companies would tolerate and perpetuate this type of racism is revolting."

Chrysler Denies Financing to Creditworthy Blacks
According to the suit, Chrysler uses an automated computer program called the ACE (Automated Credit Evaluation) System, which is designed to give colorblind, objective credit evaluations to customers applying for financing from Chrysler.

However, the complaint argues that Chrysler modified the ACE System software with a 'disabling switch' that rerouted all applications from particular dealerships for subjective review by an employee at Chrysler Regional Headquarters. The suit cites two dealerships in which virtually every credit application submitted by a black customer was denied financing regardless of credit scores.

Plaintiff Jerrell Coburn, one of the six named plaintiffs, received a score of 656 on the Empirica scale, a system used by one of the three largest credit-reporting bureaus in the United States, and a score that should have qualified him for Chrysler promotional financing, according to the complaint. After Chrysler denied his credit application, Coburn received financing from another financial institution at a much higher interest rate.

"Last year, Chrysler asked me to come in, telling me that they had great financing available, and that if I was in the market for a new Jeep, now was the time," Coburn said. "I thought 'hey, they are rewarding me for being a valued customer for so many years' - little did I know that I was something very different than a 'valued customer.'"

"If Chrysler thinks that they can judge me by the color of my skin or the neighborhood in which I choose to buy my house, well, they have another thing coming," he noted. The suit claims Chrysler has denied financing to creditworthy black applicants at two Chicago-area dealerships since at least April 2001. In September of 2002, Chrysler began denying all credit applications from the Marquette dealership, and continues to deny financing to the dealership, the complaint states.

Another named plaintiff, Vanessa Dampeer, had a similar experience; finding out Chrysler refused to finance her purchase only after taking delivery of the Chrysler Sebring. "Overnight, we went from zero percent financing to 14 percent," Dampeer said.

Berman believes that other dealerships around the country suffer from redlining by Chrysler. "These extreme comments and policies existed at Chrysler for too long to simply be an anomaly," Berman said.

Prosecuting the case with Berman are noted Chicago lawyers Edward Vrdolyak, Eugene Pincham and William Hooks. Pincham, a former justice of the Illinois Court of Appeals, indicated that he was particularly anxious to present this case to a jury. "In this day and age, these facts are shocking and we hope a jury will send a message to Chrysler that this practice will not be tolerated in this great state or anywhere else in this country," Pincham said.

Suit Claims Racist Tendencies Permeate Chrysler Leadership
Corroborated by several witnesses and detailed in the complaint, two separate Chrysler zone managers charged meetings with racial slurs and extremely derogatory comments such as:

• "We found out these 'mulignons' [a derogatory racial slur] were getting [sales contracts] bought and [financing] approved by Chrysler when they should be standing on the bus. And if it weren;t for Rosa Parks, those niggers would still be standing in the back of the bus." (par. 77)

• "My whole office knows that I don't buy nigger paper." [Meaning: My whole office knows that I don't provide financing for black customers.] (par. 78)

• "Now you can see why I don't buy [financing for] mulignons." (par. 94)

• Addressing a question about the disparity between financing customers in minority populated neighborhoods and suburban neighborhoods: "Well, you've got to give the nigger a little credit for shopping in the suburbs where the washrooms are cleaner, and he has a better chance of getting off the lot with his new ride without getting killed." (par. 105)

The suit also states Chrysler leadership was well aware of the attitudes and behaviors of its regional operations. According to the suit, during a meeting in June 2002, Chrysler Financial Vice President Brad Norman participated in a meeting in which the Chicago zone manager stated, "Well guys, what did we decide to do with Gerry's nigger deals?" At no time did the executive from Chrysler's corporate headquarters in Detroit challenge the racist remark, the suit contends.

Allegedly Repossessing Vehicles from Blacks in Good Standing
The complaint also charges that when 70 Marquette dealership customers obtained financing, Chrysler renounced the executed financing agreements as "nigger deals," and unlawfully repossessed all or some of the 70 vehicles.

According to the complaint, many of the vehicles were repossessed from owners who never missed a payment or were only marginally late with a payment.

Chrysler's attempts to repossess these vehicles began a series of meetings that exposed Chrysler's allegedly racist policies. In these meetings, Chrysler's regional zone manager asserted that the only way the black purchasers of Chrysler vehicles qualified for financing in the first place was through a fraudulent conspiracy between dealership employees and insiders within Chrysler, the complaint states. Despite having no evidence, Chrysler's zone manager forced Marquette owner Gerald Gorman into taking financial responsibility for the allegedly fraudulent deals by threatening to close down his dealership unless a full recourse deal was signed, the complaint argues.

In this deal, the zone manager promised to allow Gorman to assist with collecting payments on the sales contracts, provide notice to Gorman if customers fell behind in their payments, and help mitigate the costs to Gorman as a result of the repossessions, the suit states.

According to the complaint, Chrysler immediately began repossessing vehicles purchased by blacks and returning them to the Marquette dealership, without notifying Gorman.

The repossessions turned away customers from the dealerships and severely hurt their bottom line, according to the complaint. The two dealerships have filed suit against Chrysler, claiming breached contracts and forced agreements brokered by Chrysler zone managers resulted in severe financial losses.

The class-action suit seeks damages related to civil rights violations and the paying of higher interest rates by plaintiffs, as well as punitive damages to deter the company from discriminatory conduct.

Berman is joined in the litigation by attorneys Edward Vrdolyak, Eugene Pincham and William Hooks.

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About Hagens Berman
Hagens Berman Sobol Shapiro LLP is a consumer-rights class-action law firm with offices in nine cities. The firm has been named to the National Law Journal’s Plaintiffs’ Hot List seven times. More about the law firm and its successes can be found at www.hbsslaw.com. Follow the firm for updates and news at @ClassActionLaw.

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