In 1998, a car buyer complaining about the terms of her car loan brought this case as a proposed class-action lawsuit against General Motors Acceptance Corporation (GMAC) in the U.S. District Court for the Middle District of Tennessee. The plaintiff alleged that GMAC violated the Equal Credit Opportunity Act (ECOA) by charging African-American consumers higher finance charge markups in its retail credit pricing system than it charged white consumers. The plaintiff sought injunctive relief and compensatory damages. Since this case predates PACER, the Judge’s orders unrelated to the appeal of the class action certification are unavailable. Any information about Judge Trauger’s reasoning as to those orders was provided by the docket.

The plaintiff originally entered into a retail contract to purchase a vehicle in 1995, with Beaman Automotive Group and GMAC subsequently purchased her contract. Under GMAC’s pricing system, the plaintiff qualified for a buy rate of 18.25%, but Beaman had discretion under the Finance Charge Markup Policy to increase her interest rate. Therefore, the plaintiff ended up paying GMAC a 20.75% interest rate on her contract. Because of Beaman’s involvement in the policy and her individual contract, on June 19, 1998 the plaintiff amended her complaint to add Beaman Automotive as a defendant in the case. After this amendment, defendant, GMAC, filed a motion to dismiss the claim on August 25, 1998. This motion to dismiss, as well as Beaman’s motion for judgment on the pleadings were denied in part and granted in part by Judge Todd Campbell.

Shortly before the plaintiff announced her intention to file a motion for class certification, on March 30, 1999, the case was transferred to Judge Aleta Trauger.

On November 19, 1999 the plaintiff filed a motion for class certification, with the proposed class defined as “[a]ll African American consumers who obtained financing through GMAC in Tennessee pursuant to GMAC’s ‘Retail Plan—Without Recourse’ between May 10, 1989 and the date of judgment and who were charged a finance charge markup greater than the average finance charge markup charged white consumers.” Judge Aleta Trauger granted class certification on August 28, 2000.

The defendant challenged the certification of the proposed class, arguing the proposed class was over inclusive—it covered too long of a time period and too many tier ratings—and therefore, the plaintiff’s claim of her markup would not be typical of the other proposed plaintiffs. Judge Trauger denied the defendant’s challenge. She concluded that it was not a requirement for class action status that every proposed class action member’s claim occur in the same way, but rather that the claim arise from the same practice or course of conduct. The lead plaintiff and the class members all claimed their injury arose from GMAC’s policy to make racially discriminatory finance charge mark-ups, which was sufficient for class certification, Judge Trauger found. There were over 10,000 people with the same claims; Trauger certified the proposed class as a 23(b)(2) class. 196 F.R.D. 315.

In the same opinion, Judge Truager ruled on defendant GMAC’s May 4th motion for summary judgment. Judge Trauger granted the motion as to the plaintiffs’ claim to hold GMAC vicariously liable for defendant Beaman’s Equal Credit Opportunity Act (ECOA) violations through the use of the Federal Trade Commission’s Holder in Due Course Rule. Judge Trauger held that this Rule required the plaintiff to establish that GMAC “knew or had reasonable notice” of Beaman’s credit practices that violated the ECOA in order to hold GMAC liable. Judge Trauger denied summary judgment as to all other claims. 196 F.R.D. 315.

The defendant GMAC filed an interlocutory appeal of Judge Trauger’s grant of class certification; the Sixth Circuit Court of Appeals granted immediate review on November 6, 2000. The defendant GMAC also filed a motion to stay District Court proceedings until the resolution of the 6th Circuit Court of Appeals interlocutory appeal, but Judge Trauger denied the motion to stay on September 15, 2000.

The Court of Appeals reversed Judge Trauger’s District Court decision on class certification on July 24, 2002 for abuse of discretion. The Sixth Circuit held that Judge Trauger erred in certifying the proposed class under 23(b)(2) because “compensatory damages under the ECOA are not recoverable by a 23(b)(2) class.” 296 F.3d 443.

Meanwhile, a similar case in the Middle District of Tennessee, Cason v. Nissan Motor Acceptance Corp, that involved discriminatory lending practices, was set to go to trial on February 3, 2003. On November 4, 2002 the plaintiff filed a motion to stay court proceedings pending a final resolution of this case. Judge Trauger granted the plaintiff’s motion on November 27, 2002. The case settled prior to trial, and Judge Traueger vacated the stay on April 9, 2003.

Prior to the stay of proceedings, the plaintiffs filed a seventh amended class action complaint on September 17, 2007. Shortly after the District Court proceedings resumed, defendant GMAC filed a motion to be dismissed from this complaint on May 19, 2003. This motion to dismiss was granted in part by Judge Trauger on August 21, 2003. At this time the plaintiffs’ claims seeking to hold GMAC vicariously liable under the non-delegable duty doctrine were dismissed.

The case was beginning to come to a resolution on June 2, 2003 when American Financial, A B C, Bill Heard Chevrolet, and New York Times Co. were all terminated as defendants in the case. At this time, the plaintiffs and the defendant Beaman Automotive filed a stipulation of dismissal and all of the plaintiffs’ claims against Beaman were dismissed. GMAC was the only remaining defendant in the case.

Since the plaintiffs’ original motion for class certification was denied on appeal and remanded to the District Court, the plaintiffs filed another motion for national class certification on October 15, 2003. Judge Trauger granted this motion on January 14, 2004 as a 23(b)(2) class because plaintiffs were only seeking injunctive and declaratory relief, not damages. However, Judge Trauger altered the proposed class definition to “all black consumers who obtained non-recourse financing from GMAC in the US pursuant to GMAN’s ‘Retail Plan-Without Recourse’ between 5/10/89 and the date of judgment; excluding black consumers who obtained such financing under special rate contracts for which markup is prohibited, pursuant one of General Motors Corporation’s or GMAC’s Special Rate Programs.” 220 F.R.D. 64.

On February 18, 2004 Judge Trauger granted preliminary approval of the parties proposed settlement, and the plaintiffs filed an 8th amended complaint.

On March 29, 2004, after a fairness hearing on March 8, the settlement was approved by Judge Trauger, and the plaintiffs withdrew and dismissed the claims concerning the special rate programs.

In this final order on March 29, Judge Trauger granted the settlement. Within the terms of the settlement, the plaintiffs agreed to dismiss the suit with prejudice. GMAC agreed to include an APR disclosure in each contract form, to limit the difference between the APR and buy rate, to contribute $1.6 million to a consumer education program on credit financing, and to launch a diversity marketing initiative.

The court approved the class representatives and counsel’s requests for attorney fees in the amount of $9 million and reimbursement of litigation expenses in the amount of $508,989.78. The case was dismissed with prejudice.

The settlement agreement lasted 3 years, ending in 2007. This case is now closed.

Mackenzie Walz - 02/15/2018


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