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Denny's Restaurants Settle Bias Suits for $54 Million


WASHINGTON — U.S. government officials and civil rights advocates, hailing a "new partnership" dedicated to weeding out racism in commercial establishments, announced a record $54.4-million discrimination settlement with the Denny's restaurant chain Tuesday.

The settlement, which earmarks $28 million for victims of discrimination at California Denny's restaurants, closes the book on two class-action lawsuits that became a modern version of the lunch-counter protests of the civil rights movement's early days.

"With the help and cooperation of private counsel, the Justice Department and Denny's have entered into the largest, most-sweeping nationwide settlement of a public accommodations case in history," said Deval L. Patrick, assistant attorney general for civil rights.

The firm was accused in the lawsuits of fostering a discriminatory corporate culture and refusing to serve blacks at some of its 1,400 Denny's restaurants across the country.

Denny's would not say how many cases of alleged discrimination in Southern California would be affected by the settlement. "There are 3,000 claims in California and 4,300 in the nation, and we're not able to break them out," spokeswoman Karen Randall said.

But Jerry Steering, a lawyer who represents five clients who alleged discrimination at Denny's restaurants in Costa Mesa, Orange and Yorba Linda in 1992 and 1993, described the agreement as "good news for my clients because it represents another option for them."

Steering said his clients have the option of continuing to pursue their lawsuit in U.S. District Court in San Diego--or accept $35,000 each from the settlement fund. "I don't know what they'll decide to do," Steering said. "I will say that the quality of our cases is such that they can probably get a lot more money if we go to trial."

The five customers alleged that Denny's either refused to serve them or demanded that they pay for meals in advance, even though white customers were not being asked to do so.

San Diego resident Leon Youngblood alleged that a Denny's restaurant on 17th Street in Costa Mesa made him wait for a table while white customers were quickly seated. Youngblood called the Costa Mesa Police Department to lodge a complaint.

The Justice Department settlement, which must be approved in U.S. district courts in San Jose and Baltimore, ends a painful chapter for Flagstar Cos. of Spartanburg, S.C., which owns the chain.

Some black customers, for example, said that they were asked to prepay for meals or to pay cover charges before they were seated. One former restaurant manager said he was told by superiors to close his restaurant if "too many" black customers approached.

Under terms of the arrangement, Flagstar did not admit wrongdoing. Nevertheless, Justice Department officials said, the settlement represents a landmark in civil rights enforcement: the largest agreement ever negotiated in a case involving discrimination at restaurants, hotels or other public accommodations.

The agreement resolves separate lawsuits filed last year in California and Maryland. The California plaintiffs include Rachel Thompson of Vallejo, a 15-year-old black girl who went to Denny's in late 1992 to celebrate her 13th birthday but was refused the restaurant's customary free birthday meal.

The Maryland lawsuit was filed by six U.S. Secret Service officers who stopped at a Denny's in Annapolis in May, 1993, amid preparations for a speech by President Clinton at the U.S. Naval Academy. The black agents said that they sat for nearly an hour without being served, even as they watched white colleagues served several times. Their lawsuit was expanded to include claimants in 48 other states.

Under the settlement, Flagstar will pay $28 million in damages to California customers, plus $6.8 million in attorney fees. The chain will pay $17.7 million to customers in Maryland and other states, along with $1.9 million in legal fees.

Customers who feel they were treated unfairly at Denny's can request claim forms and apply for a portion of the damages by calling the company toll-free at (800) 836-0055.

The claims will be screened by an independent claims administrator and the Washington Lawyer's Committee for Civil Rights and Urban Affairs, which filed the Maryland lawsuit. Damages will be prorated among victims whose claims are approved.

Besides paying damages, Flagstar will be required to retain an independent civil rights monitor to ensure the company's compliance with the settlement. In addition, it agreed to feature blacks as customers and employees in advertisements, train its employees in racial sensitivity and allow representatives of a civil rights group to make random spot checks for bias at Denny's outlets.

Flagstar officials said that the company already has begun satisfying many of the agreement's requirements.

Attorneys for plaintiffs in the class-action suits said that the settlement could become a precedent for future discrimination cases.

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