During the early 1990’s, Denny’s Restaurants (particularly franchises located in Southern California) were accused of widespread discrimination against black customers. Complaints alleged racially segregated customer seating and forcing black customers to pay for their meals before eating. With the assistance of the Justice Department and then-Assistant Attorney General for Civil Rights Deval Patrick, more than 4000 individuals filed claims in federal court.

The plaintiffs alleged that their rights had been violated under the provisions of Title II of the 1964 Civil Rights Act. Known as the Public Accommodations Act, Title II was developed specifically to end segregation in hotels and restaurants. The law had not been applied widely in class-action suits, where charges of discrimination are usually made by employees and not paying customers.

Fearing the negative publicity associated with widespread accusations of racial discrimination, Denny’s settled the lawsuits collectively without litigation. On May 25, 1994, Flagstaff Companies, Denny’s parent organization, agreed to pay $54.4 million – the largest settlement ever reached under federal public accommodation laws – to settle the pending federal lawsuits.

The case represented a significant victory for civil rights advocates, and $28 million was earmarked to compensate victims of Denny’s discriminatory policies. Although Flagstaff Companies did not admit any wrongdoing as part of the settlement, it did agree to retain an independent civil rights monitor to prevent future discrimination.