Digital Extra: The Station Fire

06:39 PM EDT on Wednesday, August 4, 2004

The Associated Press

PROVIDENCE -- The owners of The Station nightclub should be held personally liable for failing to have workers' compensation insurance for their employees, the state argued today in Workers' Compensation Court.

A $1.06-million penalty was levied against Jeffrey and Michael Derderian's company, Derco LLC, for failing to carry the required insurance. Four employees were among the 100 who died as a result of the Feb. 20, 2003, fire at the West Warwick club.

The penalty was the maximum possible and the largest workers' compensation penalty ever imposed by the state.

Journal file photo Brothers Michael Derderian, left, and Jeff Derderian, owners of The Station nightclub in West Warwick, are shown awaiting their arraignment in December on criminal charges stemming from the fire.

Six months ago, the state Department of Labor hearing officer ruled that the brothers cannot be individually penalized because their "status as managers of a limited liability company does not come within the meaning of the term 'corporate officers' as set forth" under state law.

The state Labor Department lawyers then appealed that ruling, arguing tuat a new amendment clarifies the state law and affirms that managers of limited liability companies can be held personally responsible.

"This amendment is a clarification, not an alteration of existing law," said Bernard Healy, an attorney for the Labor Department, in court papers.

He said the amendment, which took effect July 2 and is not retroactive, only strengthens the department's argument.

The new law adds language to include managers of limited liability companies among those who can be held liable for the fine, penalty or imprisonment for failure to carry the insurance.

Thomas Dickinson, an attorney for the Derderians, said that because the law is not retroactive, the Derderians are exempt from the amendment.

"The individual liability is absolutely clear cut that it doesn't exist," said Jeff Pine, an attorney for Jeffrey Derderian.

He said it "would be erroneous for a court to impose any liability because the statute ... didn't allow for it."

The defense also questioned whether the court has jurisdiction to hear the Labor Department's appeal.

A ruling was expected next week.

If there had been workers' compensation insurance, the families of the dead employees would have been eligible for $15,000 for burial and other expenses plus a portion of the deceased's lost wages.

The brothers also each face 200 counts of involuntary manslaughter stemming from the fire, which was sparked by the pyrotechnics of 1980s rock band Great White. The band's former tour manager also faces criminal charges. Each has pleaded not guilty.

Additionally, the Derderians are named in several lawsuits filed by victims' families and survivors.