Digital Extra: The Station Fire

04:56 PM EDT on Wednesday, August 18, 2004

By JACK PERRY
projo.com staff

PROVIDENCE -- A Workers' Compensation Court judge ruled today that the owners of The Station nightclub are personally liable for a $1.06-million penalty against their company for violating the state workers' compensation insurance law.

Jeffrey and Michael Derderian previously admitted to state labor officials that they had no workers' compensation coverage for nearly three years before a Feb. 20, 2003, fire at the West Warwick club. The disastrous blaze killed 100 people, including 4 nightclub workers, and injured more than 200 others.

The state Department of Labor and Training penalized the Derderians' company, Derco LLC, $1,000 for each day that the West Warwick nightclub was without the insurance coverage for its employee -- the largest such penalty ever levied in Rhode Island.

The Derderian brothers have appealed that ruling against their company and have been fighting efforts to hold them personally liable for the penalty.

Judge John Rotondi's decision today means the state can go after the Derderians' personal assets to pay the penalty, as well as any corporate assets.

His ruling comes in response to the state labor director's appeal of a February ruling by a state Department of Labor hearing officer that the Derderians could not be held personally liable.

Rotondi set the stage for today's ruling last week, when he rejected the Derderians' argument that the labor director's right of appeal was eliminated when the General Assembly amended the state workers' compensation law last July.

In his written ruling issued today, Rotondi found that Department of Labor hearing officer Louis J. Vallone made a mistake.

Rotondi wrote, "The hearing officer committed a clear error of law in his finding that the status as manager of a limited liability company does not come within the meaning of the term 'corporate officers' as set forth" in the law.

" 'Managers' of Limited Liability Companies fulfill the role of 'corporate officers' within their organization and as such can be held personally liable for the administrative penalty pursuant to the provisions" of the law, he added.

The Station was the only known asset of the Derderians' company. The brothers' lawyers have said their clients do not have $1.06 million.

The Derderians will appeal the decision to the appellate division of the state Workers' Compensation Court, according to Jeffrey Pine, attorney for Jeffrey Derderian.

"I was a little bit surprised," Pine said of the ruling. "I think the law is clear. I actually had some hope the court would agree with our position."

Pine said the penalty as a whole is "pretty much unenforceable."

He said the brothers want to offer financial help to the families of the four employees killed in the fire, and those workers who were hurt. But, if the brothers pay the fine, the money will go to the state, rather than the survivors and the families of those killed, Pine said.

Pine would not comment specifically on the Derderians' assets, but said "they're not millionaires."

The Derderians have already appealed the penalty against their company to the state Supreme Court.

The Derderians 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.

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

-- With reports from Journal staff writer Lynn Arditi and The Associated Press