A Workers' Compensation Court judge will rule today on The Station nightclub owners' appeal of a $1.06-million penalty that the state has leveled against their company for failure to purchase workers' compensation insurance.
Judge Bruce Q. Morin also is expected to rule on whether The Station's owners, brothers Jeffrey and Michael Derderian, can be held personally liable for the $1,066,000.
The state Department of Labor and Training imposed the penalty in the aftermath of the Feb. 20 fire at the West Warwick nightclub that killed 100 people, including 4 of the nightclub's workers.
The $1.06-million penalty -- $1,000 per day for the nearly three years the nightclub was without coverage -- represents the maximum allowed by law and the largest ever imposed in a Rhode Island workers' compensation case.
Lawyers representing The Station's owners, brothers Jeffrey and Michael Derderian, have argued that the penalty is "excessive" when compared with other lack-of-coverage cases.
The fact that four of the nightclub's workers died in the fire should not have been considered in assessing the penalty, said lawyers Jeffrey B. Pine and Kathleen M. Hagerty, because there was no evidence or testimony to that effect in the official record.
The labor department's official record in the case basically amounts to a one-page "stipulation" signed by the labor department's lawyer and the Derderians' lawyers that lays out basic facts about the business, such as its corporate name, the period during which the nightclub operated without coverage, and that it "ceased operating" after the fire on Feb. 20.
The official record provides no documentation about the number of Station employees or how many were injured or died in the blaze.
Pine and Hagerty have told reporters that the amount of the penalty against their clients' company, Derco, LLC, is largely in reaction to the publicity surrounding the nightclub fire.
Yesterday, Louis J. Vallone, chief legal counsel for the state Department of Labor and Training, and the hearing officer in The Station case, said in an interview that his decision was based solely on the facts in the official record. "In The Station case, no one considered that there were any deaths. I didn't," Vallone said. "It wasn't in evidence. The only thing I considered was in the stipulation to the facts. It would have been improper to consider anything else."
In imposing the $1.06-million penalty, Vallone wrote that "the civil action does not permit the director to assess penalties against corporate officers."
However, in a separate appeal, Bernard P. Healy, the labor department's associate attorney, took issue with Vallone's ruling on that point and requested that the court consider assessing the penalty against the Derderians personally, "in their individual capacities as managers/owners of Derco, LLC."
Lynn Arditi, a Journal staff writer, can be reached at larditi@projo.com
