Workers' comp penalty stands
Judge Bruce Q. Morin's ruling is the first legal blow for the Derderian brothers, who may appeal the decision to the state Supreme Court.
07/25/2003
BY LYNN ARDITI
Journal Staff Writer
PROVIDENCE -- A state Workers' Compensation Court judge yesterday
upheld the state's $1.06-million penalty against the company that owned
The Station nightclub for failure to purchase workers' compensation
insurance.
Judge Bruce Q. Morin also ruled that state law allows for the assessment
of a penalty personally against the nightclub's owners, brothers Jeffrey
and Michael Derderian.
It is now up to the state Department of Labor and Training's hearing
officer to decide whether to try to put the Derderians on the hook
personally for any or all of the $1,066,000.
The penalty is the maximum allowed by state law and the largest ever
imposed by the state in a workers' compensation case.
The Feb. 20 fire at The Station nightclub killed 100 people, including 4
nightclub workers, and injured nearly 200.
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Kathleen M. Hagerty, left, lawyer for Michael Derderian, and Jeffrey Pine, lawyer for Jeff Derderian, react to yesterday's ruling by a judge upholding a $1.066-million fine against the company that owned The Station.
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The ruling, nearly six months after the fire, marks the first legal blow
for the former nightclub owners. Four civil lawsuits filed by victims of
the fire are currently pending in Rhode Island -- three in federal court
and one in Superior Court, Providence -- in addition to a federal suit
in Connecticut.
The Derderians had appealed the labor department's $1.06-million
penalty, saying it was excessive and violated their constitutional
rights. Their lawyers argued that the Derderians' company, Derco, LLC,
was being punished more severely than other employers who violate the
workers' compensation insurance law because of publicity surrounding the
nightclub fire.
In his ruling from the bench yesterday, Morin responded to the
suggestion of unfair treatment, saying the claim "that Derco was treated
differently" from other employers "was unsubstantiated."
Morin said the law requires that the labor department base its rulings
not on "speculation or new reports," but rather on the contents of the
official record. And that record, Morin said, "is sparse." It includes a
stipulation to basic facts about the company, its incorporation papers
and the period for which it lacked insurance coverage. There is no
documentation about the employees who were injured or died in the blaze.
Morin said state law, however, allows the labor department director
"discretion" to assess a penalty of $500 to $1,000 per day for each day
an employer operates without the required coverage.
Jeffrey B. Pine, the lawyer representing Jeffrey Derderian, said
yesterday that he and his cocounsel, Kathleen M. Hagerty, who represents
Michael Dederian, will seek permission to appeal the ruling directly to
the state Supreme Court.
"I'm both surprised and disappointed," Pine said to a group of news
reporters gathered outside the courthouse after the hearing. "I think
the fine is excessive . . . . It's totally disproportionate to
everything that's gone before this case."
Asked by a reporter if the publicity surrounding The Station had any
impact on the judge's ruling, Hagerty replied, "No question, no
question. If they had been any other employer, this wouldn't have
happened."
Her voice rising in anger, Hagerty also said:"To say you owe us a
million bucks because you had no insurance when they know that umpteen
[businesses] have run across the street to Beacon Mutual to obtain
insurance . . ." Pine whispered something to his cocounsel and she broke
off.
Pine said he will ask the court for permission to hold off on enforcing
payment of the $1.06-million penalty pending their appeal. Even if the
Derderians were ordered to come up with the money, Pine said, they
wouldn't be able to.
"They just don't have it," Hagerty said.
While the $1.06-million penalty leveled in the Derderians' case is
unprecedented for a workers' compensation insurance case in Rhode
Island, that is not so nationally.
"Certainly, there have been larger penalties in workers' comp violations
across the country," said Paul Martinek, editor of Lawyers' Weekly USA,
a national trade publication. "Fines in the millions of dollars are not
unusual" for insurance violations.
However, Martinek added, "those do tend to involve much larger
companies." In many states, he said, the laws base the penalty in part
on the size of the company and the number of its employees.
Lynn Arditi, a Journal staff writer, can be reached at
larditi@projo.com
