A judge yesterday denied a request by the owners of The Station to wait until after their appeals are heard to enforce a $1.06-million penalty against the nightclub for lack of workers' compensation insurance.
Workers' Compensation Court Judge Bruce Q. Morin said that only the state Supreme Court has the authority to "stay" a penalty pending appeal, suggesting that it is now up to the state Department of Labor and Training to "do whatever they have to do to enforce" its order to pay.
Yet any immediate action by the Labor Department to force payment of the penalty appears unlikely.
Bernard Healy, the Labor Department's associate attorney, said after yesterday's hearing that while the agency could seek a court order to demand payment, it will wait "at least a week" to allow the nightclub owners' a chance to request a stay from the Supreme Court.
In the meantime, Healy said, the Labor Department will schedule a hearing to determine the extent to which the state can hold The Station's owners, brothers Michael and Jeffrey Derderian, personally liable for the $1.06 million.
The penalty imposed by the labor department -- $1,000 per day for each day the nightclub was without coverage -- is the maximum allowed by state law and the largest ever imposed by the state in a workers' compensation case.
The Derderians last month appealed the penalty to the Workers' Compensation Court, and Morin upheld the order. The case is now pending before the Workers' Compensation Court's appellate division.
The $1.06 million is one of two penalties the Derderians are facing in connection with the Feb. 20 fire at the West Warwick nightclub, which killed 100 people, including 4 nightclub employees, and injured nearly another 200 people.
Last Thursday, the federal Occupational Safety and Health Administration fined the company that owns The Station, Derco LLC, $85,200 for alleged violations of workplace safety laws.
A conference on the OSHA fines has been scheduled for Sept. 5.
Yesterday, speaking before Morin, Jeffrey B. Pine, the lawyer for Jeffrey Derderian, argued that there was "no public harm" by agreeing to delay enforcement of the $1.06-million penalty since such penalties are deposited into a state administrative fund.
"It may be argued that somehow this money would go to the victims" of The Station fire, Pine said. "I'm not aware that any money from this fund would go to the victims. It's part of the general fund of the state."
The Labor Department's Healy took issue with Pine's characterization of the administrative fund, saying, it's "a special account to be used by the (Labor Department) director to uphold and forward the special intent of the Workers' Compensation Act . . . To say the funds cannot be used for the benefit of the victims at this point is incorrect and untrue."
Healy also noted that he had no indication from the Derderians' lawyers that their clients had ever paid any money in lieu of workers' compensation benefits to the fire victims.
Asked by a reporter after the hearing whether the Derderians had paid any such benefits to the fire victims, Pine replied flatly, "No."
Surrounded by a familiar huddle of television cameras and reporters outside the courthouse, Pine reviewed his arguments for why the Derderians and their company, Derco LLC, should not have to pay the $1.06 million. He called the penalty "excessive," saying it's "twelve times more" than OSHA's $85,200 fine.
Pine said that he and his co-counsel, Kathleen M. Hagerty, who represents Michael Derderian, will file their request for a stay of the $1.06-million penalty, both against Derco and the Derderians personally, at the state Supreme Court "probably within the next day."
Pine said the Supreme Court would probably schedule a conference on the matter within a week or so of the filing.
Lynn Arditi can be reached at larditi@projo.com
