A three-judge appeals panel of the state Workers' Compensation Court has upheld a penalry of more than $1 million against the company that owns The Station nightclub for failure to carry the mandatory workers' compensation insurance.
The penalty, which amounted to $1,000 for each day that 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 ruling, detailed in a 15-page decision received yesterday by the attorneys for the nightclub's owners, will take effect immediately upon being entered into the court on Oct. 30, said George Healy, associate judge in the state Workers' Compensation Court. "Unless they get an order of the Supreme Court staying this order," Healy said, "as of Oct. 30 . . . they have to pay."
Lawyers for the nightclub's owners, brothers Jeffrey and Michael Derderian, said yesterday that they would seek an immediate stay of the order and appeal the ruling to the state Supreme Court.
State law gives them 20 days from the date the order is entered, on Oct. 30, to file their appeal.
The three-judge panel's ruling -- signed by Chief Judge Robert Arrigan, Associate Judge Janette Bertness and Associate Judge Dianne Conner -- also says that state law allows the Labor Department to hold the Derderians personally liable for all or part of the $1.06 million.
The matter is expected to be remanded to the state Department of Training for hearings on the issue of personal liability.
The Feb. 20 fire at the nightclub killed 100 people, including four nightclub workers. After the fire, Labor Department officials discovered that the The Station had been without workers' compensation coverage for nearly three years.
In July, Workers' Compensation Court Judge Bruce Q. Morin upheld the Labor Department's $1.06-million penalty against Derco LLC, the company that owned The Station. Morin also ruled that labor officials could hold the Derderians personally liable for all or part of the penalty.
Lawyers for the Derderians appealed Morin's ruling to the Workers' Compensation Appellate Division, and the matter was heard last month by the three-judge panel.
The lawyers -- Kathleen M. Hagerty, who represents Michael Derderian, and Jeffrey B. Pine, who represents Jeffrey Derderian -- argued that the $1.06-million penalty was excessive, and thus violates their clients' constitutional rights. They also said that Derco LLC legally insulates the Derderian brothers from being held personally liable for any of the penalty.
But the three-judge panel rejected those arguments. The judges ruled that "the amount of the penalty is discretionary subject to the boundaries set forth in the statute." The judges also wrote that state law "allows the hearing officer to assess penalties against corporate officers," and said Morin was correct in remanding the matter to the Labor Department for further proceedings.
Even if the $1.06-million penalty is upheld on its next appeal, it is not clear that the state would ever collect the money. The Derderians' lawyers have repeatedly maintained that their clients do not have $1.06 million.
Healy, the Labor Department's lawyer, said: "I hope that the employee victims of the fire will some day see some compensation from this. The fine would be secondary to that."
