The state Supreme Court yesterday agreed to stay a more than $1-million penalty against the company that owns The Station nightclub for failure to carry workers' compensation insurance.
The order, signed by retired Chief Justice Joseph R. Weisberger, also prevents the state from collecting any or all of the $1.06 million from the nightclub's owners, brothers Jeffrey and Michael Derderian, until the court determines whether it will hear the Derderians' case on appeal.
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 Feb. 20 fire at the nightclub killed 100 people, including four nightclub workers. After the fire, the state Department of Labor and Training discovered that 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.
The Derderians' lawyers appealed. Last month, a three-judge appeals panel of the Workers' Compensation Court upheld the $1.06-million penalty against Derco LLC and remanded the matter of personal liability to the state Department of Labor and Training.
Yesterday's order effectively delays collection of any penalty against either the Derderians or Derco LLC by requiring that state labor officials first engage in another round of legal proceedings on the matter of personal liability. If the labor department imposes such a penalty, it would likely go through another round of appeals at the Workers' Compensation Court before landing at the Supreme Court.
In the meantime, the Derderians' lawyers have 20 days to file their appeal of the case to the Supreme Court.
Lawyers for both sides yesterday said they were pleased with the decision to stay the penalties.
"I think it makes perfect sense," said Bernard Healy, the labor department's associate attorney. "I don't believe Derco LLC. . . is viable at all. So as a practical matter, if any funds were paid I'd expect it would be from the managers of the company, Jeffrey and Michael Derderian, and not Derco."
Jeffrey B. Pine, the lawyer for Jeffrey Derderian, said, "It's certainly welcome. . . because we felt the penalty against Derco is excessive and not justified by any evidence."
Pine said he is hopeful that the Supreme Court will take the appeal, adding, "It's a case that's clearly in a unique status in terms of the penalty imposed. And the application of the statute itself is something that has to be reviewed and interpreted."
Lynn Arditi, a Journal staff writer, can be reached at larditi@projo.com
