The Station nightclub owners must now file a list of their creditors by Monday, and submit a list of their assets and liabilities by Oct. 21.

01:00 AM EDT on Friday, September 30, 2005

BY LYNN ARDITI
Journal Staff Writer

PROVIDENCE -- A federal bankruptcy court judge ruled yesterday that the Station nightclub owners' request for protection from creditors shields them, at least temporarily, from facing sanctions for failure to pay more than $200,000 in workers' compensation benefits to the families of four nightclub workers killed in the 2003 fire.

Brothers Jeffrey A. and Michael A. Derderian were scheduled to stand trial on the benefits claims today in state Workers' Compensation Court.

But Judge Arthur N. Votolato granted an emergency request by the Derderians' lawyers yesterday to recognize that the Chapter 7 filing triggers an "automatic stay," freezing, at least for now, all civil claims against the Derderians.

The Station nightclub owners have until Monday to file a list of their creditors, and until Oct. 21 to submit a list of their assets and liabilities.

Chapter 7 bankruptcy filing effectively asks the court to wipe out all the person's debts. Bankruptcy requests generally put a halt to any civil claims made against the filer.

On Wednesday, however, the Derderians' bankruptcy lawyer, Christopher M. Lefebvre, filed an "emergency" request to Votolato, stating that the Workers' Compensation Court expected the Derderians to appear in court today "to somehow prove and or convince the trial judge that the proceeding has been halted" by the bankruptcy filing.

Workers' Compensation Court Judge Bruce Q. Morin had subpoenaed the Derderians to answer questions about why they were allegedly unable to pay the $200,000. Lawyers for the Derderians had said that they would advise their clients to invoke their Fifth Amendment privileges against self-incrimination.

Votolato's ruling yesterday followed nearly three hours of public hearings and private conferences with lawyers for the Derderians and the plaintiffs in the workers' compensation cases.

"In essence, we got what we wanted," Lefebvre, the Derderians' bankruptcy lawyer, said after learning of the ruling. "In any event, the Derderians won't be there tomorrow."

Judge Votolato gave the Derderians until Monday to file a list of all their creditors, and until Oct. 21 to submit a full list of their assets and liabilities.

Lawyer Stacy Bettez Ferrara, the court-appointed trustee in the case, said after the hearing that, under the federal bankruptcy law, she is authorized to request documentation of a debtor's finances going back four years from the date of the bankruptcy filing.

The goal of the inquiry is to determine what, if any, income or assets the debtor has -- or has hidden -- that could be used to repay his or her creditors.

Lefebvre, the bankruptcy lawyer for the Derderians, said that houses, cars, boats, furniture and even jewelry can be considered part of a debtor's assets. But often, he said, most of those items are of limited value.

"In the absence of some rare jewel or cash," Lefebvre said, "most household furniture becomes worthless."

The trustee also can ask for documentation about whether the debtor has transferred any assets during the four years prior to the bankruptcy filing. For example, has the debtor bought or sold property? And if so, was that property sold at a fair market value? Or, was it conveyed to somebody else -- a family member or friend, for instance -- in order to hide it from the bankruptcy court?

"As long as it's sold for fair market value, that's not a problem," Lefebvre said during a break in the hearing. However, he added, the trustee may want to know where the profits from the sale are.

It remains to be seen, however, whether the bankruptcy court will request the sort of documentation which will illuminate the Derderians' financial situation at the time of the fire, on Feb. 20, 2003.

"The trustee's duties in bankruptcy cases is very limited: to look for assets, find them, liquidate them and repay creditors," Lefebvre said.

The four workers killed in the blaze were bouncer Tracy F. King, 39; waitress Dina Ann DeMaio, 30; guitarist Steven R. Mancini, 30; and his wife, Andrea Louise Jacavone Mancini, 28. At the time of their deaths, King and DeMaio were supporting young children.

The Derderians have been sending the employees' families monthly checks -- $125 for those without children and $500 for those with children -- since April, lawyers said. However, they have not paid the full benefits owed under state workers' compensation law.

The Derderians also each face 200 counts of involuntary manslaughter. They have pleaded not guilty.

Lynn Arditi, a Journal staff writer, can be reached by e-mail at larditi [at] projo.com