R.I. Court to Decide Next Week on Personal Liability of Nightclub Owners for $1 Million Workers’ Comp Penalty

August 12, 2004

The Rhode Island Workers Compensation Court has refused to dismiss a case by state labor officials that seeks to hold the owners of The Station nightclub personally liable for their failure to purchase workers compensation insurance.

While Judge John Rotondi agreed that the question of personal liability could proceed, the workers compensation judge did not issue a ruling on whether the nightclub proprietors can be held personally liable in this situation. The court said that decision would come next week.

The state is seeking to hold Jeffrey and Michael Derderian personally liable for a $1 million fine levied against their company, Derco, LLC. The fine was levied because the firm had no workers compensation insurance when fire struck the Derderians’ West Warwick nightclub last February, killing 100 people including four employees and injuring hundreds of others.

A Department of Labor hearing officer ruled that they can’t be personally penalized. But the labor department then appelaed that denial to the workers compensation court. Marvin D. Perry, director of the Rhode Island Department of Labor, appealed to the state Workers’ Compensation Court to reject the hearing officer’s finding and hold the Derderians personally responsible for the $1 million.

The Derderians sought to dismiss the labor department’s appeal on the grounds that recent changes in state law restricted the labor department’s right to appeal but Judge John Rotondi refused.

“The legislature did not intend to remove the director’s right of appeal,” Rotondi wrote. “Thus, it is clear that this court was not divested of its subject matter jurisdiction over this appeal.”

The Derderians have also appealed the penalty against their company to the state Supreme Court.

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