R.I. Court Holds Nightclub Owners Personally Liable

The Rhode Island Workers Compensation Court has ruled that the owners of The Station nightclub can be held personally liable for their failure to obtain required workers’ compensation coverage.

The ruling means that the brothers’ personal assets can be tapped to pay the more than $1 million fine levied against their company, Derco LLC, for not having the insurance in place when their nightclub burned, killing 100 people including four employees.

The decision written by Associate Judge John Rotondi came in an appeal of a state labor department decision.

Jeff Pine, the lawyer for the owners, Michael and Jeffrey Derderian, told Associated Press that the ruling on personal liability would be appealed. The record $1 million fine has already been appealed.

Four employees were among the 100 people killed as a result of last year’s fire at The Station in West Warwick.

The issue of personal liability came up because on July 2 the state enacted an amendment to its statute on limited liability corporations, under which Derco is licensed. The amendment said that owners and managers of limited liability companies could be personally responsible for fines and penalties.

The state argued that this was not a change in the law but simply a clarification.

But the Derderians maintained that the new amendment was meant to establish personal liability and since it was not retroactive, they could not be held personally liable for the fine imposed before July 2.

In February, a state labor department ruling sided with the brothers because their ”status as managers of a limited liability company does not come within the meaning of the term ‘corporate officers’ as set forth” under state law.

Earlier this month, the workers’ compensation court rejected a motion by the Derderians’ lawyers that the personal liability issue not be allowed to continue. This latest ruling overturns the original labor department holding that found the owners could not be held personally responsible.