R.I. Nightclub Owners’ Bankruptcy Filing Stays Workers’ Comp Court Trial

The owners of a Rhode Island nightclub where a fire killed 100 people filed for bankruptcy last Friday, saying they faced a staggering amount of debt and could no longer pay off their creditors.

Jeffrey and Michael Derderian, who owned The Station nightclub in West Warwick, said in a joint statement that they and their company, Derco LLC, were declaring bankruptcy after a “recent review of our present financial condition.”

“Regrettably, we are no longer able to satisfy all of our present creditors or our potential future creditors,” the brothers’ statement read.

The Derderians are asking to be released from paying what could be “insurmountable” monetary judgments against them stemming from the fire, said Christopher Lefebvre, the attorney who handled the bankruptcy filing.

“They don’t have anything to pay out,” Lefebvre said. “You can’t lose sight of the fact, the bottom line, the Derderians have no assets. They are broke.”

The Derderians filed for Chapter 7 bankruptcy protection, which usually leads to the liquidation of assets so debts can be cleared.

The filing came exactly one week before the Derderians were to stand trial in Workers’ Compensation Court on charges that they failed to make full payments to the families of four workers killed in the Feb. 20, 2003 fire.

John Harnett, a lawyer for the family of one of the victims, Steven Mancini, said the workers’ compensation trial would be stayed pending the outcome of the bankruptcy proceedings in federal court. He expressed pessimism that his client would ever receive the requested benefits.

“I’m disappointed in the fact that it leaves the families of the victims without any financial help in the form of the benefits which we were fighting for,” Harnett said.

Jeff Pine, a lawyer for Jeffrey Derderian, said a motion regarding the bankruptcy filing would be filed with the workers compensation court and he expected those proceedings to be rendered moot.

“They’re being charged as criminals on one hand and being assessed unprecedented penalties on the civil side,” Pine said. “So they’ve had to fight a lot of battles in a lot of different forums. (Bankruptcy) is one of the results.”

The Derderians said in their statement that they would continue to make payments to the families of the four employees. In addition to the tens of thousands of dollars in death benefits and lost wages owed to the employees’ estates, the Derderians have also been ordered to pay more than $1 million for failure to carry the required insurance. The brothers later appealed that fine to the state Supreme Court.

The Derderians are awaiting trial on involuntary manslaughter charges and have been sued in federal court by the survivors of the fire and relatives of the victims.

Lawyers for the Derderians said they were not surprised by the bankruptcy filing, saying the deadly fire and the ensuing litigation caused financial strain.

“It has been always been a question of when and not if,” her clients would file for bankruptcy, said Kathleen Hagerty, who represents the brothers.

“It’s clear that what occurred … has significantly impacted not only their ability to make a living but the status of their finances,” she added.

The brothers estimated in their bankruptcy filings that their assets were less than $50,000 while their debts exceeded $100 million. They said they face more than 200 estimated creditors.

The Station burned to the ground during a concert by the 1980s rock band Great White. The fire was sparked by a pyrotechnics display that ignited flammable foam lining the club’s walls and ceiling. The band’s former tour manager, Daniel Biechele, who lit the pyrotechnics, is also charged with involuntary manslaughter.

“While we realize no amount of money could ever erase the injuries suffered or the heartache of loss, we hope that in some small way our insurance and our continued payments will benefit those affected,” the Derderians’ statement read.

Lefebvre said a meeting of creditors was scheduled for Nov. 2 where anyone affected by the bankruptcy filing will be able to question the Derderians about the information in the petition.

Andrew Caslowitz, who represents the surviving relatives of Tracy King, a bouncer at the club, said he was very disappointed.

“The tragedy of it is they didn’t have workers’ compensation insurance, and they should have,” Caslowitz said.

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