Station Nightclub: Who Pays?

September 27th, 2005 by

Jeffrey and Michael Derderian, former owners of the Station nightclub in Rhode Island, have filed for bankruptcy. The move surprised absolutely no one, least of all the attorneys on the other side. As owners of a club where 100 people died in a rapidly moving fire caused by illegal fireworks, the Derderians are on the hook not only for the lives of their customers, but for the lives of their employees as well. We pointed out in previous blogs going back to 2003 that the brothers failed to carry workers comp insurance for their employees, four of whom died in the fire. The brothers were fined over $1 million by a workers comp court for failing to carry this mandatory insurance.
The fine has not been paid and, given the chapter 7 filing, it is unlikely that it ever will be. The brothers have been making some sort of payments to the families of their deceased employees, pending resolution of the case in court. According to at least once source, those payments have fallen short of what is owed. Indeed, substantial as it is, the fine is only about 1% of the estimated $100 million in liabilities facing the brothers. They list their assets at $50,000. That’s pretty slim pickings for the creditors in this unresolved tragedy.
Searching for Deep Pockets
The brothers are not the only ones facing the harsh reality of financial liabilities for the fire. Foamex, the manufacturer of the highly flammable (and improperly installed) accoustical tiles that ignited, has also filed for Chapter 11 bankruptcy, although it is not clear from their announcement whether the filing is related directly to the fire or involves other business problems.
In the aftermath of any tragedy, especially one involving negligence, there is an immediate and relentless search for deep pockets. The Derderian brothers have basically announced that theirs are empty. Foamex may also be building a firewall (no pun intended) through its bankruptcy filing. There are other layers: the owners of the building; the town of Warwick which inspected (but did not close) the facility; Great White, the band that set off the fireworks (without a permit). And yes, even Budweiser, the company sponsoring the band’s tour. What did they know — or should have known — about the illegal pyrotechnics that made a Great White appearance something special (and potentially lethal). Sure, it’s a stretch to hold the brewer responsible for what happened, but they at least have liability insurance with the order of magnitude to cover the losses. This may be one of those cases where the brewer has a miniscule portion of the liability, but will bear most of the costs. At this point, only one thing is certain. Someone is going to pay.