Legally Speaking: Deep pockets, shallow justice

By John G. Browning | Feb 26, 2008

If hell has a sneak preview, the world probably witnessed it on Feb. 20, 2003. On that night, rock band Great White, having fallen far from its '80s heyday, was playing a gig at The Station, a nightclub in West Warwick, R.I.

The concert included a pyrotechnic display ignited by the band's tour manager, Daniel Biechele. Tragically, the pyrotechnics ignited flammable polyurethane foam used as soundproofing in the club. The resulting inferno swept through the venue, killing 100 people and injuring over 200 others. It was the fourth-deadliest nightclub fire in U.S. history.

In the criminal case that followed, tour manager Biechele pled guilty to involuntary manslaughter charges in 2006 and is scheduled to be released on parole in March after serving less than half of his four year sentence. Michael Derderian, a co-owner of the club, pled no contest to involuntary manslaughter and was also sentenced to four years in prison. His brother and fellow owner, Jeffrey Derderian, cut a similar plea deal and avoided prison altogether by being sentenced to community service.

But for family members of those killed in the blaze, the criminal penalties provided little comfort, especially in light of revelations that the club had remained open despite a history of citations for hazards prior to the fire.
So the survivors and those who had lost loved ones, having been failed by the criminal justice system, turned to the civil courts. Nearly 300 such plaintiffs filed a massive federal lawsuit (there are currently 10 pending federal lawsuits).

According to Chris Fontaine, who lost her 22-year-old son Mark and whose daughter Melanie suffered second- and third-degree burns in the fire, "We're looking for the answers that we've been deprived of because of not having a [criminal] trial. We want to hear all the evidence. We want to hear about the inspections. We just want information. It's about holding people accountable and getting the answers."

Other family members echoed these sentiments. James Gahan, whose 21-year-old son Jimmy perished in the fire, wanted the civil case to assign responsibility to those who had contributed to the tragedy.

"If the criminal system is not going to follow through and make them accountable, the only thing we have left is the civil system," he said.

Plaintiff after plaintiff maintained that the lawsuit was not about the money, but instead was a search for the truth and an effort to fairly allocate fault.

But was it? True, the lawsuit named the band and its tour manager as defendants, along with the club's owners. The insurance company for Great White paid its $1 million policy limits into the registry of the court, essentially leaving it to the judge to devise a fair and equitable way to spread that amount among the hundreds of plaintiffs.

The Derderian brothers filed for bankruptcy protection, essentially shielding them from damages above and beyond their insurance coverage.

However, the lawsuit also named a dizzying array of nearly 100 defendants, many of whom had only a tenuous connection at best to the catastrophic events of Feb. 20, 2003.

Among the parties included in the lawsuit were the following:

  • the state of Rhode Island;
  • the town of West Warwick (whose building and fire inspectors had supposedly allowed the club to remain open after multiple citations);
  • the alarm company that installed the club's fire alarm system and its owner, Joseph LaFontaine;
  • multiple manufacturers of foam insulation material – not just Polar Industries, who made the PolarGuard insulation actually present in the club, but other companies as well;
  • Luna Tech, Inc. (an Alabama company) and two European subsidiaries who manufactured the fireworks used by Great White the night of the fire;
  • High Tech Effects, a Tennessee company that allegedly sold the fireworks;
  • the salesman who had actually sold the foam soundproofing;
  • Howard Julian, the previous owner of the nightclub, who had actually installed the foam;
  • Triton Realty, the real estate company that did nothing more than lease the building to Jeffrey and Michael Derderian;
  • Raymond Villanova, the actual owner of the building;
  • Anheuser-Busch, Inc. which sold beer at the concert;
  • Clear Channel Broadcasting (a division of Clear Channel Communications, Inc., the largest operator of radio stations in the United States), which owned the rock radio station WHJY-FM that had promoted the show;
  • LIN-TV (the Providence-based owner of television station WPRI-TV), along with WPRI-TV itself;
  • and one of WPRI-TV's new cameramen, Brian Butler, who was ironically at the concert filming a segment about nightclub safety.

    What justified suing some of these defendants?

    According to the victims' lawyers, the radio station had run on-air advertisements, distributed free tickets to the show, and provided a disc jockey, Mike Gonsalves, who served as emcee and introduced the band (Mr. Gonsalves was among those killed in the fire).

    Despite the station maintaining all along that it had no control over what happened at the club that night, and despite the fact that the station had neither arranged nor paid for Great White's performance, plaintiffs' lawyers argued that the station "knew or should have known that the concert it was advertising featured a band that regularly used pyrotechnics in its shows." The lawyers also claimed that the DJ had the authority to stop or delay the concert for safety reasons, but failed to do so.

    The case against the TV station and its cameraman was just as overreaching. The lawsuit accuses Mr. Butler of blocking an exit while he filmed. According to the plaintiffs, "Rather than leaving the building, or assisting patrons of The Station to escape, Butler stood within the building, directly in an egress route, and filmed distressed patrons trying to leave the nightclub. Butler's actions directly impeded the exit of patrons and contributed to the slowdown, backup, and additional logjam for those attempting to leave through the main exit."

    Butler insisted that he didn't block anyone's escape, and in fact CNN reports immediately afterward appeared to credit the cameraman with verbally urging and physically pushing people out the door, even turning back to help after he had managed to exit the club.

    His lawyer, Chip Babcock of Dallas' Jackson & Walker, maintains that "Brian Butler saved lives that night" and that his presence in the lawsuit had more to do with the deep pockets of Butler's employer than any actual liability. The videotape itself appears to support Butler's account.

    As remote as their connection to the tragic fire may have been, many defendants have already settled. Several companies, including insurance carriers for the bank and the club itself as well as the pyrotechnics defendants and at least one foam insulation maker, contributed $13.5 million toward settlement.

    In October, 2007, that number swelled to $18.5 million with Home Depot and Polar Industries kicking in an additional $5 million. In early February 2008, the TV station, its parent company, and the cameraman settled out for an estimated $30 million. By mid-February, Clear Channel had joined the ranks of the settling defendants.

    The $22 million paid on behalf of the radio station defendants brought the total amount of settlements reached to date to over $70 million – with dozens of people and companies still remaining in the case.

    Why would companies that had what would certainly appear to be virtually no causal connection to the fire pay such huge amounts to buy their way out of such a case? Of course, the obvious answer lies with the costs and negative publicity associated with protracted litigation, as well as the massive potential exposure in a case with such notoriety.

    In addition, Rhode Island law provides that an insurer who rejects a written settlement demand that is reasonable can later be held liable for any judgment, even if it is in excess of the carrier's total insurance coverage (Texas has a similar rule, known as the "Stowers Doctrine").

    However, the most likely explanation rests with Rhode Island's utter absence of meaningful tort reform measures.

    In June 2006, the Rhode Island General Assembly passed a law with this particular case in mind – which applies only to cases in which there are at least 25 deaths. Under that law, the degree of liability assessed by the jury matters not at all in reducing an award (as it would in Texas, where the jury must allocate a percentage of responsibility for all parties, including the plaintiff's own contributory negligence).

    Instead of reducing an award by the percentage assessed against those defendants who have settled out of court, the jury's total damages award is simply reduced on a dollar-for-dollar basis. As a result, unlike in Texas, Rhode Island's law could subject a defendant with a relatively small percentage of responsibility to potentially huge damages if the settlements are dwarfed by the jury verdict.

    By way of illustration, let's say that by the time the case goes to trial, every defendant has settled out except Anheuser-Busch, and the settlement pool has grown to $150 million (more than twice what it is now). Let's further assume that the jury returns a verdict of $300 million – not that implausible given the number of victims. That would mean that a lone remaining defendant of questionable culpability at best would be on the hook for $150 million – the difference between the verdict and the total credit for out-of-court settlements.

    A civil justice system should be a search for the truth and a justified apportionment of fault where fault resides, not a high stakes game of musical chairs where no corporate defendant wants to be the last one without a seat when the music stops.

    There should be a level playing field for all litigants, not a system in which the most dubious of claims can serve as a means to shake down the opposition.

    I grieve for the families who lost loved ones and I empathize with the victims whose scars – both internal and external – will never fully heal from that tragic night of Feb. 20, 2003.

    But suing companies and individuals for the flimsiest of reasons and with an eye on the depth of their pockets rather than the degree of their guilt represents no justice at all.

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