Diversion of Trust Funds Actions
Pursuant to New York’s Lien Law, monies received by owners from lending institutions for construction projects in New York, as well as monies paid by owners to general contractors for a construction project (or by general contractors to their subcontractors) are considered “Trust Funds” and must only be used for permitted purposes – such as to pay contractors and suppliers that are owed money on that project – before the funds are used for any other purpose.
The recipients of the Trust Funds are “Trustees” and if the Trustees use the Trust Funds for unauthorized purposes, the Trustees can be held liable for the amounts of money that they have “diverted.” If a Trustee is a corporation, the Lien Law provides that the corporate principals responsible for the diversion can be held personally liable.
The diversion of Trust Funds lawsuit must be brought as a class action on behalf of all of the “Beneficiaries” of the Trust Funds, and the Beneficiaries may recover from the Trustees the reasonable attorneys’ fees that they have incurred to recover the diverted Trust Funds, as well as punitive damages.
A diversion of Trust Funds lawsuit provides an additional means for Beneficiaries to recover monies owed on a construction project, and can be the only way to recoup what is owed when the corporate defendant goes out of business, or when a mechanic’s lien foreclosure action would not be successful because there is no lien fund (when the owner has paid to the general contractor or the general contractor has paid to its subcontractors all of the monies owed for all of the project work).
Construction law attorney Ronald Francis has successfully represented owners, contractors, vendors, and material suppliers in diversion of Trust Funds cases. Call the Law Offices of Ronald Francis for a free consultation regarding your diversion of Trust Funds claim.
For experienced representation in Diversion of Trust Funds actions in New York City and Nassau County, contact The Law Offices of Ronald Francis, to schedule a free initial consultation.