Adams Leclair LLP is a litigation law firm that concentrates its practice in commercial and construction advocacy throughout upstate New York. Headquartered in Rochester, New York, we provide specialized counsel, honed by decades of experience in state and federal courts at the trial and appellate levels. We also represent clients in various administrative tribunals from local planning boards and boards of assessment review to state and federal agencies, such as Financial Industry Regulatory Authority (FINRA), the New York State Department of Labor, the EEOC, and the National Labor Relations Board.
Our practice areas additionally include employment, municipal, real property tax, estate and trust litigation. In September 2019, we combined the talents of the construction litigation practitioners from Adams Bell Adams, PC and the experienced commercial litigators from Leclair Korona Cole LLP which has helped us better structure our clients’ business affairs in ways that anticipate and avoid conflict. We are proud of the reputation we have earned among our peers and our clients for vigorous advocacy and effective representation.
Mary Jo Korona and Stacey Trien are among the attorneys featured in the sixth annual “Women In Law” Business Edition.
This publication celebrates the accomplishments of women in the legal industry who have been recognized for 2021 in The Best Lawyers in America©.
Both women are founding partners of Adams Leclair LLP. Mary Jo Korona is currently serving as Senior Counsel focusing her practice on advising higher education institutions and resolving commercial, business relationship and contract disputes. Stacey Trien leads the litigation team handling employment and insurance matters. Trien is the current President of GRAWA (Greater Rochester Association of Women Attorneys).
Rochester, N.Y.–Adams Leclair LLP is once again highlighted in the annual Chambers USA: America’s Leading Lawyers for Business in the category of Commercial Litigation, as were attorneys Paul Leclair and Steven Cole.
- Paul Leclair is a founding partner of Adams Leclair and has practiced in Rochester for more than thirty years. He assists clients with a diverse range of complex commercial matters, including partnership disputes, breach of contract, insurance, and construction matters.
- Steven Cole is the managing partner at Adams Leclair and advises both individual and corporate clients on issues such as trade secrets disputes, intellectual property matters and securities litigation.
Chambers USA sought-after rankings are the result of extensive research and interviews with in-house counsel and corporate executives.
Adams Leclair LLP is a commercial litigation boutique with an experienced bench of attorneys in Rochester and Albany, New York. Adams Leclair LLP represents clients in a variety of practice areas including commercial litigation, construction law, employment law, trade secret protection, financial services litigation, shareholder disputes, intellectual property litigation, municipal law and tax assessment, and trust and estates litigation.
4th Department Provides Clarity On Avoiding Civil Liability Under The Lien Law By Restoring Diverted Funds
Codified in 1959, Article 3-a of the Lien Law (Lien Law §§70-79a) provides very stringent trust provisions related to certain funds on construction projects. For those not familiar with its terms, project “owners” are required to hold in trust all proceeds received from building or home improvement loans for the benefit of all contractors, suppliers and laborers performing work or furnishing materials on the project. Likewise, contractors must hold in trust all monies received as payment from owners or higher-tier contractors for the benefit of all those furnishing materials or labor on their behalf.
The statute’s primary purpose is to ensure payment to those who have directly expended labor and materials on a construction project and prevent circumstances where an owner or contractor “robs Peter to pay Paul” by utilizing trust funds to pay off unrelated debts. Accordingly, the statute mandates that a trustee cannot use any of the trust proceeds for their own purposes until all trust claims on a project have been satisfied or settled, and provides potentially serious consequences for those that violate its terms, including personal liability and even criminal sanctions. Despite the serious penalties, it has always been my opinion that the statute is relatively under-utilized in disputes involving non-payment on a construction project, particular since, in my experience, most owners and contractors do not strictly adhere to the statute’s rigid requirements. Accordingly, despite the statute being on the books for more than sixty years, the caselaw interpreting it is rather undeveloped, particularly at the Appellate level.
Recently, however, our firm was involved in a matter before the Fourth Department, which rendered a determination on an issue that had seemingly never been addressed by the Appellate Division: whether a trustee could avoid civil liability for diversion by subsequently restoring the trust with non-trust assets. In the decision rendered in DiMarco Constructors, LLC v. Top Capital of New York Brockport, LLP, 2021 NY Slip. Op. 02680, the court ruled that a diversion cause of action under the Lien Law could not be defeated (or reduced) by claims that the diversion had been subsequently restored or “cured”.
Before addressing the significance of this holding, a summary of the underlying facts is in order. In the case, a class of contractors and subcontractors alleged that the project owner breached its contract with its construction manager by failing to pay a sum in excess of $1,700,000 for labor and materials due on the project. The plaintiffs also accused the owner and its principals of diverting roughly $1,400,000 of the trust proceeds the owner received from a building loan with a regional bank. After limited discovery and prior to depositions, the owner and its principals sought dismissal of the diversion claims by asserting, inter alia, that even if there was a diversion of the building loan proceeds, any diversion was subsequently restored, since the sum ultimately paid to the construction manager was equal to or exceeded the total trust res disbursed by the bank on the building loan.
The lower court agreed with the defendants’ restoration argument and substantially reduced the plaintiff’s damages on the diversion causes of action to a maximum of $104,205.99, despite credible evidence that well over a million dollars had been improperly been diverted from the building loan proceeds during the early stages of the project. The IAS court reasoned that the plaintiffs were only entitled to recover the difference between the trust funds disbursed by the bank to the owner ($13,344,999.99) and the total amount plaintiffs had received in payment on the project ($13,230,794). In doing so, the lower court was not persuaded by evidence that the owner utilized non-trust assets to pay down a portion of the debt owed to plaintiffs on the project after the building loan trust had been depleted. Nor was the IAS court swayed by plaintiffs’ argument that defendants use of these non-trust assets did not constitute a “restoration” of previously diverted funds, because these non-trust assets (from private investors) had always been earmarked to pay for a portion of the construction.
On appeal, the Fourth Department modified the lower court’s decision by striking the portion reducing plaintiff’s damages on the diversion causes of action. In doing so, the court rejected the argument that an improper diversion of trust assets could be “cured” by a subsequent payment from non-trust assets, concluding that such circumstances would blunt the rigorous trust regulations set forth in the Lien Law, and would open the door to “pyramiding”, where an owner or contractor use loans or payments advanced in the course of one project to complete another. The Appellate Court was persuaded by language in the Court of Appeals case of Aquilino v. New York State, 10 NY2d 271 (1962), which stated that funds from an express trust may not be diverted “whether or not the diversion is subsequently remedied”. Moreover, the majority addressed concerns expressed by the lone dissenting justice, noting that the plaintiffs would not recover a windfall or “double recovery” by re-imposing the full measure of potential damages, because the plaintiffs alleged that a sum in excess of $1.7 million was due and owing for labor and materials on the project.
The holding is significant because prior to the Fourth Department’s ruling, the issue of whether a trustee could avoid civil liability by subsequently restoring diverted funds was murky at best. Even one of the leading treatises on New York construction law could only profess that it was “debatable” whether a trustee could escape civil liability by restoring the trust. (New York Construction Law Manual, 2d Ed., §9.8). This case appears to mark the first occasion that an appellate court in New York State has specifically addressed the issue of trust restoration under Article 3-a. Prior to this decision, the most cited authority for the proposition that diverted funds could not be restored was a Supreme Court decision from Rockland County, noting that the Lien Law was devoid of any statutory language giving rise to a restoration defense in a civil action. Schwadron v. Freund, 69 Misc2d 342 (NYSupp. 1972). However, as cited by defendants in its appeal brief, there are also several miscellaneous decisions that implicitly recognized a restoration defense, at least in circumstances where the plaintiff could potentially recoup a double recovery.
Now that the Fourth Department has weighed in, there is finally some clarity on the issue of restoring diverted trust funds. While it remains to be seen how this holding will impact future litigation, it should put all trustees on notice that they will not be relieved of liability (including personal liability) merely by paying out an amount equal to the total trust res, particularly when the trust beneficiaries are still owed money for labor and materials. As the statute requires, the trustee must account for the proper expenditure of trust funds, and if they cannot, they may be liable for any amounts diverted.
Article written by Richard T. Bell, Jr., a founding partner of Adams Leclair.
Adams Leclair welcomes a Syracuse University law student as its first summer intern.Gabriela Groman started law school early as a Nazareth College 3+3 Scholar. This program allows admission to Syracuse University College of Law before full completion of a bachelor’s degree in recognition of high academic achievement.
Groman brings to the firm a good deal of legal experience through her volunteer work with the Cold Case Justice Initiative. The CCJI is an organization that re-investigates unsolved racially motivated murders from the Civil Rights Era.
“Much of what CCJI members do is try to bring peace and recognition to the families who lost loved ones since that is something they were never afforded by local, state and federal police agencies,” said Groman.
Gabriela Groman focused her undergrad education on African American history and took a civil rights trip to Alabama, Mississippi, and Tennessee last January before the COVID shutdown.
“I enjoy attending seminars that discuss issues of discrimination and how society can begin to mend the damage of hate in our world. I would love to do a lot of pro bono work in the future regarding civil rights or criminal justice,” said Groman.
Groman’s parents and sister are all in the medical field and she felt drawn to follow their footsteps. However, when she took a Business Law class as a high school elective, she found reading cases fun and discovered her love for law.
“It is obvious that medical students go to school to save lives and help people feel better. I decided to go to law school to help people who find themselves in need of support, whether that be legal support or emotional. If I can use my empathy and education to help people come out with a positive solution, I would be very happy.”
Groman is a huge college football fan and intends to settle in the Rochester/Syracuse area after graduating from law school.
“My parents are from upstate and I have been bleeding orange since I came out of the womb,” exclaimed Groman.
Rochester, N.Y.– When a crew wheeled a huge box of electronic devices out of the Adams Leclair law firm last month, everybody felt good about it. Hundreds of pounds of electronics could be kept out of landfills, components could be recycled to make new electronics, and best of all, a donation would be made to Camp Good Days and Special Times due to an e-scrap recycling campaign.
“It was a simple fundraiser to organize,” said office manager Jolene Overhauser. “A donation box was delivered to our office and we asked everyone to donate their unwanted electronics. The staff and attorneys brought in their old phones, computer equipment, stereo equipment and even an old discman–what a blast from the past! The best thing about this fundraiser is that everything will be recycled and a portion of the funds will go to a great cause.”
For eleven years, Camp Good Days and Special Times has hosted an e-scrap recycling campaign by collaborating with Sunnking, an electronics recycling company in Brockport. The charity is given a portion of the value of the items recycled and so far, Camp Good Days has received more than $114,000 from Sunnking.
“I’m so happy that we were able to help provide an opportunity for children with cancer and their siblings to attend summer camp all while keeping e-scrap out of the landfills at the same time. It’s definitely a win-win situation!” said Overhauser.
Adams Leclair collected 472 pounds of electronics. That amount will be combined with the collections from 166 other Rochester area companies. It is expected Camp Good Days and Special Times will receive the largest annual check yet from Sunnking later this year.