iolta and the washington legal foundation case lucas figiel adapted by rws
TRANSCRIPT
IOLTA and the Washington Legal Foundation Case
Lucas FigielAdapted by RWS
IOLTA?
• Scheme that takes advantage of bank regulations to generate significant revenue for legal service programs
• Purpose: – to provide services for the indigent – to improve the administration and
access to justice
Consumer Checking Account Equity Act in
1980• Federal banking restrictions
relaxed
• Banks authorized to offer Negotiable Order of Withdrawal (“NOW”) accounts
• Operate like checking accounts
NOW Requirements:
• All interest must go to charitable purpose
• none of the funds in the account may belong to a for-profit corporation unless the designated charitable organization has the exclusive right to the interest
Before IOLTA
• If net interest invested for client
• If no net interest non-interest bearing account– Banks benefit
After IOLTA
• If net interest invested for client
• If no net interest into IOLTA– Public benefits when client cannot
IOLTA mandatory in IL
• SC Rule 1.15(d) - all IL attorneys must participate
• Mandatory jurisdictions generate more revenue
What goes into IOLTA?
• Client funds that cannot earn net interest – Either individually or pooled
• Targeted money:– Nominal client funds – funds expected to be held for a short
duration
Earnings
• IOLTA generates over $140 million yearly nationwide
• Lawyers Trust Fund of IL – 2001 net IOLTA Income: $3,971,932
• Service Charges: $488,762• Handling Fees: $ 49,958
Comparison to LSC
• IOLTA funds come second to those distributed by the LSC
• LSC 2003 budget $329,300,000• Disbursed to Illinois
– 2003 - $11,737,172– 2002 - $11,737,172– 2001 - $11,711,351
Why client can’t realize net interest
• Administrative and banking expenses consume the interest that is earned
• Opponents contend that what couldn’t be earned before IOLTA is being earned now
Fund Usage
• wrongful eviction• disabled children• domestic violence• educate the public about legal
issues• scholarships• clinical instruction to law students
Also used for…
• controversial issues – gay rights – legal aid to poor immigrants trying to
come to the US
• 1st Amendment implications
Brown v. LFoW
Supreme Court of Washington
LPOs- what are they?
Standing issue- bank services withdrawn?
Brown and Hayes are in the real estate business
Allen Brown $14,793.32 for 16 days interest estimated is $2.00
Greg Hayes $90,521.29 for 2 days and estimated interest is $4.96
5th Amendment Takings
1) Private Property2) Taken3) For public purpose4) Without just compensation
Purpose of Takings Clause
• Prevent the government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole
Interest is client’s property?
• Circuit split settled by Phillips• Interest that accrues belongs to
the owner of the principal • Interest is created by client funds
and not the government
Property Taken?
• Takings jurisprudence comes in two flavors: – outright takings – permanent, physical
occupation of property or where the claimant is deprived of property’s economic or productive use
– regulatory takings - regulate how the property can be used
• Different tests applied
Test used to establish a taking
• Per Se – for outright appropriations and practical equivalent
• Ad Hoc – regulatory taking requires careful balancing1) degree of interference with complainant's investment-backed expectations;
none2) the severity of the economic impact on the complainant; and
minor3) the nature of the government's action
fair regulations in highly regulated industry
Proper Test?
• Settled by Brown• Per se test - transfer of interest-
income to charitable beneficiary appropriates the principal’s beneficial interest in her property
For Public Purpose?
• Easily satisfied
• compelling interest in providing legal services to millions of needy Americans
Without Just Compensation?
• Only uncompensated takings prohibited
• Put owner in same pecuniary position had property not been taken
• The loss must be pecuniary
Measurement
• Measured by owner’s loss not government’s gain
• If loss is zero then compensation due is zero
Held
• (1) that just compensation is measured by the net value of the interest that was actually earned by petitioners
• (2) by operation of the Washington IOLTA Rules, no net interest can be earned by the money that is placed in IOLTA accounts in Washington
IOLTA wins, but…
• Whether IOLTA violates First Amendment remains unanswered