Interest on Lawyers Trust Account (IOLTA) programs recently survived a constitutional challenge. IOLTA programs require interest earned from trust accounts deposited with client money to fund legal services for the poor. Many states, including Texas, maintain a mandatory IOLTA program, requiring all lawyers who handle client funds to participate. Proponents of IOLTA argue it benefits civil justice. Opponents argue it is an unconstitutional taking in violation of the Fifth Amendment. The Fifth Circuit held IOLTA accounts to be an unconstitutional taking of client property. The Ninth Circuit, however, found IOLTA accounts constitutional, holding that IOLTA accounts are not a taking for which just compensation is due. The issue was recently resolved in the Supreme Court of the United States' decision in Brown v. Legal Foundation of Washington. The Court, recognizing the public purpose served by IOLTA accounts, found such accounts to be constitutional and not in violation of the Fifth Amendment’s Takings Clause. The Texas IOLTA program serves as a significant source of funding for civil legal services, which generated over $ 5 million in 2001. Without IOLTA funding, thousands of poor individuals in Texas would be unable to obtain legal services to resolve even the most pressing of legal concerns. An analogy of the debate can be drawn using the literary characters of Robin Hood and the Miser, Robin Hood, who wants to take IOLTA interest for the good of society, and the Miser, who wants nothing more than to keep what is rightfully his. Although the Supreme Court clearly settled the Fifth Amendment debate related to the taking of interest accrued on IOLTA accounts, the morality and legality of the current IOLTA programs may still be in the balance on First Amendment grounds. Nonetheless, IOLTA programs should survive a First Amendment constitutional challenge with consent from the client.
St. Mary's University School of Law
Katherine L. Smith,
Iolta in the Balance: The Battle of Legality and Morality between Robin Hood and the Miser Recent Development.,
St. Mary's L.J.
Available at: https://commons.stmarytx.edu/thestmaryslawjournal/vol34/iss4/7
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