1. IOLTA and the Washington Legal Foundation Case Lucas Figiel Adapted by RWS

2. 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

3. 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

4. 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

5. Before IOLTA If net interest  invested for client If no net interest  non-interest bearing account –Banks benefit

6. After IOLTA If net interest  invested for client If no net interest  into IOLTA –Public benefits when client cannot

7. IOLTA mandatory in IL SC Rule 1.15(d) - all IL attorneys must participate Mandatory jurisdictions generate more revenue

8. 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

9. 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

10. 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

11. 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

12. Fund Usage wrongful eviction disabled children domestic violence educate the public about legal issues scholarships clinical instruction to law students

13. Also used for… controversial issues –gay rights –legal aid to poor immigrants trying to come to the US 1 st Amendment implications

14. 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 Standing issue- bank services withdrawn?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

15. 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

16. 5 th Amendment Takings 1)Private Property 2)Taken 3)For public purpose 4)Without just compensation

17. 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

18. 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

19. 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

20. Test used to establish a taking Per Se – for outright appropriations and practical equivalent Ad Hoc – regulatory taking requires careful balancing 1) degree of interference with complainant's investment-backed expectations; none 2) the severity of the economic impact on the complainant; and minor 3) the nature of the government's action fair regulations in highly regulated industry

21. Proper Test? Settled by Brown Per se test - transfer of interest- income to charitable beneficiary appropriates the principal’s beneficial interest in her property

22. For Public Purpose? Easily satisfied compelling interest in providing legal services to millions of needy Americans

23. Without Just Compensation? Only uncompensated takings prohibited Put owner in same pecuniary position had property not been taken The loss must be pecuniary

24. Measurement Measured by owner’s loss not government’s gain If loss is zero then compensation due is zero

25. 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

26. IOLTA wins, but… Whether IOLTA violates First Amendment remains unanswered