Supreme Court will hear IOLTA case

The U.S. Supreme Court said last month it will review an appellate court's finding that the Interest on Lawyer Trust Accounts (IOLTA) program in Washington state is constitutional. The Ninth U.S. Circuit Court of Appeals ruled last November that although the program constitutes a government taking, it does not violate the Fifth Amendment guarantees against takings without "just compensation."

Instead, the court said, because the money in question would go to the bank rather than the client if IOLTA did not exist, the state does not owe the client any compensation. The Washington program is similar to California's IOLTA program.

Started in 1981 in Florida, IOLTA programs in all 50 states use interest on client funds held in their lawyers' trust accounts to fund legal services programs for the poor. The programs generate millions of dollars for legal aid, although the totals have dropped dramatically because of the ongoing decline in interest rates in the past year.

A Fifth Circuit appellate court has issued a ruling in a Texas case contrary to the Ninth Circuit decision by finding that IOLTA programs do constitute an illegal taking. The foundation that oversees the Texas program had sought a rehearing, but the full Fifth Circuit court denied the request last month by a 7-7 vote.

Attorneys in the Washington case had urged the high court to hear the matter in order to resolve the conflicting appellate rulings.