The 9th Circuit U.S. Court of Appeals has granted
en banc review in a case challenging the constitutionality of IOLTA
programs, which provide legal funding for the poor with interest held
The decision allows another look at whether
diverting interest from lawyer's trust accounts to legal aid
services represents a per se "taking" of clients' money under
the Fifth Amendment, a conclusion drawn by a three-judge circuit panel
The case was remanded to the district court to
determine if just compensation had been made to clients whose interest
was diverted to the program.
But the panel's conclusion is now stayed
pending review of the case brought by a Washington, D.C.-based
foundation after it was contacted by legal professionals included in a
Washington state IOLTA program.
The review could provide answers to long-standing
questions such as whether the per se taking rules apply to money as
well as to real property, and what compensation, if any, is due
clients. The panel's decision will ultimately determine whether such
The State Bar of California this year will
provide $13.5 million in legal aid using interest diverted from trust
Last month, an attempt by longtime IOLTA opponent
Sen. Ray Haynes, R-Riverside, to end the use of trust account interest
in California died in a Senate committee.