Until about a quarter-century ago,
checking accounts did not pay interest. Once federal regulations were changed to allow
such accounts, it was discovered that many client trust accounts were too small or the
funds were there for too short a time to generate interest.
California was a pioneer,
and other states soon followed, in having these accounts pooled and using the resulting
interest to fund legal services. All 50 states have such programs, and they provide almost
$100 million a year for legal services in the United States.
The entire budget for the federal Legal Services Corp. is only $270 million, making
IOLTA programs crucial in funding legal representation for the poor.
In a 5-4 decision, the Supreme Court held that the interest in such accounts is private
property. Chief Justice Rehnquist, writing for the court, simply concluded that interest
follows the principal and thus is private property within the meaning of the takings
clause of the Fifth Amendment.
However, the court did not decide whether such laws constitute a taking or what just
compensation will require. It is possible, for example, that the programs are not a
taking because it is the government law that creates the property or that the
court will conclude that no compensation is required because the interest would not exist
without the state laws.
Contrary to reports in the media, Phillips does not necessarily mean the end of IOLTA
Decency in arts
Another important constitutional ruling was in National Endowment of the Arts v.
Finley. A federal statute instructs the National Endowment of the Arts to consider
decency and respect for the diverse beliefs and values of the American public,
along with artistic merit, in deciding which artists to fund. The United States Court of
Appeals for the Ninth Circuit held this provision of the law unconstitutional because it
was vague and because it impermissibly discriminated against speech based on its content.
In an 8-1 decision, with only Justice Souter dissenting, the Supreme Court upheld the
federal law. Justice O'Connor, writing for the court, emphasized that the federal law
allowed the NEA to consider decency and respect for values, but it did not
require the use of these criteria or the denial of funds to any artists.
Moreover, Justice O'Connor explained that the government must fund some artists and not
others, and that inevitably requires that the agency look to the content of the artwork.
The court's ruling gives the government great license to make choices restricting speech
when it is the funding source.
Yet, not all the constitutional cases had conservative results. In United States v.
Bajakajian, the Supreme Court found that a government seizure of property under a
forfeiture law was so large as to violate the Constitution.
An individual took his life savings of $357,000, all earned legally, back to his native
country. However, he violated the federal law that requires disclosure when an individual
takes more than $10,000 in cash out of the country. For not complying with this law, the
government seized the entire $357,000.
In a 5-4 decision, with the majority opinion written by Justice Thomas and joined by
Justices Stevens, Souter, Ginsburg and Breyer, the court held that the forfeiture was
grossly excessive and thus violated the excessive fines clause of the Eighth Amend-ment.
The court noted that the criminal penalties under the law were a maximum of six months in
prison and a fine of $5,000. The court stressed that since the money was earned legally,
the government could not seize it as ill-gotten gains.
What is most surprising about the case is that four justices had no problem with what
was clearly a terribly unfair government action. The case is quite significant because it
is the first time that the Supreme Court ever has declared a forfeiture unconstitutional
as grossly excessive.
In the area of civil rights statutes, in most of the major cases, the moderate
coalition controlled and Justices Scalia and Thomas dissented, often by themselves.
For example, in two significant decisions--Faragher v. City of Boca Raton and
Burlington Industries v. Ellerth--the court held that employers may be held liable for
sexual harassment committed by supervisors.
Combating sexual harassment in the workplace requires that employers be held liable;
realistically, to recover, employees must be able to collect from the deeper pocket of
employers and only in this way will employers have an incentive to prevent and remedy
The court ruled that an employer is vicariously liable for sexual harassment by
supervisors. However, if the victim cannot prove a tangible harm, such as loss of a job or
reduction of pay, the employer can defend the suit by proving that it acted reasonably to
prevent sexual harassment and that the employee unreasonably failed to use available
In Bragdon v. Abbott, the Supreme Court considered the questions of what is a
disability under the Americans with Disabilities Act. Specifically, the
question before the court was whether HIV-positive status is a disability. The case
involved an HIV-positive woman who was denied treatment in a dental office.
In a 5-4 decision, with Justice Kennedy writing a majority opinion joined by Justices
Stevens, Souter, Breyer and Ginsburg, the court held that a disability is a condition that
interferes with a major life activity. HIV-positive status, even when a person is
asymptomatic, is a disability because it interferes with a person's reproductive
decisions. Most importantly, the court stressed the need for a broad definition of
One national newspaper covering the legal system said that the October 1997 term was
like the Seinfeld show: it was about nothing. I disagree with this assessment and believe
that ultimately the term will be remembered most for its decisions concerning major civil
rights statutes such as Title VII and the Americans with Disabilities Act.
Erwin Chemerinsky is the Sydney M. Irmas professor of law and political science at
the University of Southern California Law School.