California Bar Journal
spacer.gif (810 bytes)
IOLTA programs get another look from appeals court
spacer.gif (810 bytes)

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 in trust.

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 in January.

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 programs survive.

The State Bar of California this year will provide $13.5 million in legal aid using interest diverted from trust accounts.

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.