Nationís top court to decide IOLTA fate

by Kathleen O. Beitiks
Staff Writer

Bar officials expect the U.S Supreme Court to decide the future of the nationís IOLTA programs by June 1998 ó a decision which will determine the future of a major source of legal services funding for the poor.

The court is set to hear arguments on the constitutionality of the Texas IOLTA program in December and January.

The court will look at the decision of the 5th Circuit Court of Appeals, which struck down the Texas IOLTA program even though similar programs in Massachusetts and Florida were upheld by state courts.

At issue is the constitutionality of diverting the interest from client trust accounts to support legal services programs for the poor.

Estimates are that about $100 million nationally is secured from the interest accrued in client trust accounts.

In California, grants for the fiscal year beginning July 1 amounted to approximately $10.3 million.

Judy Garlow, director of the State Bar of California Legal Services Trust Fund Program, says she "remains convinced of the constitutionality of IOLTA and of the sound public policy which has encouraged the growth of IOLTA programs."

Garlow said IOLTA programs in all 50 states were created by legislatures or high courts only after consideration of the same issues being litigated in the case before the U.S. Supreme Court.

"IOLTA has succeeded because the states have carefully crafted programs that would apply only when the funds would not generate net revenue for the client," said Garlow.

"We share the views of the U.S. Courts of Appeals for both the First and 11th Circuits, and of several state supreme courts, that have affirmed the legal basis for these programs," she said.

Bar officials across the country are especially concerned about the future of IOLTA, in light of recent congressional cuts in federal legal services funding.

Advocates of IOLTA programs point out that the special interest-bearing accounts are used for client funds which are on deposit for short periods of time and would not be cost-effective if held in regular bank accounts.

However, Robert A. Samp, chief counsel of the Washington Legal Foundation, maintains that for the purposes of the First and Fifth Amendments, there cannot be exceptions to property laws. Samp will argue the case against IOLTA in the Supreme Court.

Samp says some people also object to Texas IOLTA funds being used for controversial programs such as the defense of illegal aliens fighting deportation.

Lawyers from the Austin, Texas, firm of Hughes & Luce will argue for the IOLTA case.

Amicus curiae briefs in Phillips v. Washington Legal Foundation, in support of the Texas IOLTA program, have been submitted by groups such as the American Bar Association, 84 state bars and IOLTA programs, the office of the U.S. Solicitor General, attorneys general of 35 states, the Conference of Chief Justices, the Council of State Governments, National Association of Counties and other local government organizations.