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Brennan Center for Justice Applauds U.S. Supreme Court Opinion Rejecting Constitutional Challenge to IOLTA

March 26, 2003

For Immediate Release
March 26, 2003

Contact Information
Amanda Cooper, 212 998–6736

Brennan Center for Justice Applauds U.S. Supreme Court Opinion Rejecting Constitutional Challenge to IOLTA

In an historic decision that is enormously important for low income individuals and families and for the operation of the civil justice system in this country, the Supreme Court today affirmed a decision of the U.S. Court of Appeals for the 9th Circuit upholding as constitutional the structure of the Interest on Lawyers Trust Account (IOLTA) program in Washington State. By a vote of 5 to 4, the Court rejected a challenge to the IOLTA program that had been brought by the Washington Legal Foundation and by certain attorneys in private practice. The case is called Brown v. Legal Foundation of Washington.
The decision is an important victory not only for low income people who rely on civil legal aid, but also for the American civil justice system, says David Udell, Director of the Poverty Program at the Brennan Center for Justice. Even with IOLTA revenues in place, only a small percentage of clients with civil matters are able to secure legal representation. The elimination of IOLTA would have made dramatically more difficult the challenges faced by courts in attempting to resolve meritorious claims for litigants who are unrepresented by counsel.

As explained in an amicus brief submitted on behalf of the Brennan Center; AARP; Legal Counsel for the Elderly, Inc.; the National Legal Aid & Defender Association; and others, IOLTA programs, which exist in every state, raise money essential to fund civil legal aid programs. The Court relied on the amicus brief in observing that in 2001 IOLTA programs raised more than $200 million to help finance civil legal aid. The money comes from interest earned on short term and/or small escrow accounts that the lawyers set up to handle real estate transactions and other matters for clients. By pooling these escrow accounts, IOLTA entities, like the one challenged in Washington, succeed in generating substantial net interest that otherwise would be lost to bank administrative fees.

Challenging the Washington IOLTA program, the Washington Legal Foundation had argued that the IOLTA structure is an unconstitutional taking that violates the Fifth Amendment, which prohibits government from taking property for public use without fair compensation. Writing for the majority, Justice Stevens said: It is neither unethical nor illegal for lawyers to deposit their clients funds in a single bank account. Justice Stevens explained that the plaintiffs suffered no pecuniary loss.

The Brennan Center congratulates the many individuals and firms who have helped to achieve this important victory.

The Brennan Centers Access to Justice project is a national, multifaceted effort dedicated to helping ensure that low-income people have access to effective, enduring, and unrestricted legal assistance in civil cases. The Center actively fights actions that interfere with legal services advocacy and vocally rebuts the relentless attacks made by opponents of Legal Services.