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The U.S. Supreme Court has handed down a sound legal ruling
that preserved a mechanism essential to funding legal services
for the poor.
The case, Brown v. Legal Foundation of Washington,
originated in Washington state, but the high court ruling
has implications across the country. Every state has a program
requiring that certain funds that lawyers hold in trust for
their clients be deposited in a joint account. The interest
earned on that money goes to fund legal services for the poor.
Not all client funds go into such accounts. What do go in
are funds that lawyers hold for a limited escrow account and
other short-term deposits. Were these funds to be deposited
in individual accounts they would generate only tiny amounts
of interest, which would likely be eaten up by transaction
costs and taxes. By pooling these funds in "interest
on lawyers' trust accounts," however, substantial interest
income can be raised for legal services to the poor.
One of the plaintiffs in this case, for example, would have
earned a gross of $5 on a two-day escrow deposit of $90,500.
Pooled, though, the trust funds generate about $160 million
a year nationally, and as much as $4 million a year in Washington
state.
The high court decided yesterday that the government's use
of the interest on these funds does not amount to a "taking"
of property requiring "just compensation" under
the Fifth Amendment. Since the lawyers' clients' net gain
on the funds would have effectively been zero had they been
in individual accounts, the 5-4 majority ruled; there is no
need for compensation.
In a perfect world, civil legal representation would be
available to everyone. But in this imperfect world, creating
such funding for such services by generating interest income
that otherwise would be unavailable is both innovative and
constitutionally sound.
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