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Austin American-Statesman
Tuesday, December 10, 2002
David Pasztor
Almost half of the budget that pays for legal
aid services for poor, elderly and immigrant Texans could
be lost, depending on the outcome of a case argued before
the U.S. Supreme Court on Monday. At issue is the legality
of a little known process all states use to pay for legal
aid without tapping into tax dollars.
Texas' program known as IOLTA, for Interest on Lawyers'
Trust Accounts is the largest source of money for free legal
services in the state and next year would pump about $5 million
into charities and nonprofits that offer services ranging
from domestic abuse hot lines and neighborhood legal clinics
to border immigration and refugee assistance.
A Washington based foundation is challenging such programs,
arguing that they are an illegal government taking of private
property forbidden by the Fifth Amendment to the U.S. Constitution.
The nation's highest court will decide if the programs can
continue.
"It would definitely be a devastating blow, but right
now we are just operating under the assumption we will be
able to continue," said Laura Figueroa, spokeswoman for
the Texas program. "We are confident it is a constitutional
program."
In the early 1980s, states embraced such programs as a clever,
pain free way to raise money for legal aid services by tapping
into the earning potential of millions of dollars that lawyers
temporarily hold for clients.
Clients post money with lawyers for myriad purposes, such
as real estate escrows or retainers. The amounts often are
so small, or will be held for such a short time, that they
would generate little or no interest income.
But under IOLTA, lawyers pool the money, and it generates
significant returns. Typically, banks agree to waive fees
on the collective accounts, and the interest is used to pay
for legal aid programs.
Texas began its program in 1984, setting up the Texas Equal
Access to Justice Foundation to administer the money. Since
then, the foundation has distributed more than $70 million.
It receives other funding, but IOLTA makes up about 48 percent
of its budget, said Figueroa, the foundation's communi cations
manager.
In the mid 1990s, the Washington Legal Foundation, a public
interest law group dedicated to free enterprise and the protection
of civil rights for business, began to challenge IOLTA programs
in court.
The group's lawsuit against Texas prompted a three judge
panel of the 5th U.S. Circuit Court of Appeals to rule in
2001 that the state's program is an illegal taking of private
property.
But in a similar suit filed against the Washington state
program, the 9th U.S. Circuit Court of Appeals decided last
year that the programs pass constitutional muster.
The Texas case has been appealed to the U.S. Supreme Court,
but it was the Washington case in which the high court heard
arguments Monday. The court's ruling in the Washington case
is expected to resolve the challenge to Texas' program as
well, Figueroa said.
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