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Associated Press
Monday, June 10, 2002
Paul Queary
OLYMPIA (AP) - The U.S. Supreme Court agreed Monday to hear
a Washington case challenging the widespread practice of pooling
client money held by lawyers and using the interest to pay
for legal services for the poor.
A Washington Supreme Court rule issued in 1984 requires
lawyers to put clients' money in a pooled account if the amount
is too small or will be held for too short a time to earn
interest for the individual client. The rule was later expanded
to include real estate closing officers.
The interest from the pooled money adds up to about $6 million
per year statewide. It goes to the Legal Foundation of Washington,
which doles it out to 34 legal aid agencies around the state.
The Washington Legal Foundation a Washington, D.C., organization
that defends private property rights sued in federal court
in 1997 to overturn the practice. The foundation argues the
practice essentially steals the interest from the clients,
an illegal taking of personal property under the Fifth Amendment
to the U.S. Constitution.
"No one person suffers an awful lot," said Richard
Samp, the foundation's chief counsel. "But it's a small
amount of money that's stolen from a lot of people."
Similar programs called IOLTA for Interest on Lawyers' Trust
Accounts exist in all 50 states so the case could have broad
impact.
Advocates argue that the program is an important source
of legal help for poor people forced to deal with civil legal
matters including domestic violation protection orders, child
custody fights and eviction disputes.
"We only can help right now about one out of five people
who ask for help," said Barbara Clark, executive director
of the Legal Foundation of Washington. "The potential
loss of this funding is very devastating."
IOLTA contributes 38 percent of the money available for
low income civil legal assistance in Washington, Clark said.
Advocates also argue that interest is essentially created
by the program because taxes and accounting costs would eat
away the money if lawyers tried to set up a similar program
to benefit the clients.
But Samp argues that IOLTA programs essentially discourage
lawyers from setting up such pooled accounts that might benefit
their clients.
A U.S. District Court initially dismissed the Washington
case, but a three judge panel of the 9th U.S. Circuit Court
of Appeals overturned the ruling. Then the full 9th Circuit
overruled its own justices in the state's favor, agreeing
with the state's contention that the clients weren't harmed
because the interest wouldn't be earned otherwise.
"It didn't take anything from them that they otherwise
would have had," said Maureen Hart, a senior assistant
attorney general. "They're in the same boat that they
would have been in before."
Meanwhile, the Supreme Court ruled against a similar program
in Texas in 1998. The court found that the interest belonged
to the clients, not
the state.
However, that case, like Washington's, has taken a torturous
journey through the courts. Despite the high court's ruling,
a trial judge found that the program wasn't an illegal taking
of the clients' property. But the 5th U.S. Circuit Court of
Appeals overturned that decision and
essentially ordered the district court to shut down the Texas
program.
The Texas Equal Access to Justice Foundation is asking the
high court to take another look at that case.
The Washington case is Washington Legal Foundation v.
Legal Foundation of Washington, 01 1325.
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