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Legal Times
Monday, December 2, 2002
Tony Mauro
Why does the Washington Legal Foundation hate
lawyers' trust accounts so much?
That is the one question that almost certainly will not be
asked when the conservative public interest law firm goes
before the U.S. Supreme Court on Dec. 9 -- although it has
surfaced in recent weeks as the case has inched toward the
high court. The battle will consummate the Washington Legal
Foundation's 12-year takings-clause battle against Interest
on Lawyers' Trust Accounts, or IOLTA, which are second only
to the Legal Services Corp. as a funding source for civil
legal aid nationwide.
Here's the issue in a nutshell: For a variety of reasons,
lawyers sometimes hold client money in escrow, often for very
brief periods of time. Those escrow accounts earn interest
-- tiny amounts when taken individually. But in all 50 states
and the District of Columbia, state IOLTA programs amass that
interest and parcel it out to legal assistance organizations.
A lot of money is on the line: IOLTA programs generated more
than $200 million last year.
Since 1990, the Washington Legal Foundation has argued that
the interest belongs to clients, so that IOLTA violates the
Constitution by seizing client property without compensation,
even though without IOLTA, bank fees would almost certainly
eat up the pocket-change bits of interest that would belong
to individual clients.
So, critics ask, while the stakes for legal services are
enormous, what's in it for the WLF? Even if the foundation
wins, the average client for whom it is fighting might barely
notice.
"As a takings issue, it is really hard to see why they
get excited about it," says Carter Phillips of Sidley
Austin Brown & Wood, author of the main brief defending
IOLTA. "It's a crusade, really. I don't see what else
would animate them."
The foundation's chief counsel, Richard Samp, who readily
agrees that the individual yield of a victory would be small,
laughs at Phillips' suggestion. "If the worst that can
be said is that we are on a crusade, that's ok with me,"
Samp says.
But Samp also acknowledges that "a lot of people ask
if we have a bug in our behind about IOLTA." He continues,
"Is this the largest wrong in the universe? No."
Samp adds, "But it is clearly wrong, and we think our
job is to right the wrongs that others might not bother to
fix."
Others think there is more than righting wrongs behind the
campaign that has ended up before the Supreme Court in Washington
Legal Foundation v. Legal Foundation of Washington, No.
01-1325.
Critics cite a September fund-raising letter from Samp's
group.
"We are finally in a position we've fought more than
a decade to reach -- a position where we can deal a death
blow to the single most important source of income for radical
legal groups all across the country," wrote WLF Chairman
Daniel Popeo. Among the foundation's adversaries in the litigation,
Popeo continues, are "groups dedicated to the homeless,
to minorities, to gay and lesbian causes, and any other group
that has drawn money from hard-working Americans like you
and me to support its radical cause!"
The defenders of IOLTA are trying to use the letter against
the WLF, including part of it as an appendix to a brief filed
with the Supreme Court by former Solicitor General Seth Waxman,
who represents IOLTA supporters AARP, the Brennan Center for
Justice and others.
Waxman, a Washington, D.C., partner at Wilmer, Cutler &
Pickering, attacked the letter as a "gross mischaracterization
of the nature of IOLTA-funded legal services programs."
He also asserted that the letter makes it clear that "this
case is not at all about property it believes has been taken."
Popeo declined to comment on the letter. Samp, the Washington
Legal Foundation's counsel of record in the IOLTA case, says
he did not see it until he read it in Waxman's brief. Samp
says he does not know whether the letter was successful in
raising money.
"This case exposes the cold, unsympathetic underbelly
of the property rights movement," says Douglas Kendall
of Community Rights Counsel, which filed a pro-IOLTA brief
for the National League of Cities and others. "WLF has
little to gain here besides the satisfaction of depriving
the indigent of desperately needed legal services."
But Samp insists that throughout the campaign, "we've
been scrupulous about not saying anything negative about legal
services for the poor." And he stresses that the takings
issue is the primary reason for foundation's campaign, which
has included legal challenges against IOLTA programs in Massachusetts,
Texas and Washington state.
The Washington Legal Foundation began its litigation attack
on IOLTA in 1990 and won its first U.S. Supreme Court victory
in 1998 in its Texas challenge. In Phillips v. Washington
Legal Foundation, the Court found that the interest held
in IOLTA accounts was the property of clients. But it deferred
judgment on the question of whether, as a result, IOLTA programs
violate the takings clause -- and whether there can be any
compensation to the clients even if there is a violation.
Those are the questions now before the Supreme Court.
But if Samp is right that the takings clause is the main
focus of the campaign, then some IOLTA supporters wonder why
the Washington Legal Foundation has a backup theory for undoing
IOLTAs -- a First Amendment claim still pending in both the
Texas and Washington cases. The WLF asserts that government-backed
IOLTA programs amount to compelled speech, forcing people
to spend their own money to advance points of view they do
not support.
The groups usually most interested in takings -- Defenders
of Property Rights and the Institute for Justice -- are conspicuously
absent from the IOLTA case, although it is cast as a takings
case.
Officials of Defenders of Property Rights did not return
phone calls.
Chip Mellor, president and general counsel of the Institute
for Justice, says the IOLTA issue is important. "However,"
he adds, "the WLF has been tenaciously pursuing this
issue for years and has it well in hand. We don't just file
'me too' briefs."
Samp also says the WLF spent less time seeking amicus curiae
support than it did in 1998. "Then we said we were not
going to be 'out-amicused,'" says Samp. "This time
we decided it was not that important."
One important amicus the foundation did seek support from
was the Bush administration. Solicitor General Theodore Olson,
who has long ties to the WLF, recused himself from the discussions,
but WLF officials met with Deputy Solicitor General Paul Clement.
Clement also met with representatives of groups favoring IOLTA.
In the 1998 case, the solicitor general's office weighed
in on the pro-IOLTA side, but this time it is sitting out
the case -- which Samp views as a victory.
Footnote: In addition to answering the constitutional question
in the case, the Supreme Court with any luck will resolve
a grammatical dispute as well.
The briefs in the case offer several different interpretations
of what the acronym IOLTA stands for. The petitioner, Washington
Legal Foundation uses the plural possessive for the L-word,
and plural for the A-word, as in "Interest on Lawyers'
Trust Accounts." Wrong, replies respondent Legal Foundation
of Washington, which uses the singular, nonpossessive form
for "lawyer," and only one "account" --
as in "Interest on Lawyer Trust Account."
A brief on behalf of 48 state bar associations and the National
Association of IOLTA programs charts a third course: the plural,
nonpossessive form of "lawyers," and a singular
"account."
AARP's brief goes with a fourth version, pluralizing "account:"
"Interest On Lawyers Trust Accounts."
In all, the four former solicitors general whose names are
on briefs in the case -- Charles Fried, Drew Days, Seth Waxman
and Walter Dellinger III -- each offer different versions
of what IOLTA stands for.
Is there one official, correct way to deconstruct the acronym
IOLTA? Yes, says Beverly Groudine, counsel to the American
Bar Association's IOLTA Commission, whose Web site actually
spells it two different ways. Groudine comes down in favor
of plural possessive on lawyers and plural on accounts, because
"it's grammatically correct. These are accounts that
are in the name of the lawyers." But Groudine acknowledges,
"I see it every way. People get sloppy."
Including the Supreme Court, apparently. In the 1998 Phillips
ruling, the justices opted for "Interest on Lawyers Trust
Account," not the ABA version.
Still, the ABA's "Interest on Lawyers' Trust Accounts"
has the backing of one much relied-upon arbiter of legal style
-- Black's Law Dictionary.
The state of Florida launched the first IOLTA program in
1981, so it ought to provide an answer, right? No such luck.
It ducked the question from the outset by not including lawyers
in the name at all. In Florida the program is called IOTA,
which stands for Interest on Trust Accounts.
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