OLYMPIA -June 10, 2002 - The U.S. Supreme Court today announced it will review a Washington Supreme Court rule that requires lawyers and real estate closing officers to place client funds that cannot earn net interest for the client into a pooled account, the interest from which is then used to provide legal services to low-income persons.
The court will review the state Supreme Court's Interest on Lawyers' Trust Account (IOLTA) program, which raises approximately $6 million per year for legal services to the needy in Washington state. The case is titled Washington Legal Foundation v. Legal Foundation of Washington.
Under the Supreme Court rule establishing the IOLTA program, lawyers and real estate closing officers are required to place into a pooled account client funds that are either too small or are held for too short a period of time to generate interest for individual clients.
Under the IOLTA program, interest on the pooled funds is provided to the Legal Foundation of Washington, a non-profit organization that administers the program in this state.
"This necessary program helps bridge the gap between the legal needs of Washington's low-income citizens and their ability to pay," Attorney General Christine Gregoire said. "Without it, many of the state's neediest citizens would find the doors to the courthouse too heavy to open."
When first adopted by the state Supreme Court in 1984, the court rule establishing the program applied only to attorneys. The rule was extended to real estate closing officers after the state Supreme Court found that some of their work constitutes the practice of law.
A public-interest law organization and two individuals whose escrow funds had been placed in an IOLTA account filed suit in U.S. District Court against the Legal Foundation of Washington and eight justices of the state Supreme Court. The plaintiffs alleged the IOLTA program violates the Fifth Amendment by taking property without just compensation and that it violates the First Amendment by requiring them to support activities of fund recipients with whom they disagree.
The District Court dismissed the case. On appeal, the 9th U.S. Circuit Court of Appeals ruled the plaintiffs had no Fifth Amendment claim, but remanded the case to the District Court for further proceedings on the First Amendment claim. The plaintiffs then asked the U.S. Supreme Court to review the 9th Circuit's decision.
The Attorney General's Office, representing the state Supreme Court justices, opposed review by the U.S. Supreme Court. Among other things, the justices argued that consideration of the case by the high court was premature because the First Amendment issue has not been resolved in the lower court. The justices also argued that the 9th Circuit's decision sustaining the rule is consistent with decisions by the U.S. Supreme Court involving the Fifth Amendment takings issue.