Utah Bar Foundation
| Publication year | 1998 |
| Pages | 28 |
| Citation | Vol. 11 No. 8 Pg. 28 |
The Current Status of Utah's IOLTA Program
On June 15, 1998, the U.S. Supreme Court issued a 5-4 decision in Phillips v. Washington Legal Foundation, 1998 WL 309070, a case originating from the state of Texas. The Court held that interest income earned on client funds held in Texas IOLTA (interest on lawyer trust fund accounts) is the private property of the client. The majority opinion, authored by Chief Justice Renquist and joined by Justices O'Connor, Scalia, Kennedy and Thomas expressed no view as to whether Texas has "taken" client property through the IOLTA program, nor did it express an opinion as to the amount of "just compensation," if any, due the respondents. Those two issues were remanded to the district court for consideration.
Justice Breyer authored a dissent, joined by Justices Stevens, Souter and Ginsburg, expressing the view that the interest generated by the Texas IOLTA program is not client property. In addition, Justice Souter authored a dissent joined by Justices Stevens, Ginsburg and Breyer. It asserts that the Court should have either decided all three Takings Clause issues together or returned the case to the Fifth Circuit Court of Appeals to do the same. Justice Souter opined that this approach would reduce the risk of placing undue emphasis on the existence of a generalized property right that may turn out to be solely theoretical, especially when, in his estimation, the respondents will have a difficult time prevailing on the other two issues.
It is anticipated it will take several years before this case works its way back to the Supreme Court for final resolution. In the meantime, the Utah Bar Foundation, and all other IOLTA-funded programs in the country (all 50 states have such programs) have had to assess the impact of the Phillips decision on current operations. Utah's IOLTA program exists pursuant to an order from the Utah Supreme Court. See In the Matter of Interest on Lawyers' Trust Accounts, 672 P.2d 406 (Utah 1983). This order, and similar ones in other jurisdictions, permits the pooling of nominal client funds for deposit in interest bearing trust accounts, and requires that the accrued interest must be paid over to a non-profit entity for the support of law related public service activities.
After consideration of the options available, the Utah Bar Foundation and most, if not all, entities disbursing IOLTA funds, have decided to...
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