More Mandatory Rule Changes

On October 11, the North Carolina Supreme Court issued an order requiring the North Carolina State Bar to implement a mandatory IOLTA program. With this action, North Carolina joined Missouri, Alabama and Maine as states that have adopted mandatory IOLTA rules this year.  When the mandatory requirements in all four states take effect on January 1, 2008, there will be 36 mandatory IOLTA programs operating in the United States.

Earlier this fall, the high courts of Maine and Alabama approved changes to their states’ IOLTA rules that will require attorneys to participate in IOLTA. The Supreme Court of Missouri approved a similar amendment in August. The new IOLTA rules in these three states also contain interest rate comparability provisions, under which lawyers are required to place their IOLTA accounts at a financial institution that pays those accounts the highest interest rate or dividend generally available at the institution to other, non-IOLTA customers when the IOLTA accounts meet the same minimum balance or other requirements. In addition, two mandatory IOLTA programs – in California and New York – added IOLTA interest rate comparability requirements. The California requirement was included in legislation signed into law October 11, and the New York requirement was included in regulations that took effect August 15.

IOLTA programs provide funding critical to maintaining and improving access to the justice system in communities across the United States. Depending on the state, IOLTA dollars go to support civil legal assistance for poor people, efforts to improve the administration of justice by our courts, initiatives to educate the public about legal issues, and scholarships and clinical instruction for law students.

Here are some recent stories about the organizations and initiatives funded by IOLTA programs:

• IOLTA at Work in Rhode Island: The International Institute of Rhode Island Immigration Law Project
• IOLTA at Work in Ohio: TeamChild Helps Cincinnati-area Children Stay in School
• IOLTA at Work in Maryland: Maryland Legal Aid Bureau Focuses on Low-Income Tenants
• IOLTA at Work in Georgia: Atlanta Legal Aid's Home Defense Program

Constitutional challenges in the federal courts have ended in the wake of the U.S. Supreme Court's decision in Brown v. Legal Foundation of Washington (PDF), 538 U.S. 216, (2003), which found that Washington State's IOLTA program did not violate the Fifth Amendment. The long-standing cases against the Texas and Washington State IOLTA programs were dismissed in late 2003 and early 2004.

In October 2004 the Supreme Court declined to hear a case involving a Fifth Amendment claim brought in Missouri state court against that state's IOLTA program. That decision left standing a March 2004 appellate court decision to dismiss the claim against the IOLTA program.

Read a detailed analysis of the Brown decision or learn more about the background of the litigation.