Phillips v. Washington Legal Foundation
Frequently-Asked Questions and Answers About the U.S. Supreme Court Ruling
Q. Did the United States Supreme Court rule that the Texas IOLTA program is unconstitutional
A. No.
The Court only ruled that, under Texas law, "the interest income generated by funds held in IOLTA accounts is the private property of the owner of the principal." The Court expressly did not rule on whether the funds have been "taken" by the State or whether just compensation is due. In order to prevail under the Fifth Amendment Takings Clause, there must be a finding that there is private property, that the property has been "taken," and that some compensation is due the property owner. The Court ruled only on the first issue and remanded the other two issues to the lower court for determination.
Q. Is the Texas IOLTA program still operational?
A. Yes.
The Court did not enjoin operation of the Texas program or any other IOLTA program. Instead, it remanded the case to the lower court to determine if there has been a taking and if any just compensation is due.
Q. Does this opinion affect other state IOLTA programs?
A. No.
At this point, the Court's decision does not affect other IOLTA programs. The Court only ruled that under Texas law, clients have a property interest in the interest generated from IOLTA accounts. It did not rule on the constitutionality of the Texas program or any other IOLTA program.
Q. Should lawyers continue to participate in IOLTA programs?
A. Yes.
The IOLTA rules that exist in every state remain in effect. It is also important to remember that lawyers' compliance with these rules and their continued participation in the program help to provide equal access to justice, as the monies generated from IOLTA accounts fund programs that provide direct legal services to the poor, pro bono legal services, improvements in the administration of justice and law related education.
Prepared by the ABA Commission on IOLTA - June 1998
