IOLTA Litigation - Past Litigation
Washington Legal Foundation, et al. v. Massachusetts Bar Foundation, et al., 993 F2d 962 (CA1 1993)
In 1991, the Washington Legal Foundation, individual lawyers and clients sued the Massachusetts IOLTA program in federal district court, claiming that the program violates the due process and free speech provisions of the U.S. Constitution. The plaintiffs alleged that the use of client money to generate interest involves a taking prohibited by the Fifth Amendment. They argued further that their First Amendment rights are violated when IOLTA money is used to fund activities that they find ideologically offensive. The U.S. District Court dismissed the Washington Legal Foundation complaint, holding that clients have no property rights in the interest generated by IOLTA accounts, nor do they have a constitutionally protected beneficial interest in the use of those funds. The court also found that the state's IOLTA rule expresses a content-neutral commitment to improving the administration of justice. On appeal, the First Circuit Court of Appeals upheld the district court's decision. At the ABA Commission on IOLTA's request in 1991, the ABA filed an amicus curiae brief with the First Circuit Court of Appeals in support of the Massachusetts IOLTA program. See, Washington Legal Foundation, et al. v. Massachusetts Bar Foundation, et al., 993 F2d 962 (CA1 1993).
Cone v. State Bar of Florida, 819 F2d 1002 (CA11 1987), cert. denied, 484 US 917, 108 SCt 268, 98 LEd 2d 225
The Eleventh Circuit Court of Appeals considered a client's claim that she had a constitutionally protected property right to IOLTA revenues. The client's constitutional claims turned on one question: was the interest earned on nominal or short-term funds held in an IOTA (Interest on Trust Accounts) account the client's property for purposes of the Fifth and Fourteenth Amendments?
The plaintiff relied on the traditional property doctrine that interest follows principal: "interest goes with the principal, as the fruit with the tree." (Himely v. Rose, 9 US (5 Cranch) 313, 3 LEd 111 (1809)). The Eleventh Circuit, however, reasoned that this doctrine necessarily assumes the existence of a fruit-bearing tree. In the absence of the IOTA program, the plaintiff's money would not have borne any fruit (i.e., interest) for her or for anyone else. In other words, because the client's principal could not earn net interest for the client and would not have produced interest prior to IOTA, she was not entitled to the interest earned solely by virtue of the Florida IOTA program. See, Cone v. State Bar of Florida, 819 F2d 1002 (CA11 1987), cert. denied, 484 US 917, 108 SCt 268, 98 LEd 2d 225.
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