Brown v. Legal Found.

Brown v. Legal Found.

Opinion

 [***385]   [**1411]   [*220]  JUSTICE STEVENS delivered the opinion of the Court.

 The State of Washington, like every other State in the Union, uses interest on lawyers' trust accounts (IOLTA) to pay for legal services provided to the needy. Some IOLTA programs were created by statute, but in Washington, as in most other States, the IOLTA program was established by the State Supreme Court pursuant to its authority to regulate the practice of law. In  Phillips v. Washington Legal Foundation, 524 U.S. 156, 141 L. Ed. 2d 174, 118 S. Ct. 1925 (1998), a case involving the Texas IOLTA program, we held "that the interest income generated by funds held in IOLTA accounts is the 'private property' of the owner of the principal."  Id., at 172. We did not, however, express any opinion on the question whether the income had been "taken" by the State or "as to the amount of 'just [****9]  compensation,' if any, due respondents."  Ibid. We now confront those questions.

As we explained in  Phillips, id., at 160-161, in the course of their legal practice, attorneys are frequently required to hold clients' funds for various lengths of time. It has long been recognized that they have a professional and fiduciary obligation to avoid commingling their clients' money with  [*221]  their own, but it is not unethical to pool several clients' funds in a single trust account. Before 1980 client funds were typically held in non-interest-bearing federally insured checking accounts. Because federal banking regulations in effect since the Great Depression prohibited banks from paying interest on checking accounts, the value of the use of the clients' money in such accounts inured to the banking institutions.

 In 1980, Congress authorized federally insured banks to pay interest on a limited category of demand deposits referred to as "NOW accounts." See 87 Stat. 342, 12 U.S.C. § 1832. This category includes deposits made by individuals and charitable organizations, but does not include those made by for-profit corporations or partnerships unless [****10]  the deposits are made pursuant to a program under which  [***386]  charitable organizations have "the exclusive right to the interest." ¹ 

Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.