Brown v. Legal Foundation Of Washington

538 U.S. 216 (2003)

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Nature of the Case

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Facts

In 1984, the Washington Supreme Court established its IOLTA program. The four essential features of its IOLTA program: (a) the requirement that all client funds be deposited in interest-bearing trust accounts, (b) the requirement that funds that cannot earn net interest for the client be deposited in an IOLTA account, (c) the requirement that the lawyers direct the banks to pay the net interest on the IOLTA accounts to the Legal Foundation of Washington (Foundation), and (d) the requirement that the Foundation must use all funds received from IOLTA accounts for tax-exempt law-related charitable and educational purposes. The Foundation must use all funds received from lawyers' trust accounts for tax-exempt law-related charitable and educational purposes. In 1995, the Washington Supreme Court amended its IOLTA Rules to make them applicable to Limited Practice Officers (LPOs) as well as lawyers. LPOs are non-lawyers who are licensed to act as escrowees in the closing of real estate transactions. Brown (Ps), a public interest law firm and four citizens, sought to enjoin state officials from continuing to require LPOs to deposit trust funds into IOLTA accounts. Ps contend that they are being forced to associate with the Recipient Organizations and that this violates their First Amendment rights. They contend that the 'taking' of the interest earned on their funds in the IOLTA accounts violates the Just Compensation Clause of the Fifth Amendment. They further allege that the requirement that client funds be placed in IOLTA accounts is 'an illegal taking of the beneficial use of those funds.' The District Court granted Ds' motion for summary judgment. While the case was on appeal, the Supreme Court decided Phillips v. Washington Legal Foundation. The Ninth Circuit decided that the IOLTA program caused a taking of Ps' property and that further proceedings were necessary to determine whether they are entitled to just compensation. The en banc majority affirmed the judgment of the District Court; there was no taking because Ps had suffered neither an actual loss nor an interference with any investment-backed expectations and that the regulation of the use of their property was permissible. The Supreme court granted certiorari.