U.S. Supreme Court Rules in Favor of Washington State Legal Aid Funding Program; Decision Likely to Impact Texas Equal Access to Justice Foundation's IOLTA Program

Business Wire, March 26, 2003

Business Editors/Legal Writers

AUSTIN, Texas--(BUSINESS WIRE)--March 26, 2003

The United States Supreme Court, in a 5-4 decision, today ruled that the Washington State Interest on Lawyers' Trust Accounts (IOLTA) Program does not violate the Fifth Amendment.

The Legal Foundation of Washington (LFW), administrator of the state's IOLTA Program, has been embroiled in the litigation since 1997. The program is one of Washington State's primary funding sources for civil Legal Aid to the poor, generating about $4 million to $6 million per year.

The ruling in Brown et al v. LFW et al should have positive implications for the Texas IOLTA Program, administered by the Texas Equal Access to Justice Foundation. The Texas case, Thomas R. Phillips, Chief Justice, Supreme Court of Texas et al v. Washington Legal Foundation, is pending before the U.S. Supreme Court. The petitioners sought Supreme Court review after the 5th U.S. Circuit Court of Appeals declared the Texas IOLTA Program unconstitutional. TEAJF is currently reviewing the Washington State decision and evaluating the potential impact it could have on the Texas IOLTA Program.

Richard L. Tate, TEAJF board chair and a defendant in the Texas lawsuit, said, "We are elated with the Court's opinion in the Washington case. We believe that the strength of our trial record will lend greater support to the constitutionality of our Texas Program. We look forward with great optimism to the Court's disposition of our case."

The Texas IOLTA Program was implemented in 1984 as a voluntary program to fund civil legal services to the poor. In 1989, participation in the IOLTA Program became mandatory for Texas attorneys. According to Texas IOLTA rules, when an attorney receives client funds that are nominal or held for a short period of time, the funds must be deposited into an interest-bearing IOLTA bank account. The collected interest from the pooled funds is released to the Texas Equal Access to Justice Foundation, which then grants the money to nonprofit Legal Aid organizations across the state.

In 1994, the Washington Legal Foundation sued the Texas Equal Access to Justice Foundation contending that the Texas IOLTA Program violates clients' First and Fifth Amendment rights. The case made its way through the judicial system and was heard by the U.S. Supreme Court in 1998 on the Fifth Amendment claim. The case was remanded to the U.S. District Court, where Judge James R. Nowlin dismissed the case against the Texas IOLTA Program with prejudice as to all significant points, affirming its constitutionality.

In October 2001, a three-judge panel of the 5th U.S. Circuit Court of Appeals overturned Nowlin's ruling, declaring the Texas IOLTA Program unconstitutional. TEAJF requested a rehearing of the 5th Circuit Court en banc, which was denied in May 2002 in a 7-7 vote, with one judge recusing himself. The Texas IOLTA Program then petitioned for review by the U.S. Supreme Court.

Supreme Court of Texas Justice Harriet O'Neill said, "IOLTA funding allows the poorest Texans access to basic legal services, services that are desperately needed to protect women and children from domestic violence and to provide legal assistance to the elderly who have nowhere else to turn. We're pleased that this critical funding source will remain intact as a result of the Supreme Court's decision."

Although Texas IOLTA funds have declined considerably in recent years due to low interest rates, the program continues to generate millions of dollars annually for the provision of civil Legal Aid. The Texas Equal Access to Justice Foundation granted $5 million in IOLTA funds to 39 nonprofit Legal Aid groups for the 2003 grant year. For a complete list of grantees, visit www.teajf.org/grants/awards/2003_awards.html.> Amy Wright, Executive Director of the Women's Advocacy Project, an IOLTA-funded organization that serves victims of domestic violence statewide, said, "Thank goodness that the importance of public interest legal work was upheld by the Supreme Court today. IOLTA funds may now continue to help the thousands of desperate Texans who need access to our legal system for protection."

For more information about the Washington State ruling, contact Barbara Clark at 206/624-2536, ext. 13.

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