01-1325 Brown v. Legal Foundation of Washington

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Although lawyers may occasionally deposit client funds in an IOLTA account when those funds could have produced net interest for their clients, it does not follow that there is a need for further hearings to determine whether petitioners are entitled to compensation from respondents. The Washington Supreme Court’s Rules unambiguously require lawyers to deposit client funds in non-IOLTA accounts whenever those funds could generate net earnings for the client. If petitioners’ money could have generated net income, the lawyers violated the court’s Rules, and any net loss was the consequence of the lawyers’ incorrect private decisions rather than state action. Such mistakes may give petitioners a valid claim against the lawyers, but would provide no support for a compensation claim against the State or respondents. Because Washington’s IOLTA program mandates a non-IOLTA account when net interest can be generated for the client, the compensation due petitioners for any taking of their property would be nil, and there was therefore no constitutional violation when they were not compensated.

271 F.3d 835, affirmed.

Local effect:

Wisconsin, like every other state, takes the interest from attorneys’ IOLTA accounts, and that rule is preserved by this decision.

Stevens, J.; Scalia, J., dissenting; Kennedy, J., dissenting.