Court strikes down texas IOTA program.

In a decision that has national implications, the U.S. Fifth Circuit Court of Appeals ruled October 15 that Texas' interest on lawyers' trust accounts program is unconstitutional.

A three-judge panel of the New Orleans-based U.S. Fifth Circuit held that using pooled interest from lawyers' trust accounts for legal aid amounted to an unconstitutional taking without just compensation, in violation of the Fifth Amendment. Washington Legal Foundation v. Texas Equal Access to Justice Foundation, case no. 00-50139.

Darryl Bloodworth, president of The Florida Bar Foundation, said the decision will not immediately affect the operations of Florida's IOTA program, and there is no need for Florida lawyers to make any changes or do anything differently with their IOTA accounts.

"Of course, I was disappointed," Bloodworth said, adding, however, that he was "not terribly surprised" because the Fifth Circuit had ruled against IOTA before.

"As far as the immediate impact, though, I don't think there is any because there is an 11th Circuit opinion from a number of years ago stating that our program is constitutional. And until this issue is ultimately decided in the U.S. Supreme Court, it seems to me the program should continue here in Florida."

Richard A. Samp, chief counsel for the group challenging the Texas program, however, said the ruling calls into serious question the constitutionality of all the nation's mandatory IOTA programs. Every state except Indiana has similar programs, which raise more than $150 million a year for providers of legal aid to the poor.

"Clearly this is the end of the IOTA programs in the Fifth Circuit, which includes not only Texns, but also Louisiana and Mississippi," Samp said, adding he hopes bar authorities across the country read the court's decision "very carefully."

Bar President Terry Russell said the ruling is "extremely harmful to what I consider to be the greatest innovative program in this country's history in terms of getting civil legal services to the poor.

"There is a fight ahead of us and a real possibility, I hope not a probability, but a RUSSELL real possibility that we could lose the IOTA program," Russell said. "If we do, we will be called on to fill in the void."

Samp said the Washington Legal Foundation's victory was "foreordained" by the 1998 U.S. Supreme Court's finding in Philips u. WLF, case no. 96-1578, that clients have a protected property interest in funds created by pooled IOTA accounts. The...