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MPRE, Client Fees and IOLTAs
The MPRE is history for me, I hope. I have no idea. Before the test I was getting 70-80% of practice questions right, and that should be good enough to get a “passing” score for most states. (According to the BarBri review you only need to get 32-38 out of the 60 possible questions correct in order to pass in even the most rigorous states.) So will I be taking the test again in March? I'll know in five weeks.
But while studying I learned something I didn't know about lawyer fees. I haven't ever thought much about fees because I plan on not having to think about them at all for at least the foreseeable future; one of the great things about being a public defender is you don't bill hours or clients (at least in most states). But in studying I learned that when a lawyer is holding a large sum of money for a client for a long period, the lawyer is supposed to put that sum into a client trust account and pay the interest to the client for whom the money is held. If the lawyer is holding a small sum of money for a short period, the lawyer should put it into a pooled trust account (typically a checking account that holds money entrusted by numerous clients) and the interest on the whole pool of money goes to the state bar or to a legal foundation where it's used to fund indigent legal services. These are called “Interest On Lawyer Trust Account” (IOLTA) programs.
Great, right? Except, isn't this just backwards? Why do large sums of interest revert to the client, while small sums go to the poor? Why not just give all the interest—whether from small or large sums, and wether held for long or short periods—to indigent legal services? Why not just tell people, “Hey, if you retain a lawyer and give that lawyer money to safeguard for some reason, the interest on that money is going to go for the greater good.” It would just be one of the costs of legal services.
So whadya say, ABA? Shall we make this little change in our “model” rules?
Posted November 5, 2005 10:19 AM | 3L
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This is actually pretty easy to answer. In both cases (large amount and small amount), the interest on the money belongs to the client. So, when the government takes that interest to pay for legal services, it's a taking under the Constitution. The difference is, in the case of interest from IOLTA money, fair compensation for the taking is $0, because there would have been no net interest at all in those cases. (Because of transaction costs.)
The Supreme Court dealt with this just a few years ago in Brown v. Legal Foundation of Washington, 538 U.S. 216. As it happens, my Property professor is president of the organization that administers the IOLTA funds for Washington and was involved in the case, so we spent some time talking about it when we were doing takings.
The underlying politics of that case is interesting. The people who brought the takings suit are mainly interested in killing legal funding to indigent people, which might have happened if they'd won. The takings argument was really just a smokescreen for their real agenda.
Posted by: Jim at November 5, 2005 11:45 AM
"Why do large sums of interest revert to the client, while small sums go to the poor?"
Are you *sure* you passed?? :)
Posted by: Dave! at November 5, 2005 08:01 PM
