Washington Legal Foundation v. Massachusetts Bar Foundation

Decision Date08 January 1993
Docket NumberNo. 92-1775,92-1775
Citation993 F.2d 962
PartiesWASHINGTON LEGAL FOUNDATION, et al., Plaintiffs, Appellants, v. MASSACHUSETTS BAR FOUNDATION, et al., Defendants, Appellees. . Heard
CourtU.S. Court of Appeals — First Circuit

Richard A. Samp, with whom Daniel J. Popeo, John C. Scully, and Francis C. Newton, Jr. were on brief, for plaintiffs, appellants.

Allan van Gestel, with whom James C. Rehnquist, John C. Kissinger, Jr., and Goodwin Procter & Hoar were on brief, for Massachusetts Bar Foundation, William W. Porter, Asst. Atty. Gen., and Scott Harshbarger William W. Porter, Asst. Atty. Gen., and Scott Harshbarger, Atty. Gen., on brief for The Chair of Massachusetts Bd. of Bar Overseers, defendant, appellee.

Atty. Gen., on brief for Massachusetts IOLTA Committee, Donald K. Stern, S. Tara Miller, and Hale and Dorr on brief for Boston Bar Foundation, Joseph L. Kociubes, Stephanie A. Kelly, Diane E. Cooley, and Bingham, Dana & Gould on brief for Massachusetts Legal Assistance Corp., defendants, appellees.

William W. Porter, Asst. Atty. Gen., and Scott Harshbarger, Atty. Gen., on brief for The Justices of Massachusetts Supreme Judicial Court, defendants, appellees.

Peter M. Siegel, Randall C. Berg, Jr., and Arthur J. England, Jr., and Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A. on brief for Alabama Law Foundation, Inc., Alabama State Bar, Arkansas IOLTA Foundation, State Bar of Arizona, Arizona Bar Foundation, The State Bar of California, The Legal Services Trust Fund Com'n of State Bar of California, Colorado Bar Ass'n, Colorado Lawyer Trust Account Foundation, Connecticut Bar Foundation, Connecticut Bar Ass'n, Delaware Bar Foundation, Delaware State Bar Ass'n, The Florida Bar, The Florida Bar Foundation, Georgia Bar Foundation, State Bar of Georgia, Hawaii Bar Foundation, Hawaii State Bar Ass'n, Idaho Law Foundation, Inc., Idaho State Bar, Illinois State Bar Ass'n, Lawyers Trust Fund of Illinois, The Iowa State Bar Ass'n, Kansas Bar Foundation, Kentucky IOLTA Fund, Louisiana State Bar Ass'n, Maine Bar Foundation, Maine State Bar Ass'n, Maryland Legal Services Corp., Maryland State Bar Ass'n, Inc., State Bar of Michigan, Michigan State Bar Foundation, Inc., Minnesota Lawyer Trust Account Bd., The Missouri Bar, Missouri Lawyer Trust Account Foundation, Nat. Ass'n of IOLTA Programs, Inc., Nat. Legal Aid & Defender Ass'n (NLADA), Nevada Law Foundation, New Hampshire Bar Ass'n, New Hampshire Bar Foundation, New Jersey State Bar Ass'n, New Jersey State Bar Foundation, The IOLTA Fund of the Bar of New Jersey, New Mexico Bar Foundation, New York State Bar Ass'n, Interest on Lawyer Account Fund of the State of New York, North Carolina Bar Ass'n, North Carolina State Bar Plan for Interest on Lawyers' Trust Accounts, State Bar Ass'n of North Dakota, Ohio Legal Services Program of Ohio Public Defender Com'n, Oklahoma Bar Foundation, Inc., Oregon Law Foundation, Oregon State Bar, Pennsylvania Bar Ass'n, Lawyer Trust Account Bd. [Pennsylvania], Philadelphia Bar Ass'n, Rhode Island Bar Foundation, Seattle-King County Bar Ass'n, South Carolina Bar, The South Carolina Bar Foundation, South Dakota Bar Foundation, Tennessee Bar Ass'n, Tennessee Bar Foundation, Texas Equal Access to Justice Foundation, State Bar of Texas, Utah Bar Foundation, Utah State Bar, Vermont Bar Ass'n, Vermont Bar Foundation, The Virginia Bar Ass'n, Virginia Law Foundation, Virginia State Bar, Washington State Bar Ass'n, Legal Foundation of Washington, West Virginia Bar Foundation, Inc., West Virginia State Bar, amici curiae.

J. Michael McWilliams, Dennis A. Kaufman, and John H. Morrison on brief for The American Bar Ass'n, amicus curiae.

Gerald B. Gallagher, on brief pro se, amicus curiae.

Kathleen McDonald O'Malley, Chief Counsel, Patrick A. Devine, Asst. Atty. Gen., Lee Fisher, Atty. Gen., of Oh., Winston Bryant, Atty. Gen., of Ark., Richard Blumenthal, Atty. Gen., of Conn., Larry EchoHawk, Atty. Gen., of Id., Roland W. Burris, Atty. Gen. of Ill., Bonnie J. Campbell, Atty. Gen. of Ia., Michael E. Carpenter, Atty. Gen. of Me., J. Joseph Curran, Jr., Atty. Gen. of Md., Hubert H. Humphrey, III, Atty. Gen. of Minn., Mario J. Palumbo, Atty. Gen. of W.Va., Mike Moore, Atty. Gen. of Miss., Frankie Sue Del Papa, Atty. Gen. of Nev., Robert J. Del Tufo, Atty. Gen. of N.J., Tom Udall, Atty. Gen. of N.M., Nicholas J. Spaeth, Atty. Gen. of N.D., Earnest D. Preate, Jr., Atty. Gen. of Penn., Dan Morales, Atty. Gen. of Tex., Jeffrey L. Amestoy, Atty. Gen. of Vt., Robert Abrams, Atty. Gen. of N.Y., Charles W. Burson, Atty. Gen. of Tenn., Ken Eikenberry, Atty. Gen. of Wash., and Mary Sue Terry, Atty. Gen. of Va., on brief for the States of Oh., Ark., Conn., Id., Ill., Ia., Me., Md., Minn., Miss., Nev., N.J., N.M., N.Y., N.D., Penn., Tenn Before BREYER, Chief Judge, BOWNES, Senior Circuit Judge, and BOUDIN, Circuit Judge.

Tex., Vt., Wash., W.Va., and Va., amici curiae.

BOWNES, Senior Circuit Judge.

This appeal involves a challenge to the Massachusetts Interest on Lawyers' Trust Accounts ("IOLTA") program. The district court granted the defendants' motion to dismiss the plaintiffs' claims that the IOLTA program violated their First Amendment rights of freedom of speech and association, and effected a taking of their property in violation of the Fifth and Fourteenth Amendments, 795 F.Supp. 50 (1992). We affirm.

I. BACKGROUND

Traditionally, in Massachusetts and in other states, clients' funds which lawyers held for a short term or in nominal amounts were deposited into non-interest bearing pooled trust accounts. See, e.g., In re Mass. Bar Ass'n, 395 Mass. 1, 478 N.E.2d 715, 716 (1985); In re Minn. State Bar Ass'n, 332 N.W.2d 151, 155-56 (Minn.1982). Banking laws and the ethical obligation of lawyers to maintain clients' funds so that they were immediately available for reimbursement prevented such pooled trust accounts from accruing interest. Cone v. State Bar of Fla., 819 F.2d 1002, 1005 (11th Cir.), cert. denied, 484 U.S. 917, 108 S.Ct. 268, 98 L.Ed.2d 225 (1987). Interest earned by pooled trust accounts remained with the banking institution which held the funds. Id. With the advent of Negotiable Order of Withdrawal ("NOW") accounts authorized by the Consumer Checking Account Equity Act, interest became available on checking accounts for eligible depositors. Id. at 1005-06. Eligible depositors include individual owners of deposited funds and certain charitable, non-profit or public interest entities including IOLTA programs. See id.; In re N.H. Bar Ass'n, 122 N.H. 971, 453 A.2d 1258, 1259 (1982). During the late 1970's and through the 1980's, Florida and many other states proposed IOLTA programs and courts upheld the programs finding them constitutionally and ethically permissible. 1 As of January, 1992, forty-nine states and the District of Columbia had authorized IOLTA programs. ABA/BNA Lawyers' Manual on Professional Conduct 45:202 (1992). Indiana remains the only state which has not adopted an IOLTA program. Id.; In re Public Law No. 154-1990, 561 N.E.2d 791 (Ind.1990); In re Ind. State Bar, 550 N.E.2d 311 (Ind.1990).

The Massachusetts IOLTA program was established by amendment to Canon 9, DR 9-102 of Rule 3:07 of the Rules of the Supreme Judicial Court, effective September 1, 1985, the "IOLTA Rule." Mass. Bar Ass'n, 478 N.E.2d at 720-21. From 1985 until 1990, the IOLTA program operated as a voluntary system. Attorneys could elect to participate by establishing an interest-bearing IOLTA account and by complying with DR 9-102(C) requirements which included choosing a recipient charity from a group designated by the IOLTA Committee.

In 1989, the Massachusetts Supreme Judicial Court ("SJC") converted the voluntary IOLTA program into a mandatory program by amending the IOLTA Rule, effective January 1, 1990. As amended, the rule required all Massachusetts lawyers to deposit client funds into interest bearing accounts: either (1) a pooled IOLTA account if, in the judgment of the lawyer, the deposits were nominal in amount or to be held for only a short period of time; or (2) individual accounts for all other client funds. The Rule required lawyers or law firms to direct the banks holding their IOLTA accounts to disburse accrued interest to a charitable entity selected by the lawyer or firm from a group designated by the SJC. The designated charities were Massachusetts Legal Assistance, the Massachusetts Bar Foundation, and the Boston Bar Foundation.

The SJC again amended the IOLTA Rule, effective January 1, 1993, to change the process for disbursement of IOLTA funds. 2 The IOLTA Rule now vests responsibility for disbursement of IOLTA funds in the IOLTA Committee and eliminates choice by lawyers of recipient eligible charities. The IOLTA Committee must disburse sixty-seven percent of all IOLTA funds to Massachusetts Legal Assistance and the remaining thirty-three percent to "other designated charitable entities."

The parties have not briefed or argued any issues in the context of the 1993 amendment to the IOLTA Rule. 3 Although the amendment of the IOLTA Rule affects the process of funds disbursement, the changes are not material to this decision. None of the parties argued that the lawyers' choice of recipient charities, as provided by the 1990 version of the IOLTA Rule, was significant. The funds are still disbursed primarily to Massachusetts Legal Assistance with the remainder to "other designated eligible charities" which are still the Massachusetts Bar Foundation and the Boston Bar Foundation. In addition, the mission of IOLTA funds remains the same: "The Massachusetts Legal Assistance Corporation may use IOLTA funds to further its corporate purpose and other designated charitable entitles [sic] may use IOLTA funds either for (1) improving the administration of justice or (2) delivering civil legal services to those who cannot afford them." Mass.Sup.J.C.R. 3:07, DR 9-102(C), as amended by...

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