BROWN v. LEGAL FOUNDATION OF WASHINGTON

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Case Basics
Docket No. 
01-1325
Petitioner 
Brown
Respondent 
Legal Foundation of Washington
Advocates
(Argued the cause for the respondent Legal Foundation of Washington)
(Argued the cause for the petitioners)
(Argued the cause for the respondents, Justices of the Supreme Court of Washington)
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Facts of the Case 

Every state uses interest on lawyers' trust accounts (IOLTA) to pay for legal services for the needy. Among it rules, Washington's program requires that funds that cannot earn net interest for the client be deposited in an IOLTA account. The Supreme Court of Washington extended its IOLTA rules to cover Limited Practice Officers (LPOs), nonlawyers who are licensed to act as escrowees in real estate closings. Allen Brown and Greg Hayes alleged that they regularly purchase and sell real estate, in the course of such transactions they deliver funds to LPOs who are required to deposit them in IOLTA accounts, and the taking of the interest earned on their funds in IOLTA accounts violates the Just Compensation Clause of the Fifth Amendment. The District Court found, among other things, that Brown and Hayes had lost nothing. Sitting en banc, the Court of Appeals reasoned that there was no taking because Brown and Hayes had suffered neither an actual loss nor an interference with any investment-backed expectations.

Question 

Does the use of interest on lawyers' trust accounts to pay for legal services provided to the needy constitute a state taking in violation of the Just Compensation Clause of the Fifth Amendment?

Conclusion 
Decision: 5 votes for Legal Foundation of Washington, 4 vote(s) against
Legal provision: Takings Clause

No. In a 5-4 opinion delivered by Justice John Paul Stevens, the Court held that state law that requires client funds that could not otherwise generate net earnings for the client to be deposited in an IOLTA account is not a regulatory taking. Moreover, the Court reasoned that, because compensation is measured by the owner's pecuniary loss, which is zero whenever the Washington law is obeyed, there is no violation of the Just Compensation Clause of the Fifth Amendment. Justice Antonin Scalia, joined by Chief Justice William H. Rehnquist and Justices Anthony M. Kennedy and Clarence Thomas, dissented, arguing that the Court's decision created an exception to its general rule that the just compensation owed to former owners of confiscated property is the fair market value of the property taken. Justice Kennedy also filed a separate dissent.

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BROWN v. LEGAL FOUNDATION OF WASHINGTON. The Oyez Project at IIT Chicago-Kent College of Law. 23 November 2014. <http://www.oyez.org/cases/2000-2009/2002/2002_01_1325>.
BROWN v. LEGAL FOUNDATION OF WASHINGTON, The Oyez Project at IIT Chicago-Kent College of Law, http://www.oyez.org/cases/2000-2009/2002/2002_01_1325 (last visited November 23, 2014).
"BROWN v. LEGAL FOUNDATION OF WASHINGTON," The Oyez Project at IIT Chicago-Kent College of Law, accessed November 23, 2014, http://www.oyez.org/cases/2000-2009/2002/2002_01_1325.