Washington Legal Foundation v. Legal Foundation

Four individuals, Allen Brown, Greg Hayes, Dennis Daugs, and Dian Maxwell, and the Washington Legal Foundation (collectively “Appellants”) challenge the legality of Washington State’s Interest on Lawyers’ Trust Account (“IOLTA”) program on First and Fifth Amendment grounds. Beginning where the Supreme Court left off in Phillips v. Washington Legal Foundation, 524 U.S. 156, 160 , 118 S.Ct. 1925 , 141 L.Ed.2d 174 (1998), Appellants contend that the Washington State IOLTA program unconstitutionally takes the interest generated by their monies placed in IOLTA trust accounts and compels speech. We review this case en banc to consider whether there has been an unconstitutional taking, ie., a taking without just compensation, of property belonging to Appellants. In doing so, we reject the analytical approach that “trifurcates” the Fifth Amendment issues, previously taken of procedural necessity or otherwise by other courts. Believing the better approach to be consideration of the Fifth Amendment question as a whole, we must decide whether the State of Washington, by establishing its IOLTA program and applying it to Limited Practice Officers, took property belonging to any of the five…

with whom Judges TROTT, KLEINFELD and SILVERMAN join, dissenting.

For the second time within a year, our court follows the dissenters in a Supreme Court takings case while ignoring the Supreme Court majority. See also Tahoe-Sierra Pres. Council, Inc. v. Tahoe Regional Planning Auth., 228 F.3d 998 (9th Cir.2000) (Kozinski, J., dissenting from denial of rehearing en banc). In so doing, our court once again deprecates one of the cherished protections of the Bill of Rights — the right not to have the government take private property without just compensation. It also creates a square conflict with the only other circuit to have ruled on this issue. See Wash. Legal Found. v. Tex. Equal Access to Justice Found., 270 F.3d 180 (5th Cir.2001).

The majority starts — as it must — with the proposition that interest earned by appellants on funds deposited in IOLTA accounts is their property. The reason they must is that the Supreme Court said so. See Phillips v. Wash. Legal Found., 524 U.S. 156 , 118 S.Ct. 1925 , 141 L.Ed.2d 174 (1998). The question presented, then, is whether the government must pay compensation when it takes this private property for a public purpose. The majority starts…