In a 5-4 decision in Brown v. Legal Foundation of Washington, the United States Supreme Court held that a state law that (1) requires lawyers and limited practitioner officers ("LPOs") to deposit client funds that cannot otherwise generate net-earning for their clients into an interest on lawyer's trust account ("IOLTA account") and (2) mandates that the interest produced on those funds be transferred to a different owner for a legitimate public use could constitute a per se taking of the clients' right to that interest, but no compensation is owed to such clients when they suffer no net loss. The Court reasoned that any compensation must be measured by the owner's net pecuniary loss rather than by the value of the taker's gain. Conversely, the dissent argued that the appropriate measure of just compensation is the fair market value of the property at issue rather than the owner's net pecuniary loss, emphasizing that such fair market value should not be reduced by any administrative or transactional costs to the owner.
Hughes, Robert C. III
"Nothing Lost, Nothing Owed: Supreme Court Upholds State IOLTA Program in Brown v. Legal Foundation of Washington,"
Mercer Law Review: Vol. 55:
2, Article 9.
Available at: https://digitalcommons.law.mercer.edu/jour_mlr/vol55/iss2/9