Brown v. Legal Foundation of Washington

Brief Fact Summary.

The State of Washington used interest on lawyers’ trust accounts (IOLTA) to pay for legal services provided to needy clients. The program was established by the state supreme court. The Legal Foundation argued that this was an unconstitutional taking.

Synopsis of Rule of Law.

“Just compensation” in takings clause issues is determined by the property owner’s loss. If the loss is net zero, there is no entitlement to just compensation, and no violation of the takings clause.

Facts.

The State of Washington used interest on lawyers’ trust accounts (IOLTA) to pay for legal services provided to needy clients. The program was established by the state supreme court. The Supreme Court had previously ruled that IOLTA funds were the private property of the owner of the principal account in Phillips v. Washington. The Court left open the question of whether the funds could be taken. Brown argued that this was an unconstitutional taking.

The takings clause does not prohibit taking private property; it prohibits taking private property without just compensation. Just compensation is determined by the property owner’s loss.

Here, Brown’s losses were net zero because it was only the interest on the accounts (as opposed to the principal).

Issue.

Are IOLTA programs unconstitutional under the takings clause?

Held.

No, the programs are constitutional.

Dissent.

Justice Scalia (with Roberts, Kennedy, and Thomas)

This decision creates a new exception to the general rule that just compensation is the fair market value of the property taken. It also arbitrarily prevents the property owner from collecting the net interest which is their property. This is a new type of taking: the Robin Hood Taking, wherein the government takes wealth to give to the poor, and it ignores the constitution.

Discussion.

The takings clause does not prohibit taking private property; it prohibits taking private property without just compensation. Just compensation is determined by the property owner’s loss.

Here, Brown’s losses were net zero because the program only takes the interest on the accounts (as opposed to the principal). Therefore, he is not entitled to any compensation, and it is not a violation of the takings clause.