Brief Fact Summary. The Petitioner, Phillips (Petitioner), argues that the interest on Interest on Lawyers Trust Accounts (IOLTA) is the property of the attorney’s clients and that the Respondent, Washington Legal Foundation (Respondent), use of the interest to fund other legal services is a “taking.”
Synopsis of Rule of Law. Interest gained on deposit accounts belongs to the owner of the principal even if the interest provides no economic gain or value for the owner.
Issue. Is the interest earned from client funds in IOLTA’s “private property” for the purposes of the Takings Clause?
Held. Yes. It is a well-established property principle that “interest follows principal.” Therefore, while the interest income may have no economically recognizable value to its owner, possession, control and disposition are nonetheless valuable rights that inhere in property. Whether this amounted to a taking was remanded to a lower court.
The court held that the interest income generated by funds held in IOLTA accounts is the private property of the owner of the principal.View Full Point of Law