Washington Legal Foundation v. Legal Foundation

271 F.3d 835

• Court: Court of Appeals for the Ninth Circuit
• Decided: November 14, 2001
• Docket: No. 98-35154
• Status: Published

Opinions

WARDLAW, Circuit Judge:

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 Appellants without providing just compensation therefor. We analyze this issue in accordance with the dictates of Penn Central Transportation Co. v. City of New York, 438 U.S. 104, 124, 98 S.Ct. 2646, 57 L.Ed.2d 631 (1978), and hold that with respect to the funds deposited into client trust accounts by the Limited Practice Officers in this case, there has been no taking of property without just compensation in violation of the Fifth Amendment. U.S. Const, amend. V. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm the district court with respect to Appellants’ Fifth Amendment claim. Because the district court did not have the opportunity to consider Appellants’ First Amendment claim in light of Phillips, however, we vacate the judgment on that claim and remand for further proceedings.

I. IOLTA

When a lawyer takes the oath of a state bar, he receives the great privilege of admission to the practice of law in that state and pledges to conduct himself in accordance with the code of professional responsibility that accompanies such an honor. Of the many ethical requirements placed upon lawyers, one of the most significant is loyalty to the client. In addition to representing their clients zealously and protecting their legal rights, lawyers must protect the integrity of their clients’ property and avoid using their position as the property’s temporary guardian to their own benefit. To this end, lawyers have long been required to place their clients’ money in bank accounts separate from their own. As early as 1908, professional ethical guidelines required that “money of the client or collected for the client ... should be reported and accounted for promptly, and should not under any circumstances be commingled with his own or be used by him.” Canons of Professional Ethics Canon 11 (1908) (amended 1933). Today, almost one hundred years later, lawyers in all fifty states are held to that same high standard of professional conduct. According to the Model Rules of Professional Conduct, “[a] lawyer shall hold property of clients or third persons that is in a lawyer’s possession in connection with a representation separate from the lawyer’s own property. Funds shall be kept in a separate account maintained in the state where the lawyer’s office is situated, or elsewhere with the consent of the client or third person.” Model Rules of Profl Conduct R. 1.15(a) (1999).

In compliance with these ethical obligations, before 1980, clients’ funds were generally pooled in noninterest-bearing, federally insured checking accounts. Phillips, 524 U.S. at 160, 118 S.Ct. 1925. Even though, at that time, federal law prohibited federally insured banks from paying interest on checking accounts, such accounts were used to ensure that the funds were available on demand. See 12 U.S.C. §§ 371a, 146(b)(1)(B), 1828(g). The holding bank received a great windfall from these accounts. Not only did the holding banks use the funds as an interest-free loan, keeping all the derived income, but they also charged the account holder — the lawyer — a fee for services rendered. Only if a sum was very large or was to be held for a long period of time would it be placed in an interest-bearing savings account, because, at that point, the loss of the checking account convenience was outweighed by the value of the interest gained. See Phillips, 524 U.S. at 160-61, 118 S.Ct. 1925; see also ABA Comm, on Ethics and Profl Responsibility, Formal Op. 348 (1982). When such an account was set up, the client bore the additional costs for any services rendered by the bank and the lawyer in accounting for the interest, remitting it to the client, and generating tax forms for both the client and the Internal Revenue Service.

Client trust accounts, however, would not remain interest-free for long. In 1980, Congress passed the Consumer Checking Account Equity Act, codified at 12 U.S.C. § 1832, which allowed federally insured banks to pay interest on certain demand accounts, called “Negotiable Order of Withdrawal” (“NOW”) accounts. NOW accounts are strictly regulated; they must “consist solely of funds in which the entire beneficial interest is held by one or more individuals or by an organization which is operated primarily for religious, philanthropic, charitable, educational, political, or other similar purposes and which is not operated for profit.” Phillips, 524 U.S. at 161, 118 S.Ct. 1925 (quoting 12 U.S.C. § 1832(a)(2)). Although for-profit organizations, such as corporations, partnerships, associations, and insurance companies, are precluded from establishing NOW accounts for their own benefit, the Federal Reserve Board has determined that they may do so if the funds “are held in trust pursuant to a program under which charitable organizations have ‘the exclusive right to the interest.’” Id. at 161, 118 S.Ct. 1925 (citation omitted).

Congress could not have better timed its authorization of interest-bearing NOW accounts. Not only had interest rates reached unprecedented levels in the 1970s, but the States were in need of a new source of legal aid funding. An ethical tradition of the legal profession is the provision of legal services to those who cannot afford to pay for them. See Model Rules of Profl Conduct R. 6.1 (Legal Background); Geoffrey C. Hazard, Jr., After Professional Virtue, 6 Sup.Ct. Rev. 213, 215 (1989) (“[A] lawyer’s obligation to represent the poor ... is a classic canon of the legal profession.”). Providing legal services to the poor is a complex undertaking, but at a minimum, all attorneys bear the ethical responsibility at some point in their career to represent indigent clients or in some manner work to make the legal system accessible to those who could not otherwise afford it. To that end, bar associations recommend that their members designate a certain number of hours each year to pro bono services. See Model Rules of Professional Conduct Rule 6.1 (recommending at least fifty hours of pro bono work a year). They also help secure funding to support individuals and organizations that provide indigent legal services. From 1974 to 1981, a large percentage of this funding came from the Legal Services Corporation, a federally funded corporation, which awarded direct grants to local attorneys providing legal services to the poor. See James D. Anderson, The Future of IOLTA: Solutions to Fifth Amendment Takings Challenges Against IOLTA Programs, 1999 U. Ill. L.Rev. 717, 720. In 1981, however, Congress severely limited the scope and budget of the Legal Services Corporation, and as a result, the States and their bar associations were forced to look for new sources of funding.

The availability of interest through the establishment of NOW accounts provided a unique opportunity for the legal profession to further two of its most important ethical obligations — ensuring that all individuals, regardless of their financial circumstances, have access to the judicial system and segregating client trust funds from the lawyers’ own accounts — without imposing additional societal costs. By pooling client deposits that individually were so small or held for such a short period of time that they would not earn a net positive interest, the States could use the interest earned on the combined deposits — otherwise enjoyed as a windfall by the banks — to fund indigent legal services at no cost to the owner of the principal. Thus, in 1981, Florida created the first IOLTA program. Today, every state in the nation has followed suit. See Phillips, 524 U.S. at 159 n. 1, 118 S.Ct. 1925; see also Ind. Prof. Conduct R. 1.15(d) (2000) (Indiana, the last state to do so, instituted an IOLTA program after Phillips was decided.). IOLTA programs have been a brilliant success: in 1999, they generated $139 million nationwide. See Caitlin Liu, Court Ruling Threatens A Major Funding Source for Legal Aid, L.A. Times, Jan. 22, 2001 at B3.

The Washington State Supreme Court created its IOLTA program in 1984, codifying it in the Washington Rules of Professional Conduct as Rule 1.14. This rule requires lawyers to place “client funds that are nominal in amount or expected to be held for a short period of time” in either (i) a pooled interest-bearing trust account, the interest from which is paid to the Legal Foundation of Washington, (ii) a separate interest-bearing trust account for a particular client, or (iii) a “pooled interest-bearing trust account with subaccount-ing that will provide for computation of interest earned by each client’s funds and the payment thereof to the client.” Wash. Rules of Profl Conduct R. 1.14(c)(2). When deciding the type of account to establish, lawyers need not inform their clients or obtain their clients’ consent. Instead, lawyers are instructed to consider “only whether the funds to be invested could be utilized to provide a positive net return to the client,” taking into account “(i) the amount of interest that the funds would earn during the period they are expected to be deposited; (ii) the cost of establishing and administering the account, including the cost of the lawyer’s service and the cost of preparing any tax reports required for interest accruing to a client’s benefit; and (iii) the capability of financial institutions to calculate and pay interest to individual clients.” Wash. Rules of Prof 1 Conduct R. 1.14(c)(3).

As the IOLTA program was being created, the Washington Supreme Court also ordered the incorporation of the Legal Foundation of Washington, a nonprofit charitable organization dedicated to improving the availability and'quality of legal representation for the poor. The Legal Foundation of Washington itself does not litigate or educate but accomplishes its mission by distributing funding to different nonprofit and educational associations through a grant application process. In 1990, the IOLTA program provided $3.9 million to the Legal Foundation of Washington, and in 1995, it provided $2.7 million.

This appeal challenges one specific aspect of Washington States’s IOLTA program: its application to individuals who, during real estate transactions, place money in the hands of an escrow or title company that employs at least one Limited Practice Officer (“LPO”), a state-licensed nonlawyer who is permitted by the state to “select, prepare, and complete the appropriate legal documents incident to the closing of real estate and personal property transactions.... ” Wash. Admission to Practice R. 12. The position of “LPO” was created in 1983 in response to a Washington Supreme Court decision holding that laypersons performing those tasks were engaged in the unauthorized practice of law. See Bennion, Van Camp, Hagen & Ruhl v. Kassler Escrow, Inc. 96 Wash.2d 443, 635 P.2d 730 (1981). Although IOLTA has applied to lawyers since its inception, it did not apply to LPOs until 1995 when the addition of subsection “h” to Admission to Practice Rule 12 and the enactment of Admission to Practice Rule 12.1 (collectively the “IOLTA rules”) imposed on LPOs the same requirements that apply to practicing lawyers. Under Rule 12.1, client funds must be placed in an IOLTA account unless (i) the parties to a real estate transaction enter a written agreement requesting an interest-bearing account and “specifying the manner of distribution of accumulated interest to the parties to the transaction;” (ii) the funds are deposited in “a separate interest-bearing trust account for a particular party to a real or personal property closing on which accumulated interest will be paid to that party;” or (iii) the funds are deposited in “a pooled interest-bearing trust account with subaccounting that will provide for computation of interest earned by each party’s funds and the payment thereof to the respective party.” Wash. Admission to Practice R. 12.1(c)(2).

Although escrow and title companies, like attorneys, use separate client trust funds to hold their clients’ deposits, for the purpose of this decision, the similarity stops there. Unlike attorneys, escrow and title companies have never taken advantage of the interest-bearing capabilities of NOW accounts, even though they both used non-interest bearing checking accounts before NOW accounts were established. Escrow and title companies have not deemed NOW accounts to be realistic options for their client trust funds due to the difficulty and expense attendant to the crediting of the proper amount of interest to each person whose funds have passed through the escrow account. Furthermore, these companies handle transactions on behalf of for-profit corporations for which client funds cannot be legally deposited in NOW accounts. Thus, even if the IOLTA rules did not exist and the principal would generate net interest, escrow and title companies would not establish interest-bearing NOW accounts.

Before the enactment of the IOLTA rules, escrow and title company client trust funds did not earn interest. They did, however, receive benefits from the holding banks in the form of “earnings credits.” The credits, which accrued to the company itself, were used to offset bank fees for a variety of services, including accounting services and wire transfers. With the enactment of Rule 12.1, however, many banks — but not all — have stopped offering earnings credits to escrow and title companies opening IOLTA accounts. To make up for the loss of earnings credits and the corresponding rise in bank fees, some escrow companies — but not all — now charge “IOLTA” fees. As an example of these charges, Appellants provide a sample “settlement statement,” which includes an “IOLTA/Aceounting fee” of $5.39 charged to both the buyer and the seller.

II. Procedural History

In reaction to the proliferation of IOLTA programs, the Washington Legal Foundation sought individuals who were affected by these programs and, joining them as co-plaintiffs, initiated a number of lawsuits raising a constitutional takings challenge to their validity. It is a matter of public record that to date, the Washington Legal Foundation has filed suit challenging state IOLTA programs in California, Massachusetts, Texas, and Washington. The first of these cases to reach the Supreme Court was Phillips v. Washington Legal Foundation, 524 U.S. 156, 118 S.Ct. 1925, 141 L.Ed.2d 174 (1998). Phillips, however, arrived in a procedurally awkward manner as the Fifth Circuit Court of Appeals had addressed only the question of whether there existed a property right in the interest accruing to client funds deposited in IOLTA accounts. Wash. Legal Found. v. Texas Equal Access to Justice Found., 94 F.3d 996, 1004 (5th Cir.1996). The Supreme Court similarly limited its review, granting certiorari to determine whether “interest earned on client trust funds held by lawyers in IOLTA accounts [is] a property interest of the client or lawyer....” Phillips v. Wash. Legal Found., 521 U.S. 1117, 117 S.Ct. 2535, 138 L.Ed.2d 1011 (1997) (granting certiorari). Thus, the Supreme Court considered only that question. It held “that the interest income generated by funds held in IOLTA accounts is the ‘private property’ of the owner of the principal.” Phillips, 524 U.S. at 172, 118 S.Ct. 1925 (“We express no view as to whether these funds have been ‘taken’ by the State; nor do we express an opinion as to the amount of ‘just compensation.’ ”). The Court left open the question of whether a taking occurred without just compensation by virtue of the IOLTA program. This “bifurcation” of the Fifth Amendment question was presciently criticized by the dissenting Justices as “skewing] the resolution of the taking and compensation issues that will follow.” Id. at 178, 118 S.Ct. 1925 (Souter, J, dissenting).

While Phillips progressed through the hierarchy of the federal courts, the Washington Legal Foundation’s remaining IOLTA challenges were also making their way through the federal system. In the case before us, the Foundation joined with four individuals — two LPOs and two LPO clients — to challenge Washington State’s IOLTA program, naming the Legal Foundation of Washington, its president, and the Justices of the Washington Supreme Court (collectively “Appellees”) as defendants. Appellants alleged that Washington’s IOLTA program violated their First and Fifth Amendment rights. They sought (i) a judgment requiring the Legal Foundation of Washington “to refund the full amount of interest earned on Plaintiffs Brown’s and Hayes’s money placed into IOLTA accounts, plus interest;” (ii) a declaratory judgment that Admission to Practice Rules 12(h) and 12.1 are unconstitutional under the First and Fifth Amendments, “insofar as they require LPOs to place certain client funds into IOLTA trust accounts;” (iii) a permanent injunction preventing the Justices of the Washington Supreme Court “from taking any disciplinary action against LPOs who fail to comply with the requirements of ... Rules 12(h) and 12.1, and from adopting any rules that purport to require LPOs, as a condition for practicing their profession in Washington, to handle client trust funds in a manner designed to ensure that interest on those funds will accrue to anyone not designated by the client;” and (iv) an award of costs and attorney’s fees.

The district court, without the benefit of the Phillips decision, granted summary judgment to the Legal Foundation of Washington and the Justices on the ground that Appellants did not have a property right to the interest generated on funds held in IOLTA accounts. Without a property right, the district court reasoned, there could be neither a Fifth nor a First Amendment violation. While the case made its way on appeal to us, however, the Supreme Court held in Phillips that those individuals, like Appellants Brown and Hayes, who owned the principal placed in IOLTA accounts also owned the interest. A panel of this court was then faced with the task of advancing to the next stage of the Takings Clause analysis: determining whether there was a taking without just compensation. Following the Supreme Court’s lead in dividing the takings analysis into discrete pieces, the now withdrawn panel decision ■ “trifurcated” the takings question into two further issues: whether there was a taking and what compensation was due. Viewing the interest earned on IOLTA funds as an independent entity, separate and distinct from the principal that gave it life, the panel concluded that the IOLTA program resulted in an appropriation of 100% of Appellants’ property. Wash. Legal Found. v. Legal Found. of Wash., 236 F.3d 1097, 1100-01 (9th Cir.2001), withdrawn, 248 F.3d 1201 (2001). Overlooking the Supreme Court’s traditional view that due to its fungible nature, money — as opposed to real or personal property — cannot be physically appropriated, see United States v. Sperry Corp., 493 U.S. 52, 62 n. 9, 110 S.Ct. 387, 107 L.Ed.2d 290 (1989), the panel applied the per se takings test announced in Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 441, 102 S.Ct. 3164, 73 L.Ed.2d 868 (1982) (holding that a permanent physical occupation of a portion of a roof was a “taking” regardless of the size of the occupation or the economic impact on the owner because it was a physical appropriation). The panel reversed the district court, holding not only that Appellants owned the IOLTA interest under Phillips, but also that the IOLTA program effected a per se taking that required remand to the district court to determine what “just compensation” was due. Wash. Legal Found. v. Legal Found. of Wash., 236 F.3d at 1097. A majority of the active judges of this court voted in favor of rehearing en banc. We consider the issue anew.

III. Standing

Resolving a Fifth Amendment takings claim requires a fact specific inquiry into what has been taken and what compensation is due. Preliminarily, then, we must determine what property each Appellant has at stake in these proceedings. Because a property right is a prerequisite for advancing to the second stage of the Takings Clause analysis, we cannot allow all five Appellants to proceed simply because one or two have a valid claim to the interest at issue. Mindful that this is not a class action, we must carefully scrutinize each Appellant’s interest in and connection to Washington State’s IOLTA program. Upon doing so, we find that two of the four individual plaintiffs lack standing to pursue this action. We conclude that only Appellants Brown and Hayes own funds that contribute to the principal placed in an IOLTA account, and that therefore, only they have a property right to the generated interest. Thus, the district court properly dismissed Daug’s and Maxwell’s claims (albeit, on other grounds). We also hold that the Washington Legal Foundation lacks representational standing to pursue this action.

A. Individual Standing

“[B]efore reaching a decision on the merits, we [are required to] address the standing issue to determine if we have jurisdiction.” Nat’l Wildlife Fed’n v. Adams, 629 F.2d 587, 593 n. 11 (9th Cir.1980). “[T]he standing question is whether the plaintiff has ‘alleged such a personal stake in the outcome of the controversy’ as to warrant his invocation of federal-court jurisdiction and to justify the exercise of the court’s remedial powers on his behalf.” Warth v. Seldin, 422 U.S. 490, 498-99, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975) (quoting Baker v. Carr, 369 U.S. 186, 204, 82 S.Ct. 691, 7 L.Ed.2d 663 (1962)). There are three requirements for standing: (1) “a plaintiff must have suffered an ‘injury in fact’ — an invasion of a legally protected interest which is (a) concrete and particularized and (b) actual or imminent, not ‘conjectural’ or ‘hypothetical;’ ” (2) “there must be a causal connection between the injury and the conduct complained of — the injury has to be ‘fairly ... trace[able] to the challenged action of the defendant, and not ... th[e] result [of] the independent action of some third party not before the court;’ ” and (3) “it must be ‘likely’ as opposed to merely ‘speculative,’ that the injury will be ‘redressed by a favorable decision.’ ” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) (citations omitted) (alterations in original). We examine the property interest alleged by each of the individual Appellants in turn.

1. Appellant Brown

Appellant Allen Brown regularly purchases and sells real estate in the State of Washington. He knows of one transaction in which his escrow money was placed in an IOLTA account maintained at the Skagit State Bank. According to Brown, the $90,521.29 that he deposited with Land Title Company was placed in an IOLTA account for two days in April of 1997. He “objeet[s] to anyone other than me taking the interest earned on my funds.” He also “object[s] to some of the activities engaged in by LFW and by those to whom LFW distributes IOLTA funds.” Because Brown owned the principal that was placed in an IOLTA account, we conclude that the “interest income” earned on that principal is his property and therefore he has standing to challenge the IOLTA program. See Phillips, 524 U.S. at 172, 118 S.Ct. 1925.

2. Appellant Hayes

Appellant Greg Hayes has purchased real estate in the State of Washington as part of his business dealings and expects to continue to do so. He and his business partner gave $1000 earnest money to Fidelity National Title Company on August 14, 1996, and the remainder of the property’s cost, $6,396.66, on August 28, 1996. Fidelity deposited both sums in an IOLTA account. The real estate transaction closed on August 30, 1996. Hayes was not informed that his escrow funds were being placed in an IOLTA account, and he did not learn of the existence of IOLTA until after that transaction was completed. Like Brown, Hayes “object[s] to anyone other than me taking the interest earned on my funds” and “to some of the activities engaged in by LFW and by those to whom LFW distributes IOLTA funds.” Also like Brown, Hayes owned the principal that was placed in an IOLTA account. Thus, we conclude that the “interest income” earned on that principal is his property. Hayes therefore has standing to pursue this action. See Phillips, 524 U.S. at 172, 118 S.Ct. 1925.

3. Appellant Daugs

Appellant Dennis Daugs is vice-president of SeaTac Escrow, Inc. (“Sea-Tac”), which provides escrow services to buyers and sellers in connection with real estate transactions. Daugs is also a licensed LPO, but he refuses to comply with Rule 12.1 because he “ha[s] determined that doing so would violate SeaTac’s Fifth Amendment rights (as the holder of legal title to funds in the escrow account) and those of [his] customers (who hold equitable title to the funds).” Under Washington law, however, “legal title” does not include any valuable beneficial interests. See, e.g., Lee v. Wrixon, 37 Wash. 47, 79 P. 489, 490 (1905) (“[T]he bare legal title, ... uncoupled with a beneficial interest, is not subject to execution.”). Thus, assuming, without deciding, that Daugs holds “legal title” to the principal placed in the escrow account, that alone does not confer on him a right of ownership. Although Daugs may have legitimate objections to the IOLTA program and may believe his clients are better served by disregarding its dictates, he does not own the principal that is deposited in the IOLTA accounts, and therefore, he has no claim to the generated interest. Without the requisite property right, Daugs lacks standing to challenge the IOLTA program on Fifth Amendment grounds. We thus affirm the district court’s judgment as to Appellant Daugs.

4. Appellant Maxwell

Appellant Dian Maxwell is employed by Pacific Northwest Title Company of Washington (“PNW”), which provides escrow services among other things. After Rule 12.1 was established, PNW decided that to avoid the additional costs of the IOLTA program, estimated to be about $50.00 per transaction, it would not comply with Rule 12.1. Thus, PNW required its LPOs — including Maxwell — to surrender their licenses if they wished to continue employment. According to Maxwell, relinquishing her LPO license prevents her from fully practicing her profession because she can no longer “select and fill in the legal documents that [she is] fully qualified to select and fill in.” Unlike Daugs, who asserts in his declaration that he — as the owner of SeaTac — held legal title to the principal placed in IOLTA accounts, Maxwell does not claim any ownership in the principal or the generated interest. At most, Maxwell appears to be arguing that she lost property in the form of her LPO license as a result of the IOLTA rules.

Although Maxwell may have been adversely affected by application of the IOLTA rules to LPOs, the loss of her LPO license was an indirect result of PNW’s independent decision to eliminate LPOs from its payroll. Even if LPOs were exempt from the IOLTA rules, Maxwell can only speculate as to whether PNW would allow her to obtain a new LPO license while under its employment. Maxwell has failed to establish that her injury — the loss of her LPO license — would be redressed if LPOs were no longer required to place client funds in IOLTA accounts because such a result would require PNW to make an independent, intervening decision to employ licensed LPOs. See Pritikin v. Dept. of Energy, 254 F.3d 791, 797 (9th Cir.2001). Thus, not only was she properly denied relief by the district court on the ground that she had no property right to the generated interest, but because she has not shown that eliminating Rule 12.1 will redress her injury, she lacks standing to challenge the IOLTA program on Fifth Amendment grounds. See Lujan, 504 U.S. at 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992).

B. Representational Standing

Washington Legal Foundation is a public-interest law and policy center with members nationwide. As evidence of its connection to thé Washington IOLTA program, Washington Legal Foundation declares that its membership includes “citizens of Washington who object to having their money used to support the Washington IOLTA program, and LPOs in Washington who object to being forced to place client trust funds in IOLTA accounts.” Of the four named Appellants, it appears that only Daugs and Hayes are themselves members.

The Supreme Court has established a three-prong test for determining whether an organization, such as the Washington Legal Foundation, can sue in its representative capacity. See Hunt v. Wash. State Apple Adver. Comm’n, 432 U.S. 333, 343, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977); Presidio Golf Club v. Nat’l Park Serv., 155 F.3d 1153, 1159 (9th Cir.1998). “[A]n association has standing to bring suit on behalf of its members when: (1) its members would otherwise have standing to sue in their own right; (2) the interests it seeks to protect are germane to the organization’s purpose; and (3) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.” Hunt, 432 U.S. at 343, 97 S.Ct. 2434. If “the association seeks a declaration, injunction, or some other form of prospective relief, it can reasonably be supposed that the remedy, if granted, will inure to the benefit of those members of the association actually injured. Indeed, in all cases in which we have expressly recognized standing in associations to represent their members, the relief sought has been of this kind.” Id. (quoting Warth, 422 U.S. at 515, 95 S.Ct. 2197).

With respect to the alleged Fifth Amendment violation, Washington Legal Foundation encounters problems at the third prong of the representational standing inquiry. Because “[t]he Fifth Amendment does not proscribe the taking of property; it proscribes taking without just compensation,” Williamson County Reg’l Planning Comm’n v. Hamilton Bank of Johnson City, 473 U.S. 172, 194, 105 S.Ct. 3108, 87 L.Ed.2d 126 (1985), prospective injunctive relief is an inappropriate remedy here, where the individuals are pursuing their remedy against the state, and the question is whether they are entitled to any remedy for-the state regulatory action at issue. See Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1016, 104 S.Ct. 2862, 81 L.Ed.2d 815 (1984) (“Equitable relief is not available to enjoin an alleged taking of private property for public use, duly authorized by law, when a suit for compensation can be brought against the sovereign subsequent to the taking.”). While equitable relief may be available under other circumstances in a takings case, see, e.g., Duke Power Co. v. Carolina Environmental Study Group. Inc., 438 U.S. 59, 71 n. 15, 98 S.Ct. 2620, 57 L.Ed.2d 595 (1978) (“[The Declaratory Judgment Act] allows individuals threatened with a taking to seek a declaration of the constitutionality of the disputed governmental action before potentially uncompensable damages are sustained.”); Transohio Sav. Bank v. Director, Office of Thrift Supervision, 967 F.2d 598, 613 (D.C.Cir.1992) (“the district court should accept jurisdiction over takings claims for injunctive relief in the few cases where a Claims Court remedy is ‘so inadequate that the plaintiff would not be justly compensated’ ”) (citation omitted), the remedy for the Fifth Amendment violation alleged here is to provide the property owner with just compensation, if a taking has occurred. Because the appropriate relief — determining what, if any, just compensation is due to the owner of the property taken — necessarily requires the participation of the individual members, Washington Legal Foundation does not have representational standing to pursue a Fifth Amendment taking claim.

Thus, we hold that only individual Appellants Brown and Hayes have standing. We affirm the district court’s grant of summary judgment to the Legal Foundation of Washington and the Justices of the Washington Supreme Court on the Fifth Amendment claims of Daugs, Maxwell, and the Washington Legal Foundation. We leave open the question of standing as it pertains to the Appellants’ First Amendment claims. We proceed with our Takings Clause analysis only as it relates to the property of Appellants Brown and Hayes.

IV. Ripeness

Also as a jurisdictional matter, we must determine whether the Fifth Amendment challenges of Brown and Hayes are ripe for review. The ripeness doctrine is derived from Article Ill’s case or controversy requirement. It “prevents ‘the courts ... from entangling themselves in abstract disagreements over administrative policies, and also ... protectfs] the agencies from judicial interference until an administrative decision has been formalized and its effects felt in a concrete way by challenging parties.’ ” Stuhlbarg Int’l Sales Co. v. John D. Brush and Co., 240 F.3d 832, 839 (9th Cir.2001) (quoting Lee Pharm. v. Kreps, 577 F.2d 610, 618 (9th Cir.1978)) (alterations in original). Although Appellees did not raise the question of ripeness at the district court, we may consider it for the first time on appeal. See Reno v. Catholic Soc. Servs., 509 U.S. 43, 58 n. 18, 113 S.Ct. 2485, 125 L.Ed.2d 38 (1993) (concluding that because ripeness is derived in part from Article III principles, it may be raised for first time in the Supreme Court); In re Cool Fuel Inc., 210 F.3d 999, 1006 (9th Cir.2000) (holding that ripeness claims may be raised for the first time on appeal).

Appellees argue that the Fifth Amendment claims of Brown and Hayes are not ripe for review under Williamson County Regional Planning Commission v. Hamilton Bank, 473 U.S. 172, 105 S.Ct. 3108, 87 L.Ed.2d 126 (1985). We disagree.

In Williamson, petitioners claimed that the application of particular zoning regulations deprived them of their property without just compensation. Specifically, they alleged that the Williamson regional planning commission unreasonably disapproved of Hamilton Bank’s preliminary development plans. Williamson, 473 U.S. at 175, 105 S.Ct. 3108. Before the Court could reach the merits, however, it first had to determine whether the Commission had reached a final decision with respect to the development plans. If the Commission’s decision was not final, it could not have “taken” the property, and the case would not be ripe for review. Id. at 186, 105 S.Ct. 3108. The Court then established a two-prong test for determining whether the takings claim was ripe. First, “the government entity charged with implementing the regulations [must have] reached a final decision regarding the application of the regulations to the property at issue.” Id. at 186, 105 S.Ct. 3108. Second, compensation must have been sought “through the procedures the State has provided for doing so.” Id. at 194, 105 S.Ct. 3108. Hamilton Bank had not sought building variances to allow development in accordance with its proposed plans, thereby failing to obtain the required final decision, id. at 190, 105 S.Ct. 3108, nor had it sought compensation through the state’s inverse condemnation proceedings, thereby precluding a determination that the State’s compensation was either just or not, id. at 194, 105 S.Ct. 3108. The Court therefore concluded that the claim was not ripe.

There are, however, a few limited exceptions to the requirement of seeking compensation from the State before raising a takings claim. Williamson itself held that a plaintiff may be excused from this requirement if he demonstrates that “the inverse condemnation procedure is unavailable or inadequate.” Id. at 197, 105 S.Ct. 3108. In addition, “[a]n exception exists where the state does not have a ‘reasonable, certain, and adequate provision for obtaining compensation’ at' the time of the taking,” San Remo Hotel v. City and County of San Francisco, 145 F.3d 1095, 1101-02 (9th Cir.1998); see also Levald, Inc. v. City of Palm Desert, 998 F.2d 680, 687 (9th Cir.1993), or where resorting to state remedies would be futile, see City of Monterey v. Del Monte Dunes at Monterey, Ltd., 526 U.S. 687, 710, 119 S.Ct. 1624, 143 L.Ed.2d 882 (1999).

With respect to the first requirement, the enactment of Rules 12(h) and 12.1 constitutes a final decision. With respect to the second, we believe that the futility exception applies. The final authority on a Washington State inverse condemnation proceeding is the Washington Supreme Court. The Justices of the Washington Supreme Court, as parties to the present action, have filed briefs that argue, not just that the claim is unripe, but that there was no Fifth Amendment violation. The Justices do not point to an available state remedy, nor do they suggest that one is needed. Thus, we conclude that requiring Brown and Hayes to seek compensation from the State — a decision reviewable by the State Supreme Court — would be futile, and hold that the Fifth Amendment challenges to the IOLTA program raised by Brown and Hayes are ripe for review.

V. The Fifth Amendment

The Fifth Amendment, made applicable to the States through the Fourteenth Amendment, prohibits the taking of “private property ... for public use, without just compensation.” U.S. Const, amend. V. For Brown and Hayes to succeed in their Fifth Amendment challenges, they must establish that the interest at issue was their private property and that it was taken without just compensation. See Del Monte Dunes at Monterey v. City of Monterey, 920 F.2d 1496, 1500 (9th Cir.1990). An allegation that private property for which no compensation is due has been taken is insufficient to sustain a Fifth Amendment claim because it is the taking without just compensation that is constitutionally prohibited. See Williamson, 105 S.Ct. 3108 County Reg’s Planning Comm’n, 473 U.S. at 194 (“The Fifth Amendment does not proscribe the taking of property; it proscribes taking without just compensation.”); Macri v. King County, 126 F.3d 1125, 1129 (9th Cir.1997) (“The Fifth Amendment is not offended by the government taking property, but only by the government taking property without just compensation.”).

A. Private Property

Following the Supreme Court’s decision in Phillips, there can be no doubt that the interest earned on IOLTA account deposits is the private property of the owners of the principal. Thus, under Phillips, Appellants Brown and Hayes have a property right to whatever interest their individual deposits generate.

Appellees nevertheless attempt to distinguish Phillips, urging us to hold that, because property rights are created by state law, Phillips, which assessed property rights under Texas law, does not control the decision under Washington State law. See Phillips, 524 U.S. at 164, 118 S.Ct. 1925 (quoting Bd. of Regents of State Colleges v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972)) (“[T]he existence of a property interest is determined by reference to ‘existing rules or understandings that stem from an independent source such as state law.’ ”). This attempt is unavailing, however, because whatever distinction there may exist between Texas and Washington property law is not a tenable basis for avoiding the rule of Phillips.

In reaching its conclusion that “regardless of whether the owner of the principal has a constitutionally cognizable interest in the anticipated generation of interest by his funds, any interest that does accrue attaches as a property right incident to the ownership of the underlying principal,” id. at 168, 118 S.Ct. 1925 (emphasis in original), the Phillips majority relied upon “[t]he rule that ‘interest follows principal’ [that] has been established under English common law since at least the mid-1700’s.” Id. at 165, 118 S.Ct. 1925 (quoting Beckford v. Tobin, 27 Eng. Rep. 1049, 1051 (Ch.1749) (“[Ijnterest shall follow the principal, as the shadow the body.”)). Because Texas courts had long recognized the application of this common law rule, the Court rejected the argument that certain provisions of Texas law — income-only trusts and marital community property rules — demonstrated its disavowment. Id. at 167-68, 118 S.Ct. 1925. Furthermore, allowing Texas to legislatively “sidestep the Takings Clause by disavowing traditional property interests long recognized under state law” would directly contradict the Court’s holding in Webb’s Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 101 S.Ct. 446, 66 L.Ed.2d 358 (1980), that “ ‘a State, by ipse dixit, may not transform private property into public property without compensation’ simply by legislatively abrogating the traditional rule that ‘earnings of a fund are incidents of ownership of the fund itself and are property just as the fund itself is property.’ ” Phillips, 524 U.S. at 167, 118 S.Ct. 1925 (citation omitted).

We applied Webb’s and Phillips in Schneider v. California Department of Corrections, 151 F.3d 1194 (9th Cir.1998), which held, despite a state statute to the contrary, that prisoners possess a constitutionally cognizable property right in the interest earned on the principal held in Inmate Trust Accounts. Schneider, 151 F.3d at 1201. Seeking to square Webb’s and Phillips, which held that the common law rule that “interest follows principal” could not be abrogated by state statute, with Roth, which held that property interests were protected by the Constitution but created by state law, we distinguished between “new property” interests and “old property” interests. Id. at 1200-01. Although Roth, “a so-called ‘new property’ case,” affirmed the “unremarkable proposition that state law may affirmatively create constitutionally protected ‘new property” interests,” it “in no way implie[d] that a State may by statute or regulation roll back or eliminate traditional ‘old property’ rights.” Id. at 1200 (emphasis in original).

The States’ power vis-a-vis property thus operates as a one-way ratchet of sorts: States may, under certain circumstances, confer “new property” status on interests located outside the core of constitutionally protected property, but they may not encroach upon traditional “old property” interests found within the core.

Id. at 1200-01 (emphasis in original). We defined the “core of constitutionally protected property ... by reference to traditional ‘background principles’ of property law.” Id. Because of the “common law pedigree and near-universal endorsement by American courts[,]” we concluded that the “interest follows principal” rule lay at the core of property law, and therefore could not be abridged by state statute. Id. at 1201 (citation omitted).

Although Appellees attempt to demonstrate that under Washington law, Brown and Hayes have no property right in the IOLTA interest, any distinctions that can be drawn between Washington law and Texas law (Phillips), Florida law (Webb’s), or California law (Schneider) are immaterial. This is particularly true given that Washington adopted the common law, as did most other states, by enacting a “reception statute” that provides that “[t]he common law, so far as it is not inconsistent with the Constitution and laws of the United States, or of the state of Washington, nor incompatible with the institutions and condition of society in this state, shall be the rule of decision in all the courts of this state.” Wash. Rev. Code § 4.04.010. Furthermore, Washington state courts have previously applied the common law “interest follows principal” rule. In Tacoma School District. v. Hedges, 13 Wash. 69, 42 P. 522, 522 (1895), the Washington Supreme Court held that “[i]n the absence of any statute upon the subject,” the interest and penalties collected upon delinquent taxes should go to the school districts entitled to the principal rather than a general county fund. In 1988, nearly a century later, a Washington appellate court, “look[ing] to the common law” and relying on the “principle that interest on public funds follows the ownership of those funds,” held that “penalty and interest would follow the taxes upon which they were assessed.” City of Seattle v. King County, 52 Wash.App. 628, 762 P.2d 1152, 1155 (1988).

Thus, Appellees’ attempts to distinguish Phillips by pointing to differences between Washington and Texas property law fail. The interest earned on the principal owned by Brown and Hayes held in IOLTA accounts is their private property.

B. Unconstitutional Taking

The Phillips majority did not address the question of whether an unconstitutional taking of private property occurred:

We express no view as to whether these funds have been “taken” by the State; nor do we express an opinion as to the amount of “just compensation,” if any, due respondents. We leave these issues to be addressed on remand.

Phillips, 524 U.S. at 172, 118 S.Ct. 1925 (emphasis added). Far from disregarding the Phillips majority, as our dissenting colleagues suggest, we follow its directive in answering these questions on a fully developed record.

1. Whether a Taking has Occurred

Because Phillips did not reach the issue of whether a taking occurs when a state program enables otherwise barren principal to earn a net positive interest for the benefit of the poor, we turn to other takings cases involving property of a similar nature for guidance. As a preliminary matter, we must define the exact nature of the property at issue. In determining the existence of the property right, the Phillips majority stated that the accrued interest “attaches as a property right incident to the ownership of the underlying principal.” Phillips, 524 U.S. at 168, 118 S.Ct. 1925. Thus, the Court acknowledged that without the principal, there would be no interest and no property right in that interest. Because the latter does not exist without the former, we believe that it is logically sound to analyze the two in combination for purposes of determining whether a taking of property occurred. In a similar analysis of interest accruing on deposited funds, the Court characterized the interest on principal as a “beneficial use of [the owner’s] property” or “[a restriction of] the owner’s full exploitation of the property,” Webb’s, 449 U.S. at 163, 101 S.Ct. 446, thus suggesting that it did not view the principal and the interest as separate and distinct property interests. Applying the same reasoning, the property that we examine is a combination of the principal, which Appellants argue they have a right to keep from earning interest accruing to the State, and interest generated thereon, which Appellants argue has been taken from them.

a. Per se v. Ad Hoc Analysis

We have generally accepted two methods of analysis in takings eases: the per se analysis used in Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 441, 102 S.Ct. 3164, 73 L.Ed.2d 868 (1982), and the ad hoc analysis used in Penn Central Transportation Co. v. City of New York, 438 U.S. 104, 124, 98 S.Ct. 2646, 57 L.Ed.2d 631 (1978). The per se analysis has not typically been employed outside the context of real property. It is a particularly inapt analysis when the property in question is money. As the Supreme Court has observed, “[i]t is artificial to view deductions of a percentage of a monetary award as physical appropriations of property. Unlike real or personal property, money is fungible.” Sperry Corp., 493 U.S. at 62 n. 9, 110 S.Ct. 387. The Court reaffirmed this view in Eastern Enterprises v. Apfel, 524 U.S. 498, 530, 118 S.Ct. 2131, 141 L.Ed.2d 451 (1998), when it held that although Eastern was required to pay millions of dollars to its employee benefits funds, it “is not, of course, a permanent physical occupation of Eastern’s property of the kind that we have viewed as a per se taking.” Eastern Enters., 524 U.S. at 530, 118 S.Ct. 2131. We have endorsed Sperry’s conclusion that money differs from physical property in respects significant to takings analysis. Applying Sperry’s rationale, we held that an “[ordinance [imposing a fee in connection with the issuance of permits for nonresidential development to finance low-income housing] does not, as appellants suggest, constitute a taking per se.” Commercial Builders of N. Cal. v. City of Sacramento, 941 F.2d 872, 875 (9th Cir.1991). Other circuits have similarly approved of this aspect of Sperry. See Meriden Trust and Safe Deposit Co. v. FDIC, 62 F.3d 449, 454 (2d Cir.1995) (ad hoc analysis employed to determine whether an assessment under the Federal Deposit Insurance Act’s cross-guarantee provision that rendered Meridian Trust insolvent constituted a taking); Unity Real Estate Co. v. Hudson, 178 F.3d 649, 674 (3d. Cir.), cert. denied, 528 U.S. 963, 120 S.Ct. 396, 145 L.Ed.2d 309 (1999) (ad hoc analysis employed to determine whether requiring plaintiffs to pay-benefits under the Coal Industry Retiree Health Benefit Act constituted an unconstitutional taking where it would bankrupt the company because “the categorical approach [to Takings Clause claims] has only been used in real property cases” and states traditionally have a high degree of control over commercial dealings); Branch v. United States, 69 F.3d 1571, 1576 (Fed.Cir.1995) (ad hoc analysis employed to determine whether an assessment under the Federal Deposit Insurance Act’s cross-guarantee provision constituted a taking because “the challenged assessment did not constitute either an invasion or a restriction on the use of real property”); Nixon v. United States, 978 F.2d 1269, 1285 (D.C.Cir.1992) (characterizing Sperry as “distinguishing between money, which is not subject to the per se doctrine because it is fungible, and ‘real or personal property’ ” (citation omitted)).

When similarly faced with the question whether a policy that transferred the interest that accrued on interpleader funds deposited in Florida courts to the clerk of the court was an unconstitutional taking in Webb’s Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 163-64, 101 S.Ct. 446, 66 L.Ed.2d 358 (1980), the Supreme Court used the ad hoc analysis of Penn Central Transportation Co. v. New York, 438 U.S. 104, 98 S.Ct. 2646, 57 L.Ed.2d 631 (1978), as opposed to Loretto’s per se approach. Although in the past it had “been permissive in upholding governmental action that may deny the property owner of some beneficial use of his property or that may restrict the owner’s full exploitation of the property, if such public action is justified as promoting the general welfare,” the Court concluded that Florida’s policy had done more than “adjust [ ] the benefits and burdens of economic life to promote the common good.” Webb’s Fabulous Pharm., Inc., 449 U.S. at 163, 101 S.Ct. 446 (citation and quotation marks omitted). The Court characterized the Florida policy of retaining the interest from interpleader accounts — the interest at issue exceeded $90,000 — as a “forced contribution to general governmental revenues” for which “[n]o police power justification is offered.” Id. The Court compared the county’s appropriation of interest to that addressed in United States v. Causby, 328 U.S. 256, 262-63 n. 7, 66 S.Ct. 1062, 90 L.Ed. 1206 (1946), in which the Government had appropriated the air space above claimant’s land as part of the flight pattern for military aircraft, destroying its use as a chicken farm. The Supreme Court later categorized Causby as an ad hoc case, when it reviewed the factors that had a particular significance on the “essentially ad hoc, factual inquiries” in the Court’s Takings Clause jurisprudence in Penn Central, 438 U.S. at 123-28, 98 S.Ct. 2646.

Our conclusion that we should take guidance from the Court’s analysis in Webb’s is bolstered by the Supreme Court’s reliance on the Webb’s decision in Phillips when it determined that a property right existed in the first place. Both cases applied the same common law rule — “any interest ... follows the principal” — in concluding that the interest at issue was the property of the owner of the principal. Phillips, 524 U.S. at 166, 118 S.Ct. 1925.

Moreover, we are presented with the very circumstances for which the Penn Central analysis was intended. Here, the government’s “interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good.” Penn Central, 438 U.S. at 124, 98 S.Ct. 2646. In creating its IOLTA program, Washington State concluded that “ ‘the health, safety, morals, or general welfare’ would be promoted,” see Penn Central, 438 U.S. at 125, 98 S.Ct. (citation omitted), by using the interest generated on IOLTA funds to help fund legal services for the poor. Although the IOLTA program, like most government regulations, “curtails some potential for the use or economic exploitation of private property!,] requirfing] compensation in all such circumstances would effectively compel the government to regulate by purchase.” Andrus v. Allard, 444 U.S. 51, 65, 100 S.Ct. 318, 62 L.Ed.2d 210 (1979) (emphasis in original) (applying Penn Central ’s ad hoc analysis to determine if regulations restricting one means of disposing of certain Indian artifacts was an unconstitutional taking). We do not believe that the Fifth Amendment demands such an extreme result. The Takings Clause was never intended to replace the role of the people in determining which social programs are appropriate, and “has not been understood to be a substantive or absolute limit on the government’s power to act. That Clause operates as a conditional limitation, permitting the government to do what it wants so long as it pays the charge.” Eastern Enters., 524 U.S. at 545, 118 S.Ct. 2131 (Kennedy, J., concurring in judgment and dissenting in part).

That the banking industry is the regulatory backdrop for our decision also counsels against the application of the per se analysis to the regulations of the use of money at issue. Such analysis has almost exclusively been employed in situations involving real property. In creating its IOLTA program, Washington has not encroached upon a domain devoid of governmental regulation. As the Phillips majority recognized, it is the Federal Government’s own regulations that make the state IOLTA programs feasible. Specifically, “the Federal Government imposes tax reporting costs only on those who attempt to exercise control over the interest their funds generate, see Rev. Rul. 81-209, 1981-2 Cum. Bull. 16 [and] prohibits for-profit corporations from holding funds in NOW accounts if the interest is paid to the corporation, but permits corporate funds to be held in NOW accounts if the interest is paid to the [IOLTA fund], see Federal Reserve’s IOLTA letter.” Phillips, 524 U.S. at 170-71, 118 S.Ct. 1925. We agree with the reasoning of the Federal Circuit:

Because of “the State’s traditionally high degree of control of commercial dealings,” Lucas, 112 S.Ct. at 2899, the principles of takings law that apply to real property do not apply in the same manner to statutes imposing monetary liability. Thus, even though taxes or special municipal assessments indisputably “take” money from individuals or businesses, assessments of that kind are not treated as per se takings under the Fifth Amendment.

Branch, 69 F.3d at 1576 (citations omitted). Given the highly-regulated nature of the banking industry, individuals should expect that their commercial transactions, including their bank deposits, will be regulated. In contrast, “property law has long protected an owner’s expectations that he will be relatively undisturbed at least in the possession of his property.” Loretto, 458 U.S. at 436, 102 S.Ct. 3164. While requiring an apartment owner to allow the “direct physical attachment of plates, boxes, wires, bolts, and screws to the building” is directly contrary to the history and tradition of property law, regulating what a bank depositor may earn on a particular bank deposit is concordant with the history and tradition of banking practice. Id. at 420, 102 S.Ct. 3164.

Although we note that the Fifth Circuit recently has decided in a two to one decision to adopt the per se method of analysis in similar (but not identical) circumstances, see Washington Legal Foundation v. Texas Equal Access to Justice Foundation, 270 F.3d 180 (5th Cir.2001), given the monetary nature of the property in question, the public nature of the IOLTA program, and the highly-regulated nature of the banking industry, we believe that the better approach is that of Penn Central. Through the IOLTA program, the State of Washington may properly adjust the rights of individuals for the benefit of the public as long as its actions are “reasonably necessary to the effectuation of a substantial public purpose,” Penn Central, 438 U.S. at 127, 98 S.Ct. 2646, a determination that can be made only by engaging in the fact-specific ad hoc analysis. Following the Supreme Court’s lead in Webb’s, and the dictates of well-established takings jurisprudence, we not only believe it is entirely appropriate to apply Penn Central’s ad hoc takings analysis to the IOLTA program, but that such an analysis is compelled.

b. Application of Ad Hoc Analysis

In conducting the factual inquiry required by Penn Central’s ad hoc analysis, we may conclude a taking has occurred only if a particular regulation goes so far that it “force[s] ‘some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.’ ” Wash. Legal Found. v. Mass. Bar Found., 993 F.2d at 974 (quoting Armstrong v. United States, 364 U.S. 40, 49, 80 S.Ct. 1563, 4 L.Ed.2d 1554 (1960)). Although the ad hoc analysis provides no “ ‘set formula’ for determining when ‘justice and fairness’ require that economic injuries caused by public action be compensated by the government, rather than remain disproportionately' concentrated on a few persons,” the Supreme Court has principally relied on three factors: (1) “[t]he economic impact of the regulation on the claimant;” (2) “the extent to which the regulation has interfered with distinct investment-backed expectations;” and (3) “the character of the governmental action.” Penn Central, 438 U.S. at 124, 98 S.Ct. 2646; Phillips, 524 U.S. at 176, 118 S.Ct. 1925 (“Attention should be paid to the nature of the government’s action, its economic impact, and the degree of any interference with reasonable investment-backed expectations”) (Souter, J., dissenting) (citation omitted). Although we proceed to consider these factors in the context of the LPO-deposited funds here at issue, the Penn Central analysis — as opposed to the per se analysis — applies with the same force of logic to lawyer-deposited client funds.

(i) Economic Impact

Before Rule 12.1 was enacted, escrow and title companies deposited customer trust funds into non-interest bearing checking accounts despite Congress’s authorization of interest-bearing NOW accounts in 1980. Even today, those escrow and title companies that do not employ LPOs generally do not use NOW accounts because of the expense and difficulty involved in crediting the proper amount of interest to each affected person and because many of these clients are for-profit organizations prohibited from using NOW accounts. Thus, because no interest would be earned on client funds deposited by escrow and title companies absent the IOLTA program, requiring those companies to place client trust funds in IOLTA accounts has no economic impact on the owners of the principal. Indeed, if there be any economic impact, it is a positive one. Before their enactment, client trust funds were not placed in interest-bearing trust accounts. Following their enactment, however, client trust funds must be placed in interest-bearing accounts if they are not placed in IOLTA accounts. Thus, the IOLTA program, at worst, maintains the status quo and, at best, provides clients with interest they otherwise would not have earned.

Furthermore, the IOLTA regulations themselves provide that only those funds that would not earn a net interest — either on their own or when pooled with subac-counting — are to be deposited in IOLTA accounts. If for some reason, funds are placed in an IOLTA account which, due to miscalculation on the part of the LPO or some unforeseen delay, could have earned a net positive interest, the “taking” of that generated interest would be the direct result of the LPO’s violation of the Admission to Practice Rules. Because such a violation cannot be attributable to the State, it cannot implicate the Takings Clause. Although Appellant Hayes believes that his “choice to receive the interest from my withholdings” was taken and Appellant Brown objects to “hav[ing] no control over where the interest” goes, absent the IOLTA program, neither would have earned a positive net interest to receive or control. Brown concedes this fact. In response to being asked whether he was arguing that without IOLTA he would have earned $4.96, the amount calculated as the interest earned on the deposit at issue, Brown acknowledged that “[wjithout IOLTA in place I may not have earned anything.” Thus, because neither Brown nor Hayes would have earned net interest on their principal deposits, placing their funds in IOLTA accounts had no direct economic impact on them.

Nonetheless, Brown and Hayes maintain that they suffered a direct economic impact because, once escrow and title companies employing LPOs were required to place client funds in interest bearing IOLTA accounts, some banks decided to stop offering earnings credits due to the cost of simultaneously paying interest on IOLTA accounts and providing earnings credits. Brown and Hayes claim that, because some escrow and title companies charge IOLTA fees to make up for the lost earnings credits, the cost of their real estate transactions increased. This assertion does not affect our economic impact analysis, for two reasons. First, neither Brown nor Hayes has established either that they were charged an IOLTA fee or that the banks used by their escrow companies have stopped offering earnings credits. Second, the earnings credits were incentive payments to the escrow companies, not their customers, and, as such, the indirect economic impact on the escrow company customers of the companies’ loss of credits cannot be considered as part of a takings analysis.

To the contrary, Skagit Bank, the bank holding Brown’s principal, is among those that continue to give earnings credits for IOLTA accounts. Brown, however, argues that “it’s on a really reduced scale since IOLTA came into effect.” Thus, Brown claims that although he would not receive a direct payment of interest without IOLTA, he lost the equivalent, which “would have been earned in the sense of earnings credits” and have kept his costs down. He, however, fails to establish how much the additional costs were or whether they even existed.

Hayes’s principal was deposited in an IOLTA account, Fidelity National Title Company of Washington (“Fidelity”), held with Seafirst Bank. Although Seafirst stopped offering earnings credits on IOLTA accounts some time after Rule 12.1 was adopted, the record does not allow us to determine whether Fidelity passed the loss of earnings credits onto its customers by imposing an IOLTA fee. Hayes’s escrow closing statement does not appear to include an IOLTA fee, and Hayes does not assert that such a fee was charged. As support for his claim, Hayes relies solely on his unsupported belief that “escrow companies] in order to close the property ... have to increase their fees and I have to pay them an increased fee to cover the cost of IOLTA.”

The record also fails to establish whether, as a general matter, those escrow companies that deal with banks that have stopped giving earnings credits in fact charge an additional fee to cover the loss. It seems, for example, that Daugs’s company does not impose additional costs to make up for the loss of earnings credits. On the other hand, Maxwell testified that Pacific Northwest Title Company charged a flat rate “trust accounting fee” after the enactment of Rule 12.1 during the time that it still employed LPOs. Attached to the declaration of Gerald Wheeler, a C.P.A. who does computerized escrow accounting for banks, is an escrow settlement statement from an unrelated land transaction. Both the buyer and the seller were charged $5.40 as an “IOLTA/Ac-counting Fee” and a tax on the IOLTA/Aceounting Fee. Yet Keith Leffler, an associate professor of Economics at the University of Washington, argues that IOLTA fees are really an example of sellers “testing whether they can profitably raise prices.” According to Leffler, “[i]t is very likely that the IOLTA program has had no effect on the prices paid by the users of escrow services.” He believes that only an economic analysis could determine whether IOLTA has had an adverse impact on escrow fees, but no such analysis has been done. Furthermore, because those companies that impose IOLTA fees charge both the buyer and seller, Leffler argues that “the amount [bears] no relationship to any change in earnings credits from ... earnest money deposit[s].... [E]ven if one could show that as a result of [a loss of earning credits] there was an average increase in the prices paid by users of these services, there would be no reason to believe that the impact on any particular client would bear any relationship to any loss of earnings credit on the funds of that client, much less any relationship to the interest paid to the IOLTA program on that client’s funds.”

Moreover, as Professor Leffler’s economic analysis demonstrates, even if there were an economic impact on escrow companies’ customers such as Brown and Hayes, that impact would have been the result of discrete, discretionary pricing decisions by the affected escrow companies in response to the bank’s decision to discontinue or decrease the availability of discounts on the companies’ banking charges. While the dissent focuses on the fact that the payment of the earnings credits demonstrates that the deposits had economic value to the bank, one hardly needs that evidence to understand that the entire basis for the profitability of the banking industry is the value to the bank of the temporary use of other people’s money. Much more important for present purposes is the recognition that under the commercial arrangement between the escrow companies, the banks, and the escrow companies’ customers as it existed before IOLTA, the value of that use was split between the banks and the escrow companies. The customers had no property interest in that value, and, although the escrow companies could choose to pass on the lower overhead resulting from their lower banking costs to their customers, that pricing decision did not create any property interest in the earnings credits. It is true, of course, that because of the IOLTA program the value to the bank of the temporary use of the escrow funds is less (although not zero — banks do not distribute as interest the full value of deposited money, or they would have no earnings). But that does not change the fact that the earnings credits were nothing but incentive payments to repeat customers, the escrow companies, to use one bank rather than another, and were never the property of the escrow companies’ customers.

Because the earnings credits did not belong to the customers in the first place, but rather were incentives provided to the escrow companies to use as they pleased for any covered banking charges, any impact on the customers is no different than many caused by economic regulation of someone else. Any price increase to customers due to increased banking costs would be just the indirect result of a decrease over time in the escrow companies’ ability to acquire a certain kind of property for themselves. Moreover, any price increase would be the direct result of a private, discretionary pricing decision in no way mandated by the government. As such, those price increases should no more count as part of a takings analysis regarding the customers’ property than any other economic decision adverse to customers a retailer makes because of the economic impact on it of regulatory changes affecting one of its suppliers. Assume, for example, that changes in banking regulations meant that a supermarket would have to pay higher fees when depositing its daily sales receipts, and consequently the supermarket raised the price of milk. Neither past nor future purchasers of milk, we presume, could validly claim that the price increase was a taking of their property by the government.

Neither Brown nor Hayes can show that the cost of their individual real estate transactions increased as a result of the IOLTA rules. Therefore, we conclude that the alleged loss of the escrow and title companies’ earnings credits had no economic impact on them.

(ii) Interference with Distinct Investmenb-Backed Expectations

“Governmental action through regulation of the use of private property does not cause a taking unless the interference is significant.” Wash. Legal Found. v. Mass. Bar Found., 993 F.2d at 976 (citing Andrus, 444 U.S. at 66-67, 100 S.Ct. 318). Under Washington State’s IOLTA rules, by definition, Appellants Hayes’s and Brown’s funds would not have been placed in an IOLTA account if they were capable of generating a net interest either on their own or in a “pooled interest-bearing trust account with subaccounting that will provide for computation of interest earned by each client’s funds and the payment thereof to the respective party.” Wash. Admission to Practice R. 12.1(c)(2). Brown recognized that fact when he testified that “[w]ithout IOLTA in place I may not have earned anything.” Furthermore, because escrow and land title companies, as a general practice, never placed client trust funds in interest-bearing NOW accounts, neither Brown nor Hayes could have expected their funds to have earned interest while in the hands of their respective escrow and title companies.

Due to the structure of the IOLTA program and the general practices of escrow and title companies, neither Brown nor Hayes could have expected his principal to earn a net interest, and thus, the IOLTA program could not have interfered with their investment-backed expectations.

(iii) Character of Government Action

Brown and Hayes concede that they would have no interest without IOLTA, but they argue that, once interest is created, they have the right to determine what — 'if anything — is done with the interest. Viewing the accrued interest as its own entity, divorced from the principal, for the purpose of characterizing the extent of the “property” taken, Brown and Hayes assert that because the IOLTA rules dictate that all the interest earned on IOLTA accounts must go to the Legal Foundation of Washington, the IOLTA program is the equivalent of a 100 percent physical invasion of their property. We disagree.

The IOLTA rules are better viewed as a regulation of the uses of Brown’s and Hayes’s property, consisting of the principal and the accrued interest in aggregation. That said, the character of the government action is best viewed in the context of the industry it regulates. Banking is a heavily regulated industry, and the ability of particular types of deposits to earn interest has often been the subject of banking regulations. In fact, without the Federal Government’s regulations regarding what types of accounts can earn interest, the IOLTA program may never have been born. Moreover, the ability to practice a profession — and the conduct expected of those who do — -is also heavily regulated. Lawyers have always been held to the highest legal and ethical standards. As part of their state bar membership, lawyers in Washington are encouraged to provide legal services “to persons of limited means or to public service ' or charitable groups.” Wash. Rules of Profl Conduct R. 6.1. With or without IOLTA, they are required to segregate their clients’ funds from their own to ensure that funds are not used improperly. Wash. Rules of Profl Conduct R. 1.14. When LPOs are admitted to perform a limited practice of law, they are held to the same legal and ethical standards as lawyers. Thus, they, too, are expected to safeguard their clients’ property and to do their best to ensure that the legal system is available to all who need it. Viewed in this context, the IOLTA regulations are not out of character for either the commercial industry or the professions they affect.

The Takings Clause does not prevent the Government from being able to regulate how people use their property but limits that ability to what is “just and fair.” Andrus, 444 U.S. at 66-67, 100 S.Ct. 318. Although “[t]he government may impose regulations to adjust rights and economic interests among people for the public good,” it may “not force ‘some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.’ ” Wash. Legal Found. v. Mass. Bar Found., 993 F.2d at 974 (citation omitted). Here, neither Brown nor Hayes is being singled out to bear a burden that should be borne by the public as a whole. They, as participants in our legal system, are required to place their money in IOLTA trust accounts that generate funds at no cost to them and that expand access to the legal system from which they benefit. Given the highly regulated nature of the banking and professional industries the IOLTA rules affect, this additional unobtrusive regulation does not exceed what is “just and fair” — especially where Brown and Hayes would have earned no interest absent IOLTA. We therefore conclude that Washington State’s IOLTA program does not take either Brown’s or Hayes’s property.

2. Just Compensation

There is a second reason why Washington State’s IOLTA program does not work a constitutional violation with regard to Brown’s and Hayes’s property: Even if their property was taken, the Fifth Amendment only protects against a taking without just compensation. Because of the way the IOLTA program operates, the compensation due Brown and Hayes for any taking of their property would be nil. There was therefore no constitutional violation when they were not compensated.

Determining what constitutes “just compensation” requires putting “the owner of the condemned property ‘in as good a position pecuniarily as if the property had not been taken.’ ” United States v. 564.54 Acres of Land, 441 U.S. 506, 510, 99 S.Ct. 1854, 60 L.Ed.2d 435 (1979) (quoting Olson v. United States, 292 U.S. 246, 255, 54 S.Ct. 704, 78 L.Ed. 1236 (1934)). Incidental losses that result from the takings are not compensable. Winn v. United States, 272 F.2d 282, 286 (9th Cir.1959) (rejecting claim that compensation for the loss of business resulting from highway construction should be included in compensation accounting for value of the lost land itself). “[T]he question is, What has the owner lost? not, What has the taker gained?” Boston Chamber of Commerce v. City of Boston, 217 U.S. 189, 195, 30 S.Ct. 459, 54 L.Ed. 725 (1910). Thus, we must determine what Brown and Hayes would have enjoyed in the absence of IOLTA.

Land Title Company deposited Brown’s money — $ 90,521.29 — into an IOLTA account at Skagit State Bank where it remained for two days. The escrow IOLTA account was earning 1 percent per ann-uum. Hayes’s $14,793.32 was deposited in Fidelity’s IOLTA account; $2,000 remained in the IOLTA account for sixteen days and $12,793.32 remained in the account for two days. It is unclear from the record what the interest rate was at Hayes’s bank. As previously discussed, however, without IOLTA, neither Brown nor Hayes would have earned interest on his principal because by regulatory definition, their funds would have not otherwise been placed in an IOLTA account, and the general practice of escrow and title companies was — and still is — to place funds in noninterest-bearing accounts when IOLTA does not apply. Although without IOLTA, Brown and Hayes at most would have had the right to keep their principal from earning interest, the loss of that right has no economic value.

In seeking compensation for the interest their principal earned when deposited in the IOLTA account, Brown and Hayes are in actuality seeking compensation for the value added to their property by Washington’s IOLTA program. I-n other words, Brown and Hayes are seeking compensation not for the value of what they lost, but for the value of what the Legal Foundation of Washington has created. Our Takings Clause jurisprudence has never “force[d] a State to confer, upon the owner of property that cannot produce anything of value for him, ownership of the fruits of that property should that property be rendered fertile through the government’s lawful intervention.” Phillips, 524 U.S. at 181, 118 S.Ct. 1925 (Breyer J., dissenting).

In the context of real property, it is clear that the owner of condemned land need not be compensated for the value created by the government’s exercise of the power of eminent domain. In United States v. Virginia Electric and Power Co., 365 U.S. 624, 81 S.Ct. 784, 5 L.Ed.2d 838 (1961) (“VEPCO ”), for example, the Court had to determine what compensation was due to the owner of a destroyed perpetual and exclusive flowage easement when the Government, exercising its dominant servitude, “reduce[d] the value of riparian lands by denying the riparian owner access to the stream.” Id. at 629, 81 S.Ct. 784. Without the overriding dominant servitude, “the Government’s destruction of that easement would ordinarily constitute a taking of property within the meaning of the Fifth Amendment.” VEPCO, 365 U.S. at 627, 81 S.Ct. 784. Guided by the principle that the property interest owner “is entitled to be put in as good a position pecuniarily as if his property had not been taken” but not more, id. at 633, 81 S.Ct. 784 (citation omitted), the Court excluded from consideration any value derived from the land’s riparian location and the water power development. Id. at 629, 81 S.Ct. 784. Because the Government’s dominant servitude allowed it to reduce the value of the riparian lands by denying the riparian owner access to the water, “it also permit[ted] the Government to disregard the value arising from this same fact of riparian location in compensating the owner when fast lands are appropriated.” Id. Thus, excluding land’s riparian-based value, the Court determined that just compensation for “the value of the easement is the nonriparian value of the servient land discounted by the improbability of the easement’s exercise.” Id. at 635, 81 S.Ct. 784.

It is also clear that a property owner need not be compensated for losing the ability to use his land when there is no “reasonable probability” that such a use will occur. United States ex rel. Tenn. Valley Auth. v. Powelson, 319 U.S. 266, 275, 63 S.Ct. 1047, 87 L.Ed. 1390 (1943). Thus, when the owner of a condemned parcel of land has been granted the power to take, by eminent domain, riparian lands and water rights to set up a system of hydroelectric power production but has not yet used it, the Government need not compensate him for the lost opportunity. Id. at 285, 63 S.Ct. 1047. Although the value of the condemned property may “reflect not only the use to which the property is presently devoted but also that use to which it may be readily converted,” id. at 275, 63 S.Ct. 1047, it need not reflect “the existence of [a] privilege to use the power of eminent domain” to create a profitable four-dam enterprise in the distant future. Id. at 280, 63 S.Ct. 1047. And although the owner of the property was losing a valuable opportunity, “he [wa]s not being deprived of values which result from his expenditures or activities.” Id.

Furthermore, the Government need not compensate “for any part of what it has added to the land.” City of New York v. Sage, 239 U.S. 57, 61, 36 S.Ct. 25, 60 L.Ed. 143 (1915). Thus, the owner of land condemned for a reservoir is not entitled to compensation for the value added to the land by the availability and adaptability of the reservoir; it need only compensate the owner of the land for what is fairly believed to be the fair market value of the land at the time of condemnation. Sage, 239 U.S. at 61, 36 S.Ct. 25. “The Government cannot ... ‘be made to pay for a loss of theoretical creation, suffered by no one in fact,’ for there is ‘no justice in (requiring the Government to pay) for a loss suffered by no one in fact.’ ” VEPCO, 365 U.S. at 642, 81 S.Ct. 784 (Whittaker, J. dissenting) (citations omitted).

Here, Brown and Hayes admit that, at most, IOLTA takes their right to let their principal lie fallow. In other words, they have lost the opportunity to place the principal in a noninterest-bearing checking account. Once Brown and Hayes gave dominion and control to their respective title and escrow companies, however, their “right” to control how the principal was used had the same value to them as the barren flowage easement would have had in VEPCO, i.e., no value at all. They have produced no evidence that, without IOLTA, they could have dictated how the escrow and title companies handled their principal. Nor have they been deprived of values resulting from their expenditures or activities because, within the restrictions of the IOLTA rules, no such values could exist. Furthermore, while Brown and Hayes have the right to control the accrued interest in theory, as a practical matter, that right will never come to fruition on its own because without IOLTA there is no interest. Thus, although Brown and Hayes may have, at most, lost one of the sticks in their bundle of property rights — -the right to let the principal lie fallow — “[t]here are numerous business losses which result from condemnation of properties but which are not compensable under the Fifth Amendment.” United States ex rel Tenn. Valley Auth., 319 U.S. at 281, 63 S.Ct. 1047. This is one of them.

We therefore hold that even if the IOLTA program constituted a taking of Brown’s and Hayes’s private property, there would be no Fifth Amendment violation because the value of their just compensation is nil.

VI. First Amendment

The district court did not address Appellants’ First Amendment claims because it concluded that Appellants did not have a property right to the interest at issue. Because this conclusion was abrogated by Phillips, the district court must now consider what speech, if any, is at issue and whether the IOLTA program violates any rights Appellants may have emanating from the First Amendment. Therefore, we vacate this judgment and remand Appellants’ First Amendment claims to the district court for further proceedings consistent with this opinion.

VII. Conclusion

For the foregoing' reasons, the district court’s grant of summary judgment with respect to Appellants’ Fifth Amendment claims is affirmed, and its grant of summary judgment with respect to Appellants’ First Amendment claims is vacated and remanded. Each party shall bear its own costs of appeal.

AFFIRMED in part, VACATED in part, and REMANDED.