Washington Legal v. Massachusetts Bar
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Washington Legal v. Massachusetts Bar, (1st Cir. 1993).
Opinion
USCA1 Opinion
June 3, 1993 UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
____________
No. 92-1775
WASHINGTON LEGAL FOUNDATION, ET AL.,
Plaintiffs, Appellants,
v.
MASSACHUSETTS BAR FOUNDATION, ET AL.,
Defendants, Appellees.
____________
ERRATA SHEET
The opinion of this court issued on May 20, 1993, is amended
as follows:
Page 4, lines 5-6 from bottom: Delete 1987 after 11th Cir.
and add (1987) at end of citation: 484 U.S. 917 (1987).
Page 5, line 13: Abbreviate Indiana to Ind.
line 18: Change Assoc. to Ass'n
footnote 1, line 2: Abbreviate Arkansas to Ark.
line 3: Abbreviate Association to Ass'n
line 5: Delete 1984
Page 11, footnote 4, line 9: change and add as follows:
(1st Cir.), cert. denied, 494 U.S. 1082 (1990).
_____ ______
Page 17, line 8: Abbreviate Educational to Educ.
line 9: Abbreviate Foundation to Found.
Page 22, line 18: Delete (1979)
Page 24, line 3: Delete (1979)
Page 36, footnote 15, line 3: add after ...newspaper), cert.
_____
denied, 113 S. Ct. 1067 (1993);
______
line 10: add after ...organizations), cert. denied, 493
_____ ______
U.S. 1094 (1990);
line 11: add after ...NJPIRG), cert. denied, 475 U.S.
_____ ______
1082 (1986);
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
____________________
No. 92-1775
WASHINGTON LEGAL FOUNDATION, ET AL.,
Plaintiffs, Appellants,
v.
MASSACHUSETTS BAR FOUNDATION, ET AL.,
Defendants, Appellees.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Joseph L. Tauro, U.S. District Judge]
___________________
____________________
Before
Breyer, Chief Judge,
___________
Bownes, Senior Circuit Judge,
____________________
and Boudin, Circuit Judge.
_____________
____________________
Richard A. Samp, with whom Daniel J. Popeo, John C. Scully, and
_______________ ________________ _______________
Francis C. Newton, Jr. were on brief, for appellants.
______________________
Allan van Gestel, with whom James C. Rehnquist, John C.
__________________ _____________________ ________
Kissinger, Jr., and Goodwin Procter & Hoar were on brief, for
_______________ _________________________
Massachusetts Bar Foundation, William W. Porter, Assistant Attorney
_________________
General, and Scott Harshbarger, Attorney General, on brief for
__________________
Massachusetts IOLTA Committee, Donald K. Stern, S. Tara Miller, and
________________ _______________
Hale and Dorr on brief for Boston Bar Foundation, Joseph L. Kociubes,
_____________ __________________
Stephanie A. Kelly, Diane E. Cooley, and Bingham, Dana & Gould on
__________________ ________________ ______________________
brief for Massachusetts Legal Assistance Corporation, appellees.
William W. Porter, Assistant Attorney General, and Scott
____________________ _____
Harshbarger, Attorney General, on brief for The Chair of the
___________
Massachusetts Board of Bar Overseers, appellee.
William W. Porter, Assistant Attorney General, and Scott
___________________ _____
Harshbarger, Attorney General, on brief for The Justices of the
___________
Massachusetts Supreme Judicial Court, appellees.
Peter M. Siegel, Randall C. Berg, Jr., and Arthur J. England,
________________ ______________________ ___________________
Jr., and Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A. on
___ __________________________________________________________
brief for Alabama Law Foundation, Inc., Alabama State Bar, Arkansas
IOLTA Foundation, State Bar of Arizona, Arizona Bar Foundation, The
State Bar of California, The Legal Services Trust Fund Commission of
the State Bar of California, Colorado Bar Association, Colorado Lawyer
Trust Account Foundation, Connecticut Bar Foundation, Connecticut Bar
Association, Delaware Bar Foundation, Delaware State Bar Association,
The Florida Bar, The Florida Bar Foundation, Georgia Bar Foundation,
State Bar of Georgia, Hawaii Bar Foundation, Hawaii State Bar
Association, Idaho Law Foundation, Inc., Idaho State Bar, Illinois
State Bar Association, Lawyers Trust Fund of Illinois, The Iowa State
Bar Association, Kansas Bar Foundation, Kentucky IOLTA Fund, Louisiana
State Bar Association, Maine Bar Foundation, Maine State Bar
Association, Maryland Legal Services Corporation, Maryland State Bar
Association, Inc., State Bar of Michigan, Michigan State Bar
Foundation, Inc., Minnesota Lawyer Trust Account Board, The Missouri
Bar, Missouri Lawyer Trust Account Foundation, National Association of
IOLTA Programs, Inc., National Legal Aid & Defender Association
(NLADA), Nevada Law Foundation, New Hampshire Bar Association, New
Hampshire Bar Foundation, New Jersey State Bar Association, New Jersey
State Bar Foundation, The IOLTA Fund of the Bar of New Jersey, New
Mexico Bar Foundation, New York State Bar Association, Interest on
Lawyer Account Fund of the State of New York, North Carolina Bar
Association, North Carolina State Bar Plan for Interest on Lawyers'
Trust Accounts, State Bar Association of North Dakota, Ohio Legal
Services Program of the Ohio Public Defender Commission, Oklahoma Bar
Foundation, Inc., Oregon Law Foundation, Oregon State Bar,
Free access — add to your briefcase to read the full text and ask questions with AI
USCA1 Opinion
June 3, 1993 UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
____________
No. 92-1775
WASHINGTON LEGAL FOUNDATION, ET AL.,
Plaintiffs, Appellants,
v.
MASSACHUSETTS BAR FOUNDATION, ET AL.,
Defendants, Appellees.
____________
ERRATA SHEET
The opinion of this court issued on May 20, 1993, is amended
as follows:
Page 4, lines 5-6 from bottom: Delete 1987 after 11th Cir.
and add (1987) at end of citation: 484 U.S. 917 (1987).
Page 5, line 13: Abbreviate Indiana to Ind.
line 18: Change Assoc. to Ass'n
footnote 1, line 2: Abbreviate Arkansas to Ark.
line 3: Abbreviate Association to Ass'n
line 5: Delete 1984
Page 11, footnote 4, line 9: change and add as follows:
(1st Cir.), cert. denied, 494 U.S. 1082 (1990).
_____ ______
Page 17, line 8: Abbreviate Educational to Educ.
line 9: Abbreviate Foundation to Found.
Page 22, line 18: Delete (1979)
Page 24, line 3: Delete (1979)
Page 36, footnote 15, line 3: add after ...newspaper), cert.
_____
denied, 113 S. Ct. 1067 (1993);
______
line 10: add after ...organizations), cert. denied, 493
_____ ______
U.S. 1094 (1990);
line 11: add after ...NJPIRG), cert. denied, 475 U.S.
_____ ______
1082 (1986);
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
____________________
No. 92-1775
WASHINGTON LEGAL FOUNDATION, ET AL.,
Plaintiffs, Appellants,
v.
MASSACHUSETTS BAR FOUNDATION, ET AL.,
Defendants, Appellees.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Joseph L. Tauro, U.S. District Judge]
___________________
____________________
Before
Breyer, Chief Judge,
___________
Bownes, Senior Circuit Judge,
____________________
and Boudin, Circuit Judge.
_____________
____________________
Richard A. Samp, with whom Daniel J. Popeo, John C. Scully, and
_______________ ________________ _______________
Francis C. Newton, Jr. were on brief, for appellants.
______________________
Allan van Gestel, with whom James C. Rehnquist, John C.
__________________ _____________________ ________
Kissinger, Jr., and Goodwin Procter & Hoar were on brief, for
_______________ _________________________
Massachusetts Bar Foundation, William W. Porter, Assistant Attorney
_________________
General, and Scott Harshbarger, Attorney General, on brief for
__________________
Massachusetts IOLTA Committee, Donald K. Stern, S. Tara Miller, and
________________ _______________
Hale and Dorr on brief for Boston Bar Foundation, Joseph L. Kociubes,
_____________ __________________
Stephanie A. Kelly, Diane E. Cooley, and Bingham, Dana & Gould on
__________________ ________________ ______________________
brief for Massachusetts Legal Assistance Corporation, appellees.
William W. Porter, Assistant Attorney General, and Scott
____________________ _____
Harshbarger, Attorney General, on brief for The Chair of the
___________
Massachusetts Board of Bar Overseers, appellee.
William W. Porter, Assistant Attorney General, and Scott
___________________ _____
Harshbarger, Attorney General, on brief for The Justices of the
___________
Massachusetts Supreme Judicial Court, appellees.
Peter M. Siegel, Randall C. Berg, Jr., and Arthur J. England,
________________ ______________________ ___________________
Jr., and Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A. on
___ __________________________________________________________
brief for Alabama Law Foundation, Inc., Alabama State Bar, Arkansas
IOLTA Foundation, State Bar of Arizona, Arizona Bar Foundation, The
State Bar of California, The Legal Services Trust Fund Commission of
the State Bar of California, Colorado Bar Association, Colorado Lawyer
Trust Account Foundation, Connecticut Bar Foundation, Connecticut Bar
Association, Delaware Bar Foundation, Delaware State Bar Association,
The Florida Bar, The Florida Bar Foundation, Georgia Bar Foundation,
State Bar of Georgia, Hawaii Bar Foundation, Hawaii State Bar
Association, Idaho Law Foundation, Inc., Idaho State Bar, Illinois
State Bar Association, Lawyers Trust Fund of Illinois, The Iowa State
Bar Association, Kansas Bar Foundation, Kentucky IOLTA Fund, Louisiana
State Bar Association, Maine Bar Foundation, Maine State Bar
Association, Maryland Legal Services Corporation, Maryland State Bar
Association, Inc., State Bar of Michigan, Michigan State Bar
Foundation, Inc., Minnesota Lawyer Trust Account Board, The Missouri
Bar, Missouri Lawyer Trust Account Foundation, National Association of
IOLTA Programs, Inc., National Legal Aid & Defender Association
(NLADA), Nevada Law Foundation, New Hampshire Bar Association, New
Hampshire Bar Foundation, New Jersey State Bar Association, New Jersey
State Bar Foundation, The IOLTA Fund of the Bar of New Jersey, New
Mexico Bar Foundation, New York State Bar Association, Interest on
Lawyer Account Fund of the State of New York, North Carolina Bar
Association, North Carolina State Bar Plan for Interest on Lawyers'
Trust Accounts, State Bar Association of North Dakota, Ohio Legal
Services Program of the Ohio Public Defender Commission, Oklahoma Bar
Foundation, Inc., Oregon Law Foundation, Oregon State Bar,
Pennsylvania Bar Association, Lawyer Trust Account Board
[Pennsylvania], Philadelphia Bar Association, Rhode Island Bar
Foundation, Seattle-King County Bar Association, South Carolina Bar,
The South Carolina Bar Foundation, South Dakota Bar Foundation,
Tennessee Bar Association, Tennessee Bar Foundation, Texas Equal
Access to Justice Foundation, State Bar of Texas, Utah Bar Foundation,
Utah State Bar, Vermont Bar Association, Vermont Bar Foundation, The
Virginia Bar Association, Virginia Law Foundation, Virginia State Bar,
Washington State Bar Association, Legal Foundation of Washington, West
Virginia Bar Foundation, Inc., West Virginia State Bar, amici curiae.
J. Michael McWilliams, Dennis A. Kaufman, and John H. Morrison on
_____________________ _________________ ________________
brief for The American Bar Association, amicus curiae.
Gerald B. Gallagher, on brief pro se, amicus curiae.
___________________
Kathleen McDonald O'Malley, Chief Counsel, Patrick A. Devine,
____________________________ __________________
Assistant Attorney General, Lee Fisher, Attorney General of Ohio,
___________
Winston Bryant, Attorney General of Arkansas, Richard Blumenthal,
_______________ ___________________
Attorney General of Connecticut, Larry EchoHawk, Attorney General of
______________
Idaho, Roland W. Burris Attorney General of Illinois, Bonnie J.
__________________ _________
Campbell, Attorney General of Iowa, Michael E. Carpenter, Attorney
________ _____________________
General of Maine, J. Joseph Curran, Jr., Attorney General of Maryland,
_____________________
Hubert H. Humphrey, III, Attorney General of Minnesota, Mario J.
_________________________ _________
Palumbo, Attorney General of West Virginia, Mike Moore, Attorney
_______ __________
General of Mississippi, Frankie Sue Del Papa, Attorney General of
______________________
Nevada, Robert J. Del Tufo, Attorney General of New Jersey, Tom Udall,
__________________ _________
Attorney General of New Mexico, Nicholas J. Spaeth, Attorney General
__________________
of North Dakota, Earnest D. Preate, Jr., Attorney General of
__________________________
Pennsylvania, Dan Morales, Attorney General of Texas, Jeffrey L.
____________ ___________
Amestoy, Attorney General of Vermont, Robert Abrams, Attorney General
_______ _____________
of New York, Charles W. Burson, Attorney General of Tennessee, Ken
__________________ ___
Eikenberry, Attorney General of Washington, and Mary Sue Terry,
__________ ________________
Attorney General of Virginia, on brief for the States of Ohio,
Arkansas, Connecticut, Idaho, Illinois, Iowa, Maine, Maryland,
Minnesota, Mississippi, Nevada, New Jersey, New Mexico, New York,
North Dakota, Pennsylvania, Tennessee, Texas, Vermont, Washington,
West Virginia, and Virginia, amici curiae.
____________________
May 20, 1993
____________________
BOWNES, Senior Circuit Judge. This appeal involves
BOWNES, Senior Circuit Judge
____________________
a challenge to the Massachusetts Interest on Lawyers' Trust
Accounts ("IOLTA") program. The district court granted the
defendants' motion to dismiss the plaintiffs' claims that the
IOLTA program violated their First Amendment rights of
freedom of speech and association, and effected a taking of
their property in violation of the Fifth and Fourteenth
Amendments. We affirm.
I.
I.
BACKGROUND
BACKGROUND
__________
Traditionally, in Massachusetts and in other
states, clients' funds which lawyers held for a short term or
in nominal amounts were deposited into non-interest bearing
pooled trust accounts. See, e.g., In Re Mass. Bar Ass'n, 478
___ ____ _____________________
N.E.2d 715, 716 (Mass. 1985); In Re Minn. State Bar Ass'n,
____________________________
332 N.W.2d 151, 155-56 (Minn. 1982). Banking laws and the
ethical obligation of lawyers to maintain clients' funds so
that they were immediately available for reimbursement
prevented such pooled trust accounts from accruing interest.
Cone v. State Bar of Fla., 819 F.2d 1002, 1005 (11th Cir.),
____ __________________
cert. denied, 484 U.S. 917 (1987). Interest earned by pooled
_____ ______
trust accounts remained with the banking institution which
held the funds. Id. With the advent of Negotiable Order of
___
Withdrawal ("NOW") accounts authorized by the Consumer
Checking Account Equity Act, interest became available on
-4-
checking accounts for eligible depositors. Id. at 1005-06.
___
Eligible depositors include individual owners of deposited
funds and certain charitable, non-profit or public interest
entities including IOLTA programs. See id.; In Re N. H. Bar
___ ___ ________________
Ass'n, 453 A.2d 1258, 1259 (N.H. 1982). During the late
_____
1970's and through the 1980's, Florida and many other states
proposed IOLTA programs and courts upheld the programs
finding them constitutionally and ethically permissible.1
As of January, 1992, forty-nine states and the District of
Columbia had authorized IOLTA programs. ABA/BNA Lawyers'
Manual on Professional Conduct 45:202 (1992). Indiana
remains the only state which has not adopted an IOLTA
program. Id.; In Re Public Law No. 154-1990, 561 N.E.2d 791
___ _____________________________
(Ind. 1990); In Re Ind. State Bar, 550 N.E.2d 311 (Ind.
______________________
1990).
The Massachusetts IOLTA program was established by
amendment to Canon 9, DR 9-102 of Rule 3:07 of the Rules of
the Supreme Judicial Court, effective September 1, 1985, the
"IOLTA Rule." Mass. Bar Ass'n, 478 N.E.2d at 720-21. From
_______________
1985 until 1990, the IOLTA program operated as a voluntary
____________________
1 See, e.g., Cone, 819 F.2d 1002; In Re Interest on Trust
___ ____ ____ _______________________
Accounts, 402 So.2d 389 (Fla. 1981); In Re Ark. Bar Ass'n,
________ _____________________
738 S.W.2d 803 (Ark. 1987); Mass. Bar Ass'n, 478 N.E.2d 715;
_______________
Carroll v. State Bar of California, 213 Cal. Rptr. 305 (4th
_______ ________________________
Dist.), cert. denied sub nom. Chapman v. State Bar of Calif.,
_____ ______ ___ ____ _______ ___________________
474 U.S. 848 (1985); In Re Interest on Lawyers' Trust
____________________________________
Accounts, 672 P.2d 406 (Utah 1983); N. H. Bar Ass'n, 453 A.2d
________ _______________
1258; Minn. State Bar Ass'n, 332 N.W.2d 151.
_____________________
-5-
system. Attorneys could elect to participate by establishing
an interest-bearing IOLTA account and by complying with DR 9-
102(C) requirements which included choosing a recipient
charity from a group designated by the IOLTA Committee.
In 1989, the Massachusetts Supreme Judicial Court
("SJC") converted the voluntary IOLTA program into a
mandatory program by amending the IOLTA Rule, effective
January 1, 1990. As amended, the rule required all
Massachusetts lawyers to deposit client funds into interest
bearing accounts: either (1) a pooled IOLTA account if, in
the judgment of the lawyer, the deposits were nominal in
amount or to be held for only a short period of time; or (2)
individual accounts for all other client funds. The Rule
required lawyers or law firms to direct the banks holding
their IOLTA accounts to disburse accrued interest to a
charitable entity selected by the lawyer or firm from a group
designated by the SJC. The designated charities were
Massachusetts Legal Assistance, the Massachusetts Bar
Foundation, and the Boston Bar Foundation.
The SJC again amended the IOLTA Rule, effective
January 1, 1993, to change the process for disbursement of
IOLTA funds.2 The IOLTA Rule now vests responsibility for
____________________
2 The Massachusetts Supreme Judicial Court amended Rule
3:07, DR 9-102(C) by Order 92-18, effective January 1, 1993.
A copy of DR 9-102 and the amendment appear in the appendix
following this opinion.
-6-
disbursement of IOLTA funds in the IOLTA Committee and
eliminates choice by lawyers of recipient eligible charities.
The IOLTA Committee must disburse sixty-seven percent of all
IOLTA funds to Massachusetts Legal Assistance and the
remaining thirty-three percent to "other designated
charitable entities."
The parties have not briefed or argued any issues
in the context of the 1993 amendment to the IOLTA Rule.3
Although the amendment of the IOLTA Rule affects the process
of funds disbursement, the changes are not material to this
decision. None of the parties argued that the lawyers'
choice of recipient charities, as provided by the 1990
version of the IOLTA Rule, was significant. The funds are
still disbursed primarily to Massachusetts Legal Assistance
with the remainder to "other designated eligible charities"
which are still the Massachusetts Bar Foundation and the
Boston Bar Foundation. In addition, the mission of IOLTA
funds remains the same: "The Massachusetts Legal Assistance
Corporation may use IOLTA funds to further its corporate
purpose and other designated charitable entitles [sic] may
use IOLTA funds either for (1) improving the administration
of justice or (2) delivering civil legal services to those
who cannot afford them." Mass. Sup. J. C. R. 3:07, DR 9-
____________________
3 The Massachusetts Attorney General's Office sent this
court a copy of the amendment to DR 9-102(C) by letter dated
February 12, 1993.
-7-
102(C), as amended by Order 92-18, effective Jan. 1, 1993.
__ _______ __
The corporate purpose of the Massachusetts Legal Assistance
Corporation is to
provid[e] financial support for legal
assistance programs that provide
representation to persons financially
unable to afford such assistance in
proceedings or matters other than
criminal proceedings or matters, except
those proceedings or matters in which the
commonwealth is required to provide
representation.
Mass. Gen. L. ch. 221A, 2 (West Supp. 1992).
Unless further designation is necessary for
clarity, we will refer to the currently effective
Massachusetts Supreme Judicial Court Rule 3:07, DR 9-102(C)
as "DR 9-102(C)" or the "IOLTA Rule."
A. The Plaintiffs' Claims
______________________
There are five plaintiffs in this action. The
Washington Legal Foundation ("WLF") is a non-profit, public
interest law and policy center operating in Washington, D.C.
Karen Parker is a citizen of Massachusetts who has employed
lawyers in connection with her real estate business and other
businesses, which has resulted in her money being deposited
in IOLTA accounts. Stephanie Davis is a citizen of
Massachusetts who has not had her money placed in IOLTA
accounts, but she anticipates that, in the future, she may
need to hire an attorney which would cause her money to be
deposited in an IOLTA account. William R. Tuttle is an
-8-
attorney practicing in Abington, Massachusetts, without an
IOLTA account. Timothy J. Howes is an attorney in
Springfield, Massachusetts, where he maintains an IOLTA
account in the Shawmut Bank. Howes is suing on behalf of
himself and on behalf of his clients whose funds are
deposited in his IOLTA account.
The defendants are the Massachusetts Bar
Foundation, the Boston Bar Foundation, the Massachusetts
Legal Assistance Corporation, Katherine S. McHugh (in her
capacity as chair of the Massachusetts IOLTA Committee), Fran
F. Burns (in his capacity as chair of the Board of Bar
Overseers), and the Justices of the Supreme Judicial Court of
Massachusetts. The plaintiffs allege, pursuant to 42 U.S.C.
1983, that they have been deprived, under color of state
law, of their rights secured by the First, Fifth and
Fourteenth Amendments of the Constitution by operation of the
Massachusetts IOLTA program. 1. Count One: First and
_________________________
Fourteenth Amendments
_____________________
WLF alleges that it sent a check to cover costs and
expenses related to this legal action to a Massachusetts
attorney (not a party to the action) who deposited the check
in his IOLTA account as required by the IOLTA Rule. Parker
alleges that she has and will continue to use lawyers in
connection with her real estate business and that her funds
-9-
deposited with lawyers have and will be deposited in IOLTA
accounts. WLF and Parker allege that:
The collection of and use of interest,
under color of state law, generated from
the IOLTA trust account of [their
attorneys] for litigation, especially for
litigation that involves political or
ideological causes, and for legislative
or other forms of lobbying, deprive
[them] of their rights to freedom of
speech and association guaranteed by the
First and Fourteenth Amendments to the
U.S. Constitution.
Davis alleges that although she has not yet had
money deposited in an IOLTA, the IOLTA Rule creates "the risk
that she will be forced to choose between employing an
attorney or financially supporting organizations with which
she disagrees." Davis alleges her constitutional claims in
substantially similar terms to those quoted above. Attorney
Howes alleges that he has had to deposit client funds in his
IOLTA as required by the IOLTA Rule and that the Rule "forces
[him] to choose between not practicing law and or [sic]
practicing law and associating with organizations whose
actions offend his political and ideological beliefs and
thereby depriving him of his right to freedom of speech and
association as guaranteed by the First and Fourteenth
Amendments to the U.S. Constitution." Finally, Attorney
Tuttle alleges that the IOLTA Rule has forced him "to forego,
to his professional and financial detriment, depositing
certain client funds into non-interest bearing accounts in
-10-
order to avoid associating with organizations whose actions
offend his political and ideological beliefs" thereby
depriving him of the same constitutional rights as alleged by
Attorney Howes.
In summary, Count I alleges violation of the
plaintiffs' rights of freedom of speech and association.
-11-
2. Count Two: Fifth and Fourteenth Amendments
___________________________________________
Plaintiffs WLF and Parker allege that the IOLTA
Rule constitutes an illegal taking of the beneficial use of
their funds for public use without just compensation and
without due process of law in violation of the Fifth and
Fourteenth Amendments to the Constitution.4 Howes makes the
same claim on behalf of his clients whose funds he has
deposited into his IOLTA account. Neither Davis, Howes (on
his own behalf) nor Tuttle make claims under Count II.
3. Relief Requested
________________
The plaintiffs ask for declaratory and injunctive
relief to dismantle the operation of the mandatory IOLTA
program. Specifically, the plaintiffs request that the
court: (1) require the defendants to refund the interest
which has been earned on their funds while in IOLTA accounts;
(2) declare the IOLTA Rule void as an unconstitutional
violation of the plaintiffs' First, Fifth and Fourteenth
____________________
4 The plaintiffs have not pursued their claims alleged in
Count III based on the Fourteenth Amendment that the IOLTA
program has unconstitutionally deprived them of their
property without due process of law. The plaintiffs'
statement of issues on appeal is limited to the
constitutional rights of the plaintiffs under the First and
Fifth Amendments. Therefore, we assume that the plaintiffs'
claims under the Fourteenth Amendment have been abandoned and
are waived. United States v. Zannino, 895 F.2d 1, 17 (1st
______________ _______
Cir.) cert. denied, 494 U.S. 1082 (1990). Of course, the
_____ ______
Fourteenth Amendment is properly included in each count as
the basis upon which the First and Fifth Amendment
prohibitions apply to the states.
-12-
Amendment rights; (3) issue permanent injunctions prohibiting
the defendants from requiring attorneys to comply with the
IOLTA Rule and from disciplining attorneys for failure to
comply with the IOLTA Rule; (4) issue a permanent injunction
directing the SJC to require attorneys to make full
disclosure to their clients of uses of IOLTA funds if the
attorney elects to participate in IOLTA, and (5) grant
reasonable attorneys fees to the plaintiffs pursuant to 42
U.S.C. 1988.
B. Dismissal of Claims
___________________
The defendants moved to dismiss the plaintiffs'
action on the grounds that their constitutional claims lacked
merit and that some of the plaintiffs lacked standing.5 The
district court found that there was no serious dispute that
at least two of the plaintiffs, Parker and Howes, had
standing to bring their constitutional claims. The district
court dismissed the plaintiffs' claims holding "that the
plaintiffs have no property interest in the funds subject to
____________________
5 On appeal, the record includes only the defendants' bare
motion to dismiss which states the grounds as lack of subject
matter jurisdiction and failure to state a claim upon which
relief may be granted. The district court summarized the
defendants' grounds for the motion to dismiss: "In addition
to arguing that the plaintiffs' constitutional challenges are
without merit, the defendants contend that two plaintiffs
lack standing." Washington Legal Found., 795 F. Supp. at 52,
_______________________
n.3. We assume, therefore, that the defendants' assertion of
lack of subject matter jurisdiction referred to lack of
standing.
-13-
the SJC Rule," and that the SJC Rule did not compel
association with speech and "speech, in the constitutional
sense, is not a factor of the challenged SJC Rule."
Washington Legal Found., 795 F. Supp. 50, 53, 56 (D. Mass.
________________________
1992). The plaintiffs appeal the district court's dismissal
of their claims.
C. Standard of Review
__________________
Our standard of review of a dismissal pursuant to
Fed. R. Civ. P. 12(b)(6) is well established. We begin by
accepting all well-pleaded facts as true, and we draw all
reasonable inferences in favor of the appellants. Coyne v.
_____
City of Somerville, 972 F.2d 440, 442-43 (1st Cir. 1992).
___________________
Because a dismissal terminates an action at the earliest
stages of litigation without a developed factual basis for
decision, we must carefully balance the rule of simplified
civil pleading against our need for more than conclusory
allegations. Dewey v. University of New Hampshire, 694 F.2d
_____ ___________________________
1, 3 (1st Cir. 1982), cert. denied, 461 U.S. 944 (1983).
_____ ______
Because only well-pleaded facts are taken as true, we will
not accept a complainant's unsupported conclusions or
interpretations of law. United States v. AVX Corp., 962 F.2d
_____________ _________
108, 115 (1st Cir. 1992) ("a reviewing court is obliged
neither to 'credit bald assertions, periphrastic
circumlocutions, unsubstantiated conclusions, or outright
vituperation,'... nor to honor subjective characterizations,
-14-
optimistic predictions, or problematic suppositions."
(citations omitted)). We may affirm the district court's
order on any independently sufficient grounds. Willhauck v.
_________
Halpin, 953 F.2d 689, 704 (1st Cir. 1991).
______
D. Standing
________
The issue of standing has not been raised by the
parties on appeal, and therefore we address standing only
because it presents a threshold jurisdictional question.
Bender v. Williamsport Area School Dist., 475 U.S. 534, 541
______ _______________________________
(1986) ("every federal appellate court has a special
obligation to 'satisfy itself not only of its own
jurisdiction, but also that of the lower courts in a cause
under review,' even though the parties are prepared to
concede it." (citations omitted)); Warth v. Seldin, 422 U.S.
_____ ______
490, 498 (1975) ("[Standing] is the threshold question in
every federal case, determining the power of the court to
entertain the suit."). Standing requirements are most
strictly enforced in cases involving constitutional
questions. Bender, 475 U.S. at 541-42.
______
The standing doctrine is derived from Article III
of the Constitution which requires the existence of a "case
or controversy" before a claim may be resolved by judicial
process. Allen v. Wright, 468 U.S. 737, 750 (1984). To show
_____ ______
a case or controversy, a plaintiff must first "clearly
-15-
demonstrate that he has suffered an 'injury in fact[]'" which
means "an injury to himself that is 'distinct and
palpable,'... as opposed to merely '[a]bstract,' ... and the
alleged harm must be actual or imminent, not 'conjectural' or
hypothetical.'" Whitmore v. Arkansas, 495 U.S. 149, 155
________ ________
(1990) (citations omitted). Second, the claimant must allege
facts which show "that the injury 'fairly can be traced to
the challenged action' and, third, 'is likely to be redressed
by a favorable decision.'" Id. (quoting Simon v. Eastern
___ _____ _______
Kentucky Welfare Rights Organization, 426 U.S. 26, 38, 41
______________________________________
(1976) and Valley Forge Christian College v. Americans United
______________________________ ________________
for Separation of Church and State, Inc., 454 U.S. 464, 472
_________________________________________
(1982); see also Rumford Pharmacy v. City of East Providence,
___ ____ ________________ _______________________
970 F.2d 996, 1001 (1st Cir. 1992); AVX Corp., 962 F.2d at
_________
113. Our standing inquiry depends on whether the plaintiffs
have established the existence of a case or controversy as to
each of their claims, but does not involve the merits of
particular claims. Warth, 422 U.S. at 500.
_____
The district court found that at least Howes and
Parker had standing to bring the constitutional challenges in
this case. Karen Parker alleges that she has and will
continue to employ lawyers for transactions related to her
business and that she has and will have her funds placed in
IOLTA accounts by the lawyers she employs. She claims that
the IOLTA program collects and uses for political and
-16-
ideological causes interest generated by her funds placed in
IOLTA accounts, and therefore the operation of the IOLTA
program deprives her of freedom of speech and association in
violation of the First Amendment. Parker also claims that
the IOLTA program constitutes an illegal taking of the
beneficial use of her funds deposited in IOLTA accounts in
violation of the Fifth Amendment. She asks this court to
declare the IOLTA Rule unconstitutional and to enjoin the
operation of the rule. Based upon her allegations, which we
take as true for this purpose, she has stated an actual
injury to herself which is traceable to the IOLTA rule and
which may be remedied by the relief sought. We agree with
the district court that Parker has standing to maintain her
claims made in this action.
Howes presents a more complex standing situation.
Howes brings the First Amendment claim on his own behalf and
on behalf of his clients, and the Fifth Amendment claim only
on behalf of his clients.6 As to the First Amendment claim
____________________
6 Howes' standing on behalf of third parties is more
difficult. The general rule is that a plaintiff has standing
to assert only his own rights, not those of third parties.
Playboy Enterprises, Inc. v. Public Service Comm'n, 906 F.2d
_________________________ _____________________
25, 36-37 (1st Cir.), cert. denied, sub nom. Rivera Cruz v.
_____ ______ ___ ____ ____________
Playboy Enterprises, Inc., 498 U.S. 959 (1990). An exception
_________________________
to the rule against jus tertii standing exists if other
___ ______
considerations, such as the representative's relationship
with the third party and the opportunity of the third party
to assert its own rights, overcome prudential concerns. Id.
___
at 37. We do not address the third party standing issue,
however, because it is unnecessary for our limited purpose of
determining jurisdiction.
-17-
on his own behalf, Howes alleges that he has been compelled
by the IOLTA Rule to participate in the IOLTA program and
thereby to associate with IOLTA funded organizations which
offend his political and ideological beliefs. Howes also
alleges that the operation of the IOLTA Rule forces him to
choose between practicing law and not practicing law. He
asks for the same relief requested by Parker. Without
addressing the merits of Howes' personal claims, we find that
he has alleged an injury which may be remedied by the
requested relief which is sufficient to establish his
standing to maintain his First Amendment claim.
Because we find that at least two of the
plaintiffs, Parker, a client, and Howes, a lawyer, have
standing to maintain each claim, we need not address the
standing of all plaintiffs as to each claim. Watt v. Energy
____ ______
Action Educ. Found., 454 U.S. 151, 160 (1981); Buckley v.
____________________ _______
Valeo, 424 U.S. 1, 12 (1976) (finding appellants had standing
_____
because "at least some of the appellants have a sufficient
'personal stake' in a determination of the constitutional
validity of each of the challenged provisions to present 'a
real and substantial controversy admitting of specific relief
through a decree of a conclusive character'" (citation and
footnote omitted)). We find, therefore, that based on
Parker's and Howes' standing, we have jurisdiction in this
case.
-18-
II.
II.
ANALYSIS
ANALYSIS
________
The plaintiffs7 allege that the Massachusetts
IOLTA program violates their First Amendment rights by
collecting the interest generated by clients' funds which are
deposited in IOLTA accounts and distributing the money to
designated organizations. The plaintiffs further allege that
the recipient organizations use the money for litigation
involving political or ideological causes and for lobbying.
The IOLTA program, the plaintiffs allege, therefore compels
them to support political and ideological causes depriving
them of freedom of speech and association. The plaintiffs
also allege that the IOLTA program's appropriation of
interest from lawyers' trust accounts takes the beneficial
use of client funds which constitutes an unconstitutional
taking in violation of the Fifth and Fourteenth Amendments.8
A. The Fifth Amendment Taking Claim
________________________________
____________________
7 As noted above, all of the plaintiffs do not join in all
counts of the complaint. In addition, we have not resolved
the standing of all plaintiffs. "Plaintiffs" as used
throughout this opinion will refer to the particular
plaintiffs making the claims discussed without resolving
standing.
8 We address the plaintiffs' Fifth Amendment claim first,
although it is raised in Count II of the plaintiffs'
complaint, in order to resolve the plaintiffs' property
rights to funds deposited in IOLTA accounts before discussing
the First Amendment claim which also involves that issue.
-19-
The Fifth Amendment provides that "private property
[shall not] be taken for public use, without just
compensation." There is no dispute that clients' money or
property held by lawyers belongs to the clients and must be
returned to the clients at their request. Mass. S. J. C.
Rule 3:07, Cannon 9, DR 9-102(B)(4); Mass. Gen. L. Ann. ch.
221, 51 (1986). Many courts, including the Supreme
Judicial Court of Massachusetts, have held that clients do
not have a constitutionally protected property right to the
interest earned on IOLTA accounts.9 Mass. Bar Ass'n, 478
________________
N.E.2d at 718; see also Cone, 819 F.2d at 1007; Carroll, 213
___ ____ ____ _______
Cal. Rptr. at 312; Minn. State Bar Ass'n, 332 N.W.2d at 158;
_____________________
N. H. Bar Ass'n, 453 A.2d at 1260-61. Perhaps in response,
_______________
the plaintiffs have eschewed a right to the interest itself,
and instead claim a property right to the beneficial use of
their deposited funds, and more specifically, the right to
control and to exclude others from the beneficial use of
those funds.
To make a cognizable claim of a taking in violation
of the Fifth Amendment, the plaintiffs must first show that
they possess a recognized property interest which may be
protected by the Fifth Amendment. Penn Cent. Transp. Co. v.
______________________
____________________
9 We accept as true, as do all of the parties, the
assumption that there are no feasible accounting procedures
which would allow individual client funds deposited into
pooled accounts to earn net interest.
-20-
New York City, 438 U.S. 104, 124-25 (1978). The plaintiffs
_____________
must point to credible sources for their claimed property
interest:
Property interests, of course, are not
created by the Constitution. Rather,
they are created and their dimensions are
defined by existing rules or
understandings that stem from an
independent source such as state
law rules or understandings that secure
certain benefits and that support claims
of entitlement to those benefits.
Board of Regents v. Roth, 408 U.S. 564, 577 (1972).
___________________ ____
Intangible property rights, "'the group of rights inhering in
the citizen's relation to the physical thing, as the right to
possess, use and dispose of it[,]'" which are recognized by
state law are protected by the Takings Clause. Ruckelshaus
___________
v. Monsanto Co., 467 U.S. 986, 1003 (1984) (quoting United
_____________ ______
States v. General Motors Corp., 323 U.S. 373, 377-78 (1945));
______ ____________________
see also Bowen v. Gilliard, 483 U.S. 587, 603-09 (1987)
___ ____ _____ ________
(finding no unconstitutional taking of child's right to have
support payments used for child's best interest by an
amendment to the AFDC statute). Not all asserted property
interests are constitutionally protected, however, as "a mere
unilateral expectation or an abstract need is not a property
interest entitled to protection." Webb's Fabulous
_________________
Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 161 (1980).
________________ ________
1. Beneficial Use of Deposited Funds
_________________________________
-21-
The plaintiffs rely on trust law to establish their
right to control the beneficial use of their funds as a
protected property interest. IOLTA deposits do not require a
trust agreement and the plaintiffs have not argued that
formal trust agreements exist. Rather, the plaintiffs
contend that because the acronym "IOLTA" includes the word
"trust," a trust relationship is created between lawyer and
client when client funds are deposited into IOLTA accounts.
The relationship between lawyer and client in Massachusetts
is fiduciary as a matter of law. Markell v. Sidney B.
_______ _________
Pfeifer Found., Inc., 402 N.E.2d 76, 94 (Mass. App. 1980).
_____________________
The lawyer-client relationship presumes that the client
trusts the lawyer to handle the client's funds appropriately
and the lawyer assumes the fiduciary obligation subject to
the regulation of the profession. We are not convinced that
the deposit of clients' funds into IOLTA accounts transforms
a lawyer's fiduciary obligation to clients into a formal
trust with the reserved right by the client to control the
beneficial use of the funds as claimed by the plaintiffs.
The plaintiffs also claim that they have a
protected property right to exclude others from the
beneficial use of their funds while they are deposited in
IOLTA accounts. In support of the right to exclude, the
plaintiffs rely on cases which have established that property
owners have a right to exclude others from their real
-22-
property. See, e.g., Kaiser Aetna v. United States, 444
___ ____ ____________ _____________
U.S. 164, 176; Loretto v. Teleprompter Manhattan CATV Corp.,
_______ _________________________________
458 U.S. 419, 435-36 (1982). The plaintiffs have cited no
sources which recognize a similar constitutionally protected
property right to control or exclude others from intangible
property and we have found none.10
2. IOLTA Program Does Not Cause a Taking
_____________________________________
Assuming arguendo that the plaintiffs could
________
establish their claimed property interests in the beneficial
use of their funds subject to the IOLTA Rule, the IOLTA
program does not cause an illegal taking of those interests.
The analysis of Fifth Amendment takings claims has evolved
through a series of cases in which Supreme Court decisions
"engaging in ... essentially ad hoc, factual inquiries ...
have identified several factors that have particular
significance." Penn Central, 438 U.S. at 124. The Court has
____________
repeatedly used the significant factors enunciated in Penn
____
Central to analyze takings claims: "(1) 'the economic impact
_______
of the regulation on the claimant'; (2) 'the extent to which
____________________
10 The plaintiff has not discussed, and we do not find
analogous, intangible property rights which, by their nature
or by agreement, require the exclusion of others to preserve
the property interest. See, e.g., Monsanto, Co., 467 U.S. at
___ ____ _____________
1002 ("Because of the intangible nature of a trade secret,
the extent of the property right therein is defined by the
extent to which the owner of the secret protects his interest
from disclosure to others.").
-23-
the regulation has interfered with distinct investment-backed
expectations'; and (3) 'the character of the governmental
action.'" Connolly v. Pension Benefit Guaranty Corp., 475
________ ______________________________
U.S. 211, 225 (1986) (citation omitted); see also Hodel v.
___ ____ _____
Irving, 481 U.S. 704, 714-15 (1987); Kaiser, 444 U.S. at 175.
______ ______
The government may impose regulations to adjust rights and
economic interests among people for the public good, as long
as the government does not force "some people alone to bear
public burdens which, in all fairness and justice, should be
borne by the public as a whole." Armstrong v. United States,
_________ _____________
364 U.S. 40, 49 (1960); see also Andrus v. Allard, 444 U.S.
___ ____ ______ ______
51, 65 (1979).
a. Character of governmental action.
_________________________________
The plaintiffs claim that the character of
governmental action, through the IOLTA Rule, is a physical
invasion of their beneficial interests in their funds held in
IOLTA accounts. The physical invasion occurs, the plaintiffs
argue, because the IOLTA program borrows the principal to
generate income by collecting the interest earned on IOLTA
accounts. The plaintiffs do not claim that they have any
rights to the interest, rather they assert the right to
control who uses and benefits from the principal which
generates the interest. The IOLTA program, the plaintiffs
-24-
claim, "involves a permanent physical invasion of the funds"
while they are held in IOLTA accounts.
The Supreme Court has recognized that a taking is
more obvious when the governmental action can be
characterized as a physical invasion. Penn Central, 438 U.S.
____________
at 124. The Court has identified particular governmental
action as categorical or per se takings which generally
___ __
occur: (1) when government action compels property owners to
acquiesce in permanent physical invasion or occupation of
their private property, and (2) when "regulation denies all
economically beneficial or productive use of land." Lucas
_____
v. South Carolina Coastal Council, 112 S. Ct. 2886, 2893
_______________________________
(1992); see also Yee v. City of Escondido, Cal., 112 S. Ct.
___ ____ ___ _______________________
1522, 1526 (1992).
The plaintiffs argue that the IOLTA program causes
a physical taking similar to the takings found in Kaiser, 444
______
U.S. 164 (1979); Loretto, 458 U.S. 419; and Webb's, 449 U.S.
_______ ______
155. In Kaiser, owners of a private marina, who had
______
connected their private pond to the Pacific Ocean, challenged
the federal government's imposition of a navigational
servitude on their property requiring that they allow a right
of access to the public. The Court found that the
government's regulation of the marina amounted to a physical
invasion of their private property by the public, and was,
therefore, an unconstitutional taking of the marina owners'
-25-
right to exclude others from their private property. Kaiser,
______
444 U.S. at 180.
In Loretto, 458 U.S. 419, government regulation
_______
required private property owners to allow conduits for cable
television to be attached to their buildings even when the
property owners did not subscribe to cable television. The
Court found that the regulation authorized a physical
occupation, however small, of the plaintiff's private
property which was unconstitutional without compensation.
We find no logical analogy between the physical
invasion of real property, as in Kaiser and Loretto, and the
______ _______
operation of the IOLTA Rule. The plaintiffs' takings claim
involves intangible property rights not real property. To
bolster their claim of physical invasion, the plaintiffs
contend that their property rights are nearly identical to
the claimants' property rights in Webb's, 449 U.S. 155, in
______
which the Court stated "the [government's] appropriation of
the beneficial use of the fund is analogous to the
appropriation of the use of private property." Id. at 163-
___
64.
In Webb's, 449 U.S. 155, the Supreme Court struck
______
down, as an unconstitutional violation of the Fifth Amendment
Takings Clause, a Florida statute which required county
clerks to deposit interpleaded funds in interest bearing
accounts and retain the accrued interest. Another Florida
-26-
statute provided for a separate fee to be paid to the county
registry for holding interpleaded funds. The Court first
determined that claimants of the interpleaded funds had a
property right to the deposited funds. Webb's, 449 U.S. at
______
161-62. Applying the general rule that interest follows the
principal, the Court held that the claimants had a property
right to the interest accrued on the interpleaded funds. Id.
___
The Court concluded that there was not sufficient
justification for the county to take the interest on
interpleaded funds, which was the private property of the
claimants, when the county registries were receiving fees for
the costs related to holding the interpleaded funds. Id. at
___
164-65.
Despite the some superficial similarities between
Webb's and this case, there is a fundamental difference. In
______
Webb's, the Court found that the claimants to the
______
interpleaded fund had a recognized property right to the
interest earned while the funds were held by the county
registries. In this case, the plaintiffs do not have a
property right to the interest earned on their funds held in
IOLTA accounts. See Cone, 819 F.2d at 1006-07 (holding that
___ ____
plaintiffs had no right to interest earned on IOLTA accounts
and discussing implications of Webb's). In fact, the
______
plaintiffs recognize this and claim only the intangible
rights related to the beneficial use of deposited funds: the
-27-
right to control and exclude others. The property rights of
the plaintiffs here and the claimants in Webb's, therefore,
______
are different. The Webb's claimants had property rights to
______
accrued interest which is tangible personal property, while
plaintiffs in this case have claimed only intangible property
interests.
The IOLTA program does not occupy or invade the
plaintiffs' property even temporarily: the IOLTA program
leaves the deposited funds untouched, the funds are always
available to clients as required by DR 9-102(B)(4), and the
interest earned on IOLTA accounts is not the plaintiffs'
property. The property rights claimed by the plaintiffs are
intangible. We find no logical or legal support for the
plaintiffs' claim that the IOLTA program has caused a
physical invasion and occupation of their intangible property
rights. b. Economic interference.
______________________
Governmental action through regulation of the use
of private property does not cause a taking unless the
interference is significant. Andrus, 444 U.S. at 66-67.
______
Having found no weight to the plaintiffs' argument that
governmental action through the IOLTA Rule has effected a
physical invasion of their property rights, we consider the
economic factors which are significant to a takings claim the
economic impact of the IOLTA Rule on the plaintiffs, and
"'the extent to which the regulation has interfered with
-28-
distinct investment-backed expectations.'" Connolly, 475
________
U.S. at 225 (citations omitted).
The property rights claimed by the plaintiffs do
not involve clients' economic interests. The claimed right
to control and to exclude others from the beneficial use of
funds held by lawyers has no economic benefit for the
plaintiffs because clients would not otherwise be entitled to
the interest earned on pooled accounts. Plaintiffs do not
claim and there are no "investment-backed" expectations in
the claimed rights of clients to control and exclude others
from the beneficial use of deposited funds under these
circumstances.
In sum, the plaintiffs claim, at best, a thin
strand in the commonly recognized bundle of property rights.
Under the IOLTA Rule, the plaintiffs retain the right to
possess, use and dispose of the principal sum deposited in
IOLTA accounts. "At least where an owner possesses a full
'bundle' of property rights, the destruction of one 'strand'
of the bundle is not a taking, because the aggregate must be
viewed in its entirety." Andrus, 444 U.S. at 65-66.
______
Weighing the plaintiffs' claimed property rights against the
bundle of rights remaining in their deposited funds left
untouched by the IOLTA program, we find that the IOLTA Rule
has not caused a taking of plaintiff's property.
-29-
Consequently, we need not weigh any burden caused by taking
private rights against the public benefit.
We affirm, albeit on different grounds, the
district court's dismissal of Count Two of the plaintiffs'
complaint.
B. The First Amendment Speech and Association Claim
________________________________________________
The plaintiffs claim that the IOLTA Rule compels
lawyers, and therefore clients, to participate in the IOLTA
program and thereby support lobbying and litigation for
ideological and political causes. They contend that the
IOLTA Rule violates their First Amendment rights of freedom
of speech and association. The district court dismissed the
plaintiffs' First Amendment claims on the grounds that (1)
the IOLTA Rule did not compel the plaintiffs' participation
in the IOLTA program, and (2) the IOLTA Rule did not involve
constitutionally protected speech. We agree that the
plaintiffs' First Amendment claim was properly dismissed.
The First Amendment protects the right not to speak
or associate, as well as the right to speak and associate
freely.11 Roberts v. United States Jaycees, 468 U.S. 609,
_______ ______________________
____________________
11 The First Amendment provides:
Congress shall make no law respecting
an establishment of religion, or
prohibiting the free exercise thereof; or
abridging the freedom of speech, or of
the press; or the right of the people
peaceably to assemble, and to petition
the Government for a redress of
-30-
623 (1984); Wooley v. Maynard, 430 U.S. 705, 714 (1977); West
______ _______ ____
Va. State Bd. of Educ. v. Barnette, 319 U.S. 624, 633 (1943).
______________________ ________
The Supreme Court has established that "[t]he right to speak
and the right to refrain from speaking are complementary
components of the broader concept of 'individual freedom of
mind.'" Wooley, 430 U.S. at 714 (quoting Barnette, 319 U.S.
______ ________
at 637).
The most obvious infringement on First Amendment
rights in the context of compelled speech occurs when
individuals are forced to make a direct affirmation of
belief. See, e.g., Barnette, 319 U.S. at 633 ("the
___ ____ ________
compulsory flag salute and pledge requires affirmation of a
belief and an attitude of mind"); Wooley, 430 U.S. at 715
______
("New Hampshire's statute in effect requires that appellees
use their private property as a 'mobile billboard' for the
State's ideological message"); Pacific Gas & Elec. Co. v.
_________________________
Public Util. Comm'n, 475 U.S. 1, 17-18 (1986) ("the
______________________
[California Public Utilities] Commission's order requires
[Pacific Gas Company] to use its property the billing
envelopes to distribute the message of another."). The IOLTA
Rule does not compel the plaintiffs to display, affirm or
distribute ideologies or expression allegedly advocated by
____________________
grievances.
-31-
the IOLTA program or its recipient organizations. Direct
compelled speech, therefore, is not an issue in this case.
Compelled support of an organization engaging in
expressive activities may also burden First Amendment rights.
In a series of cases, the Supreme Court has examined the
First Amendment implications raised by compelled financial
support of unions and bar associations which engage in
political or ideological activities. See, e.g., Keller v.
___ ____ ______
State Bar of Cal., 496 U.S. 1 (1990); Lehnert v. Ferris
__________________ _______ ______
Faculty Ass'n, 111 S. Ct. 1950 (1991); Chicago Teachers
______________ _________________
Union, Local No. 1, AFT, AFL-CIO v. Hudson, 475 U.S. 292
___________________________________ ______
(1986); Ellis v. Railway Clerks, 466 U.S. 435 (1984); Abood
_____ ______________ _____
v. Detroit Board of Educ., 431 U.S. 209 (1977); Railway
________________________ _______
Clerks v. Allen, 373 U.S. 113 (1963); Machinists v. Street,
______ _____ __________ ______
367 U.S. 740 (1961); Lathrop v. Donohue, 367 U.S. 820
_______ _______
(1961); Railway Employees Dept. v. Hanson, 351 U.S. 225
________________________ ______
(1956). The Court found that compelled financial support of
these organizations implicates First Amendment rights when
the funds were used to subsidize ideological or political
activities.
In our analysis of the plaintiffs' First Amendment
claims, we must first determine whether the IOLTA Rule
burdens protected speech by forcing expression through
compelled support of organizations espousing ideologies or
engaging in political activities. If so, we will then
-32-
strictly scrutinize the IOLTA program to determine whether
the IOLTA Rule serves compelling state interests through
means which are narrowly tailored and germane to the state
interests. See Austin v. Mich. Chamber of Commerce, 110 S.
___ ______ _________________________
Ct. 1391, 1396 (1990); Pacific Gas & Elec. Co., 475 U.S. at
_______________________
19; Abood, 431 U.S. at 235.
_____
1. Is the IOLTA Rule Compulsory?
_____________________________
The district court concluded that the IOLTA Rule
was not compulsory because lawyers could avoid establishing
IOLTA accounts by choosing not to hold client funds or by
establishing individual client accounts. Washington Legal
________________
Found., 795 F. Supp. at 55. On appeal, the plaintiffs argue
______
that the district court erred in not finding the IOLTA Rule
compulsory as to them. Interpretation of a state
disciplinary rule of professional conduct is a question of
law which we review under the de novo standard. In Re
__ ____ ______
Dresser Indus., Inc., 972 F.2d 540, 543 (5th Cir. 1992); see
_____________________ ___
also Salve Regina College v. Russell, 111 S. Ct. 1217, 1225
____ ____________________ _______
(1991) (holding that district courts are not entitled to
deference on review of determinations of state law).
Reviewing a dismissal, we apply the law to the facts alleged
in the complaint and taken as true. AVX Corp., 962 F.2d at
_________
115.
The IOLTA Rule obligates lawyers to deposit client
funds which they hold for short terms or in minimal amounts
-33-
into IOLTA accounts. The plaintiffs allege facts which, when
taken as true, establish that avoiding the IOLTA Rule has
significantly limited Attorney Tuttle's practice of law and
negatively affected his livelihood.12 Attorney Howes
alleges that he has had to comply with IOLTA to maintain his
practice of law despite his belief that the IOLTA Rule
compels him to support politics and ideologies with which he
disagrees.
Claimants cannot be required by government action
to relinquish First Amendment rights as a condition of
retaining employment. Keller, 496 U.S. at 10. As alleged by
______
the plaintiffs, the burden on Tuttle and Howes of avoiding
the IOLTA Rule is more than an inconvenience, although it is
less extreme than forcing loss of employment. See Austin,
___ ______
110 S. Ct. at 1399 (recognizing that "less extreme
disincentives than the loss of employment" can force
association affecting First Amendment rights). Reviewing the
dismissal of their claims, we take the plaintiffs' factual
allegations as true and we draw the inference in their favor
that they cannot engage in the full practice of law without
holding client funds which would trigger compliance with the
____________________
12 We express no opinion concerning whether the Real Estate
Settlement Procedures Act, 12 U.S.C. 2601, requires lawyers
to use IOLTA accounts as alleged by the plaintiffs. Because
the allegation requires a legal conclusion, it is not an
allegation of fact and is not taken as true for purposes of
reviewing the dismissal of the plaintiffs' suit.
-34-
IOLTA Rule.13 Therefore, based on the stated assumptions
and inference, the IOLTA Rule is compulsory as to the two
plaintiffs who are lawyers for purposes of deciding this
case.
A different question is presented as to the
compulsory effect of the IOLTA Rule on plaintiffs who are
clients. Although the IOLTA Rule does not directly regulate
clients, its effect is compulsory because lawyers generally
deposit appropriate funds from clients into IOLTA accounts
without the knowledge or consent of their clients.
____________________
13 In a dissent urging a stiffer penalty on a malfeasant
lawyer, the following passage was quoted to illustrate the
importance of holding clients' funds in the practice of law:
"Like many rules governing the
behavior of lawyers, [the rule governing
client funds] has its roots in the
confidence and trust which clients place
in their attorneys. Having sought his
advice and relying on his expertise, the
client entrusts the lawyer with the
transaction including the handling of the
client's funds. Whether it be a real
estate closing, the establishment of a
trust, the purchase of a business, the
investment of funds, the receipt of
proceeds of litigation, or any one of a
multitude of other situations, it is
commonplace that the work of lawyers
involves possession of their clients'
funds. That possession is sometimes
expedient, occasionally simply customary,
but usually essential. Whatever the need
may be for the lawyer's handling of
clients' money, the client permits it
because he trusts the lawyer."
Matter of Driscoll, 575 N.E.2d 46, 51-52 (Mass.
______________________
1991)(Greaney, J., dissenting) (quoting Matter of Wilson, 81
________________
N.J. 451, 454, 409 A.2d 1153 (1979)).
-35-
Therefore, the IOLTA Rule effectively coerces clients'
compliance through the practices of their lawyers. Even if
clients were informed of the IOLTA Rule and offered a choice,
we will assume, again for the limited purposes of reviewing
dismissal of this case, that there are circumstances in which
the use of IOLTA accounts is necessary for legal
representation and therefore, that clients would at times be
compelled to allow their funds to be deposited in IOLTA
accounts.
2. Does the IOLTA Rule Compel Speech by the
________________________________________
Plaintiffs?
___________
The client-plaintiffs allege that "the collection
and use of interest, under color of state law, generated from
the IOLTA trust accounts ..., especially for litigation that
involves political or ideological causes, and for legislative
or other forms of lobbying, deprive [plaintiffs] of [their]
right to freedom of speech and association." The lawyer-
plaintiffs allege that forcing them to comply with the IOLTA
Rule requires them to choose between serious curtailment of
their practice of law or "associating with organizations
whose actions offend [their] political and ideological
beliefs" depriving them of their right to freedom of speech
and association.
The plaintiffs rely on the compulsory union fees
and bar association dues cases for support. They argue that
they are required to finance IOLTA program recipient
-36-
and bar association members have been compelled to support
organizations in the same way that dissenting union members
unconstitutional. In Abood, 431 U.S. 209, Detroit school
_____
fees and dues which the Supreme Court has found to be
political and ideological causes through the collection of
teachers challenged an "agency-shop" clause in their
U.S. at 7-9.
-37-
compelled union membership and compelled financial support of
distinguished, for First Amendment purposes, between
unions. Abood, 431 U.S. at 217, n.10; see also Keller, 496
_____ ___ ____ ______
claiming that it violated their First Amendment rights.14
union's collective bargaining efforts to avoid allowing non-
join the representative union to pay dues to support the
members to benefit from collective bargaining, as "free-
The agency-shop clause required employees who chose not to
compel employees financially to support their collective-
riders", without paying. The Supreme Court found that "[t]o
collective-bargaining agreement with the school board
bargaining representative [had] an impact on their First
14 An "agency-shop" does not require union membership of all
unions could not use the dues of dissenters for political or
235-36.
bargaining purpose of the agency-shop requirement. Id. at
___
ideological causes that were not germane to the collective-
____________________
Amendment interests." Id. at 222. The Court held that
___
employees while a "union-shop" does. The Court has not
In the context of bar association dues, the Court
similarly found that compelled dues of members of a unified
bar association could not be used to finance activities which
were not germane to administrative purposes of the bar
association. Keller, 496 U.S. at 14; see also Schneider v.
______ ___ ____ _________
Colegio de Abogados de Puerto Rico, 917 F.2d 620 (1st Cir.
____________________________________
1990).
The union fees and bar association dues cases do
not support the plaintiffs' cause nor do other cases which
have considered the First Amendment implications of compelled
contribution to organizations.15 These cases show that
compelled speech, through compelled financial support, arises
from the dissenters' involuntary association with ideology or
political activities. To affect First Amendment rights,
there must be a connection between dissenters and the
____________________
15 See, e.g., Hays County Guardian v. Supple, 969 F.2d 111,
___ ____ ____________________ ______
122-24 (5th Cir. 1992) (compulsory student fees used to
support university newspaper); cert. denied, 113 S. Ct. 1067
_____ ______
(1993); Carroll v. Blinken, 957 F.2d 991 (2d Cir.)
_______ _______
(compulsory student fees used to support NYPIRG, statewide
student advocacy organization), cert. denied, 113 S. Ct. 300
_____ ______
(1992); United States v. Frame, 885 F.2d 1119 (3d Cir. 1989)
_____________ _____
(fee imposed on cattle producers and importers by federal
statute used to fund national beef campaign by remitting
funds to recipient organizations); cert. denied, 493 U.S.
_____ ______
1094 (1990): Galda v. Rutgers, 772 F.2d 1060 (3d Cir. 1985)
_____ _______
(compulsory student fee used to support NJPIRG); cert.
_____
denied, 475 U.S. 1082 (1986); Smith v. Regents of the Univ.
______ _____ _____________________
of Calif., 844 P.2d 500 (Cal. 1993) (compulsory student fees
_________
used to support a wide range of student organizations and
activities); Cahill v. Public Service Comm'n, 556 N.E. 2d 133
______ _____________________
(N.Y. 1990) (utilities authorized by N.Y. Public Service
Commission to pass along to ratepayers cost of charitable
contributions).
-38-
organization so that dissenters reasonably understand that
they are supporting the message propagated by recipient
organizations. Typically, compelled contribution of money
to support political or ideological causes is the root of the
evil which offends the First Amendment: "'to compel a man to
furnish contributions of money for the propagation of
opinions which he disbelieves, is sinful and tyrannical.'"
Abood, 431 U.S. at 234-35 n.31 (quoting I. Brant, James
_____
Madison: The Nationalist 354 (1948)). In this case, the
plaintiffs' allegations that "[t]he collection of and use of
interest, under color of state law, generated by funds in
IOLTA trust accounts" violate their rights to freedom of
speech and association do not state a claim of compelled
financial support. The interest generated by funds deposited
in IOLTA accounts is not the clients' money. The process by
which the IOLTA program collects and uses the accrued
interest does not affect the plaintiffs' funds held in IOLTA
accounts nor does it require any other expenditures or
efforts by the plaintiffs.16 Put simply, the plaintiffs
have not been compelled by the IOLTA Rule to contribute their
money to the IOLTA program. Rather, the IOLTA program
____________________
16 We note that the plaintiff-lawyers are required by the
IOLTA Rule to set up IOLTA accounts in banks and deposit
appropriate client funds therein. Because a comparable
effort would be necessary to set up non-interest bearing
accounts for the deposit of client funds, we find it
inconsequential for First Amendment analysis.
-39-
recipient organizations benefit from an anomaly created by
the practicalities of accounting, banking practices, and the
ethical obligation of lawyers. The interest earned on IOLTA
accounts belongs to no one, but has been assigned, by the
Massachusetts Supreme Judicial Court, to be used by the IOLTA
program. Therefore, the collection and use of the interest
by the IOLTA program does not constitute financial support by
the plaintiffs, as they claim. If the plaintiffs believe
that the IOLTA program is not operated in accord with its
stated purpose or if they remain dissatisfied with the
assigned recipients of IOLTA funds, they may address their
complaints to the IOLTA Committee or the Massachusetts
Supreme Judicial Court.
The plaintiffs have not alleged and there are no
other facts or circumstances which establish that they have
been compelled to associate with or support the IOLTA program
in any other manner. They have not been compelled by the
IOLTA Rule to join, affirm, support or subsidize ideological
expression of IOLTA recipient organizations in any way.17
____________________
17 Although the plaintiffs have alleged deprivation of their
right to freedom of association, we have found no factual
allegations to support their claim. The IOLTA Rule does not
require that clients or lawyers join any organization. The
plaintiffs have not alleged that the organizations which
ultimately receive IOLTA funding automatically include them
as members or otherwise link them to the organizations
without their consent. C.f. Carroll, 957 F.2d at 1003
____ _______
(holding that SUNY Albany's distribution of student fees to
NYPIRG which automatically made all students members,
impermissibly forced association in violation of the First
-40-
Because the plaintiffs have not adequately alleged that the
IOLTA Rule compels a connection between them and the IOLTA
recipient organizations, we find that the IOLTA Rule does not
burden the plaintiffs' First Amendment rights. Having found
no impact on the plaintiffs' First Amendment rights caused by
the IOLTA Rule, we need not consider whether the IOLTA
program serves a compelling state interest. The district
court's order dismissing the plaintiffs' claims is
Affirmed.
Affirmed.
_________
____________________
Amendment).
-41-
Related
West Virginia State Board of Education v. Barnette
319 U.S. 624 (Supreme Court, 1943)
United States v. General Motors Corp.
323 U.S. 373 (Supreme Court, 1945)
Railway Employes' Department v. Hanson
351 U.S. 225 (Supreme Court, 1956)
Armstrong v. United States
364 U.S. 40 (Supreme Court, 1960)
International Ass'n of MacHinists v. Street
367 U.S. 740 (Supreme Court, 1961)
Brotherhood of Railway & Steamship Clerks, Freight Handlers, Express & Station Employes v. Allen
373 U.S. 113 (Supreme Court, 1963)
Board of Regents of State Colleges v. Roth
408 U.S. 564 (Supreme Court, 1972)
Buckley v. Valeo
424 U.S. 1 (Supreme Court, 1976)
Simon v. Eastern Kentucky Welfare Rights Organization
426 U.S. 26 (Supreme Court, 1976)
Wooley v. Maynard
430 U.S. 705 (Supreme Court, 1977)
Abood v. Detroit Board of Education
431 U.S. 209 (Supreme Court, 1977)
Penn Central Transportation Co. v. New York City
438 U.S. 104 (Supreme Court, 1978)
Webb's Fabulous Pharmacies, Inc. v. Beckwith
449 U.S. 155 (Supreme Court, 1980)
Watt v. Energy Action Educational Foundation
454 U.S. 151 (Supreme Court, 1981)
Valley Forge Christian College v. Americans United for Separation of Church and State, Inc.
454 U.S. 464 (Supreme Court, 1982)
Loretto v. Teleprompter Manhattan CATV Corp.
458 U.S. 419 (Supreme Court, 1982)
Ellis v. Brotherhood of Railway, Airline & Steamship Clerks, Freight Handlers, Express & Station Employes
466 U.S. 435 (Supreme Court, 1984)
Ruckelshaus v. Monsanto Co.
467 U.S. 986 (Supreme Court, 1984)
Roberts v. United States Jaycees
468 U.S. 609 (Supreme Court, 1984)
Allen v. Wright
468 U.S. 737 (Supreme Court, 1984)
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