Legal Aid

views updated Jun 08 2018


A system of nonprofit organizations that provide legal services to people who cannot afford an attorney.

California Joins States Expanding Legal Aid Funds

In October 2007, California Governor Arnold Schwarzenegger signed into law a state bar-backed bill to increase funds provided for legal aid programs under the Interest on Lawyer Trust Accounts (IOLTA) program. California joined about a dozen other states that have adopted similar changes by legislation or court rule. Assembly Bill No. 1723, by Assembly Judiciary Committee Chairperson David Jones (D-Sacramento) would raise additional funds for legal aid programs without spending tax dollars. The bill, like those in other states, essentially reformed the rules governing the interest that banks pay on IOLTA funds, which have been around for years. The changes involve new authority to invest IOLTA funds in higher-risk, but higher-earning securities.

State IOLTA funds are created when attorneys who handle money belonging to their clients (including settlement checks, fees advanced for services not yet performed, i.e., retainer fees and court costs, etc.) are required to deposit them in clearly identifiable bank trust accounts. Attorneys, when creating these bank accounts, are generally required to label them as a “trust account,” “client funds account,” etc. All fifty states currently have rules or statutes on creating IOLTA accounts. Prior to IOLTA, funds were either held in trust by law firms or deposited in non-interest-bearing checking accounts.

It became increasingly clear over the years that an opportunity to earn interest was lost when large funds or funds held for a long period of time (as when tied up in litigation) were kept in such non-interest-bearing accounts. When IOLTA accounts were created, they offered an opportunity for state bar associations to dedicate interest earned to pay for public legal aid programs without using taxpayers' money. Moreover, attorneys who deposited small sums or short-term funds could pool them into a single, interest or dividend-bearing trust account. The collective funds could earn far more income in excess of the costs that financial institutions charged to open small, individual accounts. Collected IOLTA funds could then be forwarded to the state bar associations in each state to be distributed for public programs in that state. In California, IOLTA interest income had supported approximately 100 nonprofit programs and organizations that provided legal aid to indigent and low-income persons, senior citizens, and persons with disabilities.

Prior to the passage of AB 1723, interest-bearing checking accounts were the only available option for California IOLTA funds. The interest earned on these accounts averaged less than one percent and was generally stagnant. Effective January 1, 2008, California's new law amended Business & Professional Code Sections 6091.2, 6211, 6212, and 6213. The new mandates required financial institutions to offer comparable bank investment products to their IOLTA customers as to other similarly-situated customers.

The new amendments updated the financial vehicles available for attorneys, who can now have IOLTA funds held in conservative, high-yield or other bank products. This was particularly advantageous for large-balance accounts, and was expected to double the yields of IOLTA account interest earned, and thus double the money available to legal services supported by IOLTA funds.

The success of the IOLTA accounts prior to the new changes was largely due to the interest paid on checking accounts in the 1990s, generally high. But since 1993, California's IOLTA funding dropped nearly 60 percent. According to statistics released by the California Commission on Access, IOLTA funds produced almost $19 million in interest in 1993, which, if adjusted for inflation, would amount to nearly $25 million. Conversely, IOLTA funds produced just $10.7 million in interest earned in 2005, generally just under one percent on average.

The U.S. SUPREME COURT has previously addressed the constitutionality of IOLTA accounts. In Phillips v. Washington Legal Foundation, 524 U.S. 156, 118 S. Ct. 1925, 141 L. Ed. 2d 174 (1998), the justices ruled, in a tight 5–4 decision, that interest earned from IOLTA accounts was in fact the private property of clients, and that re-appropriating it under IOLTA amounted to a “taking” under the Fifth Amendment. However, the Court did not address the argument that since clients would never see that money anyway (the banks would keep it on small accounts) without IOLTA, there was no loss for which “just compensation” was due.

In 2003, the Supreme Court agreed. In affirming a Ninth Circuit Court of Appeals decision, the high court ruled that IOLTA programs did not violate clients' right to compensation as long as the program was limited to small or short-term deposits that would not otherwise be placed in interest-bearing accounts. Brown v. Legal Foundation of Washington, 538 U.S. 216, 123 S. Ct. 1406, 155 L. Ed. 2d 376 (2003). Since the money would not have gone to clients anyway, but would go to the bank, the states did not owe “compensation.” The Court further noted that even if the money appropriated from IOLTA to legal service programs amounted to a “taking” of clients' earned interest, such a taking was valid for a public purpose to save taxpayer dollars and did not violate the Fifth Amendment.

California's IOLTA accounts are administered by the Legal Services Trust Fund Program, a department within the State Bar of California. A 21-member Legal Services Trust Fund Commission oversees the Trust Fund Program, commission members being appointed by the State Bar's Board of Governors and the Chief Justice. The Trust Fund Program also manages two other sources of funds that offer free civil legal services to low-income and indigent people, the California Equal Access Fund and the Justice Gap Fund.

Legal Aid

views updated May 14 2018


A system of nonprofit organizations that provide legal services to people who cannot afford an attorney.

In the United States, more than sixteen hundred legal aid agencies provide legal representation without cost or for a nominal fee to people who are unable to pay the usual amount for a lawyer's services. These agencies are sponsored by charitable organizations, lawyers' associations, and law schools, and by federal, state, and local governments. In some states legal aid services are partially funded from the interest earned in law firm trust accounts.

The first U.S. legal aid agency was founded in 1876 in New York City by the German Society. The agency assisted German immigrants with legal problems. Beginning in the late nineteenth century, lawyers' associations took the lead in providing low-cost legal services. In 1911 the National Alliance of Legal Aid Societies was established to promote the concept of legal aid to people who were poor. The alliance, now known as the National Legal Aid and Defender Association, publishes information and holds conferences dealing with legal aid issues.

Legal aid agencies handle civil cases, including those concerning adoption, bankruptcy, divorce, employment issues, and landlord and tenant disputes. These agencies may not use federal funds to handle criminal cases. The criminal counterpart to the U.S. legal aid system is called the public defender system. Public defenders are funded through state and local agencies and federal grants.

Legal aid agencies are run by attorneys and administrative support staff. They are often supplemented by law students, who participate in legal aid clinics that give students opportunities to work with indigent clients. In addition, many private attorneys volunteer their time to assist these agencies. In some jurisdictions the court may appoint private attorneys to handle legal aid clients. Despite these pro bono (donated) services, legal aid agencies typically have more clients than they can serve. When they do, they may exclude complicated matters, such as divorce, from the legal services they provide.

The scope of legal aid widened dramatically in 1964, when President lyndon b. johnson established the Office of Legal Services. This agency organized new legal aid programs in many states, then suffered budget cuts in the early 1970s. In 1974 Congress disbanded the office and transferred its functions to the newly created legal services corporation (Legal Services Corporation Act of 1974, 88 Stat. 378 [42 U.S.C.A. § 2996]). The corporation is a private, nonprofit organization that provides financial support to legal aid agencies through the distribution of grants. It also supports legal aid attorneys and staff through training, research, and technical assistance.


Pro Bono; Right to Counsel.

legal aid

views updated May 29 2018

legal aid System by which those below a certain income can receive free or subsidized legal representation or advice. In criminal cases, it is paid for mainly from public funds. In civil cases, costs will usually be met from the costs awarded by the court. It was introduced in Britain in 1949, and is now covered in Scotland by the Legal Aid (Scotland) Act (1986), and in England and Wales by the Legal Aid Act (1988). The high cost of legal advice is placing strain on the scheme.