Rule 6 Maintenance of Trust Accounts in Approved Institutions; IOLTA

(a) Clearly Identified Trust Accounts in Eligible Institutions Required. Every lawyer admitted to practice in Maine shall deposit all funds held in trust in this jurisdiction in accordance with Rule 1.15 of the Maine Rules of Professional Conduct in accounts clearly identified as IOLTA accounts in eligible institutions and shall take all steps necessary to inform the depository institution of the purpose and identity of the accounts. Funds held in trust include funds held in any fiduciary capacity in connection with a representation, whether as trustee, agent, guardian, executor, or otherwise.

(b) Reporting and Certification. Every lawyer admitted to practice in Maine shall annually certify to the Board in connection with the annual renewal of the lawyer’s registration that, to the lawyer’s knowledge after reasonable investigation:

(1) (A) the lawyer or the lawyer’s law firm maintains at least one IOLTA account, and (B) the lawyer has taken reasonable steps to ensure that all client funds are held in IOLTA accounts meeting the requirements of these Rules; or

(2) the lawyer is exempt from maintaining an IOLTA account because the lawyer:

(A) is not engaged in the private practice of law;

(B) does not have an office within Maine;

(C) is (1) a judge employed full-time by the United States Government, the State of Maine or another state government; (2) on active duty with the armed services; or (3) employed full-time as an attorney by a local, state, or federal government, and is not otherwise engaged in the private practice of law;

(D) is counsel for a corporation or non-profit organization or a teacher or professor employed by an educational institution, and is not otherwise engaged in the private practice of law;

(E) has been exempted by an order of the Court that is cited in the certification; or

(F) holds no client funds.

(c) IOLTA Account Requirements.

(1) An IOLTA account is a pooled trust account earning interest or dividends at an eligible institution in which a lawyer or law firm holds funds on behalf of clients, which funds are small in amount or held for a short period of time such that they cannot earn interest or dividends for the client in excess of the costs incurred to secure such income and the account is:

(A) an interest-bearing checking or share draft account;

(B) a money market account with or tied to check-writing;

(C) an account whose funds are invested solely in repurchase agreements; or

(D) an account whose funds are invested solely in qualified money market funds.

A “qualified money market fund” is an open-end investment company registered under the Investment Company Act of 1940 that is regulated as a money market fund under Rule 270.2a-7 thereof (or any successor regulation) and that, at the time of the investment, has total assets of at least $250,000,000, substantially all of which are invested in U.S. Government Securities. A “repurchase agreement” is a daily overnight repurchase agreement which must be fully collateralized by U.S. Government Securities and may be established only with a bank or other depository institution that is deemed to be “well capitalized” or “adequately capitalized” under applicable regulations of the Federal Deposit Insurance Corporation and National Credit Union Share Insurance Fund. U.S. Government Securities, for the purpose of this section, include securities of Government Sponsored Entities, including but not limited to Federal National Mortgage Association Securities, Government National Mortgage Association Securities, and Federal Home Loan Mortgage Corporation Securities.

An “eligible institution” for trust accounts or IOLTA is a bank, trust company, savings bank, credit union, or savings and loan association authorized by federal or state law to do business in Maine, the deposits of which are insured by an agency of the federal government, and which has been designated by the Maine Justice Foundation as an eligible institution.

(2) The Maine Justice Foundation shall establish guidelines governing approval and termination of eligible status for financial institutions, and shall annually publish a list of eligible financial institutions.

(3) Overdraft Notification Agreement Required. To qualify as an eligible institution, a financial institution must file with the Maine Justice Foundation an agreement, in a form provided by the Maine Justice Foundation, to report to the Board whenever any properly payable instrument is presented against a lawyer trust account containing insufficient funds, irrespective of whether or not the instrument is honored. No trust account shall be maintained in any financial institution that does not agree to so report. Any such agreement shall apply to all branches of the financial institution and shall not be cancelled except upon 60 days’ notice in writing to the Maine Justice Foundation. The overdraft notification agreement shall provide that all reports made by the financial institution shall be in the following format:

(A) In the case of a dishonored instrument, the report shall be identical to the overdraft notice customarily forwarded to the depositor and shall include a copy of the dishonored instrument, if such a copy is normally provided to depositors;

(B) In the case of instruments that are presented against insufficient funds but which instruments are honored, the report shall identify the financial institution, the lawyer or law firm, the account number, the date of presentation for payment, and the date paid, as well as the amount of overdraft created thereby; and

(C) Timing of Reports. Reports under Rule 6(c)(5)(B) shall be made simultaneously with, and within the time provided by law for notice of dishonor, if any. If an instrument presented against insufficient funds is honored, then the report shall be made within five banking days of the date of presentation for payment against insufficient funds.

(4) IOLTA Requirements. In addition to the requirements above, to qualify as an eligible institution for the maintenance of IOLTA, the institution must meet the following requirements:

(A) remit the interest and dividends on this account, net of any allowable reasonable fees, at least quarterly to the Maine Justice Foundation;

(B) transmit with each remittance a report on a form approved by the Maine Justice Foundation that shall identify each lawyer or law firm for whom the remittance is sent, the amount of remittance attributable to each IOLTA account, the rate and type of interest and dividends applied, the amount of interest and dividends, the amount and type of account- related charges deducted, if any, and the average account balance for the period in which the report is made;

(C) transmit to the depositing lawyer or law firm a report in accordance with normal procedures for reporting to its depositors; and

(D) pay on IOLTA accounts interest or dividends no less than the highest interest rate or dividend generally available from the institution to its non-IOLTA customers on accounts having similar minimum balances and other eligibility qualifications. Interest or dividends and fees shall be calculated in accordance with the eligible institution’s standard practice. In determining the highest interest rate or dividend generally available from the institution to its non-IOLTA customers, an institution may consider in addition to the balance in the IOLTA account, factors customarily considered by the institution when setting interest rates or dividends for its non-IOLTA customers, provided that such factors do not discriminate between IOLTA accounts and other accounts and that these factors do not include the fact that the account is an IOLTA account. The eligible institution shall calculate interest and dividends in accordance with its standard practice for non-IOLTA customers. The eligible institution may choose to pay the higher interest rate or dividend on an IOLTA account in lieu of establishing it as a higher rate product. Nothing contained in this rule will be deemed to prohibit an institution from paying a higher interest rate or dividend on IOLTA accounts than required by this rule or from electing to waive any fees and service charges on an IOLTA account. Lawyers may only maintain IOLTA accounts at eligible institutions that meet this rule’s requirements, as determined from time to time by the Maine Justice Foundation.

Eligible institutions may comply with the rate requirements of this rule by electing to pay an amount on funds that would otherwise qualify for the options noted above, equal to the greater of (1) a 1% interest rate or (2) 65% of the Federal Funds Target Rate in effect on July 1 of each year, which rate remains in effect for twelve months, and which amount is deemed to be already net of allowable reasonable fees.

(d) Verification of Bank Accounts.

(1) Generally. Whenever Bar Counsel has evidence that bank or trust accounts of a lawyer that contain, should contain, or have contained funds belonging to clients have not been properly maintained or that the funds have not been properly handled, Bar Counsel shall request the approval of the Chair of the Board to initiate an investigation for the purpose of verifying the accuracy and integrity of all bank accounts maintained by the lawyer. If approval is granted, Bar Counsel shall proceed to verify the accuracy of the bank accounts.

(2) Confidentiality. Investigations, examinations, and verifications shall be conducted so as to preserve the private and confidential nature of the lawyer’s records insofar as is consistent with these Rules and the lawyer-client privilege.

(e) Maine Justice Foundation.

(1) IOLTA Accounting.

(A) Beginning in 2020, on or before April 15 of each year, the Maine Justice Foundation shall complete a financial analysis of the IOLTA funds received and distributed by the Foundation during the previous calendar year and shall prepare an Annual Financial Report that will be available to the public.

(B) The Annual Financial Report shall

(i) Be prepared according to generally accepted accounting principles;

(ii) Include the specific allocation of IOLTA funds to the various providers, programs, and projects for the previous year;

(iii) Include the total funds that were set aside for reserves;

(iv) Include the total IOLTA funds that were allocated to administrative costs of the Maine Justice Foundation; and

(v) Include categories of the rates paid by participating Banks.

(C) Copies of the Annual Financial Report of IOLTA funds shall be provided to the Supreme Judicial Court on or before April 15 each year.

(2) Administrative Costs of the Maine Justice Foundation. Effective in the calendar year beginning on January 1, 2021, no more than 22% of annual IOLTA funds may be allocated to the administrative costs of the Maine Justice Foundation, except that a floor of $120,000 in administrative costs from IOLTA funds is hereby established. To allow prospective budgeting of administrative costs, the calculation of the 22% for any upcoming calendar year shall be determined by computing the average of the annual IOLTA funds received during the three calendar years preceding the calendar year before the year for which the administrative budget is being established and multiplying that number by 0.22.1

(3) Use of IOLTA Funds. IOLTA funds received and distributed pursuant to this Rule are intended to provide services that maintain and enhance resources available for access to justice in Maine, including those services that achieve improvements in the administration of justice and provide legal services, education, and assistance to low-income, elderly, or needy clients.

(f) Receipt of Voluntary Contributions. As part of its notification to attorneys to file annual registration statements, the Board may invite attorneys to make a voluntary contribution to the Campaign for Justice to assist in the funding of legal services for low income individuals. The Board may also provide a means for making the voluntary contribution at the same time that

1 For example, the 22% cap for calendar year 2021 would be calculated by averaging the total IOLTA revenues from calendar years 2017, 2018, and 2019, and multiplying that average annual revenue by 0.22.

the annual fee is paid and is authorized to utilize its administrative staff and facilities to receive these voluntary contributions and forward them to the Campaign for Justice.

(g) Consent by Lawyers. Every lawyer practicing or admitted to practice in Maine shall, as a condition thereof, be conclusively deemed to have consented to the reporting, verification, and production requirements mandated by this rule. Such consent specifically includes authorization to the disclosure by financial institutions of all bank or trust account records and information as requested of them by Bar Counsel for the purposes of verification and investigation pursuant to Rule 6(d).

(h) Costs. Nothing herein shall preclude a financial institution from charging a particular lawyer or law firm for the reasonable cost of producing the reports and records required by this rule.

Background to IOLTA Rule Amendment Accompanying Rule Amendment Effective July 1, 2019

We have carefully reviewed the many comments received in response to the posting of proposed changes to the IOLTA Rules, and we thank those commenters who took the time to provide thoughtful and helpful comments.

We now provide the background perspective requested by many of the commenters.

The concerns giving rise to the proposals for which the Court has sought public input did not begin with questions regarding lobbying. Instead, the concerns relate to the accounting system used by the Maine Justice Foundation, to whom the funds are entrusted for distribution, and the substantial administrative costs of the Foundation that appeared to be reducing the IOLTA funds that are available to support access to justice in Maine.

The Court takes very seriously its responsibilities to assure appropriate use of the IOLTA funding it has mandated. Several years ago, the Court raised concerns with the Foundation regarding its accounting methodology, particularly related to the rise in administrative costs. The concerns regarding the increased administrative costs to which IOLTA funds were being allocated led the Court to seek assurances that the accounting for all IOLTA funds was being undertaken in a careful and reliable manner. Several discussions were held with Foundation leaders to address accounting practices and budgeting policies. The Foundation’s initial responses regarding the actual allocation and uses of the IOLTA funds did not alleviate those concerns, and the Court sought a more detailed analysis.

In response, the Foundation provided an analysis to the Court in a report entitled, “An Examination of Maine’s IOLTA Program,” dated October 2018. We now understand that, in earlier years, the costs of administering the IOLTA funds often consumed less than 20% of the IOLTA funds annually. In recent years, the increased staffing at the Maine Justice Foundation has resulted in the use of an expanding proportion of IOLTA funds to support that growing staff. 2 For example, the Foundation reported that, in 2016, fully 54% of IOLTA revenues were spent on staffing and operational costs for the Foundation, leaving only 46% of the funds to be distributed to the providers of various legal services for Maine’s low income and elderly citizens. A similar administrative use of the funds occurred in 2017 (48% was allocated to administrative costs) and 2018 (40% was allocated to administrative costs).

Throughout this process, the Court consistently expressed its goal of maximizing the IOLTA funds available to Maine people in need of legal assistance. Conversations regarding a cap on administrative costs led the Court to draft a proposed amendment to the IOLTA Rule.

Separately, during the time that the Court was considering the administrative costs allocated to IOLTA, a member of the Bar raised a different concern, specifically questioning the use of mandatory IOLTA funds for lobbying purposes. Similar concerns had been raised by Justice Robert Clifford and Justice Donald Alexander in 2007 when the IOLTA rules were originally promulgated. See 2007 Separate Statements of Non-Concurrence, attached.

2 We acknowledge the Foundation’s representation that some of the additional paid Foundation staff, who may be able to seek out and secure funding from other sources, may ultimately provide further benefits to Maine people in need of help, but that broader goal should not reduce the immediate benefits of IOLTA funding as much as it has. Perhaps the time has come for a more far- ranging discussion of civil legal services funding, to include the possibility of a formal Access to Justice Commission for Maine.

To obtain further input on that issue, we included the proposal for a limitation on lobbying in the draft rule that contained the accounting and administrative cost amendments.

To be clear, the draft limitation on legislative lobbying was not, and is not, intended to include limitations on other types of systemic advocacy, such as impact litigation or administrative advocacy for individuals or groups of clients. Nor did the Court intend to prohibit organizations that do engage in legislative lobbying from receiving IOLTA funds to be used for other purposes. In addition, we unintentionally created confusion by referring to the provision of “direct legal services.” We take the opportunity to address that issue in the Amended Rule promulgated today. See M. Bar R. 6(e)(3).

Finally, we note that most of the comments received by the Court have focused on the potential limitation on legislative lobbying and voter advocacy. Many commenters did not even mention the accounting or administrative proposals, and those that did were primarily in favor of clearer accounting and reduced administrative expenses.

Accordingly, having carefully reviewed the comments sent to the Court, we have concluded that action is required regarding the more pressing concern relating to budget and administrative costs, and that further study of the potential limitation on lobbying is appropriate. We therefore bifurcate the substantive issues and take the following actions.

Accounting and Administrative Costs

The Court today officially promulgates an amended rule, clarifying the breadth of acceptable uses of IOLTA funding, setting out requirements for the Foundation’s accounting of IOLTA funds, and limiting the use of IOLTA funds for the Foundation’s administrative costs to 22% annually, with a floor of $120,000,3 effective in the calendar year beginning on January 1, 2021.

3 The floor is intended to recognize that there are basic administrative costs that must be budgeted, and that, should the IOLTA revenues dip below $600,000 in any applicable 3-year calculation period, $120,000 from IOLTA funds will be available to the Foundation for its administrative costs.

Use of Funds for Legislative Lobbying

Further study regarding the potential limitations on the use of court mandated IOLTA funds for lobbying purposes will be undertaken before further action of the Court. A small working group will be assembled to make recommendations to the Court, and a public hearing will follow.

To clarify the scope of consideration for the working group, we again emphasize that any potential limitation would apply only to the lobbying generally understood to be legislative and candidate-based lobbying and not to the variety of systemic advocacy that includes litigation or administrative advocacy.

In addition, as noted above, in the event that any limitation is ultimately promulgated, we clarify the Court’s intention to allow IOLTA funds to be allocated to a provider notwithstanding that provider’s participation in lobbying services that are separately funded through other sources.

Following the receipt of input from the anticipated working group, the Court will announce a date and time for a public hearing to allow interested parties to be heard regarding any potential limitation on the use of IOLTA funds.

Access to Justice

In conclusion, we thank the many members of the Maine Bar who have been and continue to be supportive of improvement in access to justice in Maine. We are fortunate to have a provider community that is dedicated to providing a broad range of legal assistance to Mainers in need and to attempting to fill the ever-present gap between the needs and the resources available. We look forward to a robust and productive discussion regarding the delivery of civil legal services in Maine.

[Attachment: 2007 Separate Statements of Non-Concurrence]

SEPARATE STATEMENT OF NON-CONCURRENCE IN AMENDMENTS TO THE BAR RULES BY CLIFFORD, J.

Prior to the changes in the Rules promulgated today, participation in the IOLTA Program by members of Maine’s bar has been voluntary. The changes in the Rules eliminate the existing opt-out provision and make participation mandatory.

The use of funds generated from such a mandatory program should properly be limited to the provision of legal services, and I would prohibit the use of any funds generated by a mandatory IOLTA program from being used for purposes of legislative advocacy at the state, local, or federal level.

The use of any such funds generated from bank accounts of attorneys and their clients for political purposes, with which many of those attorneys or clients may disagree, is coercive and, in my view, improper. Accordingly, I cannot support any changes in the rules that make participation in the IOLTA program mandatory, unless the use of those funds is limited to the provision of legal services.

SEPARATE STATEMENT OF NON-CONCURRENCE IN AMENDMENTS TO THE BAR RULES BY ALEXANDER, J.

The Rule amendments adopted today make participation in the IOLTA Program mandatory for those lawyers who maintain client trust accounts. The 2007 amendments also assure that banks, credit unions, and other financial institutions maintaining IOLTA accounts pay interest on those accounts at rates comparable to similar commercial accounts. These actions are a further demonstration of the Court’s and the Bar’s commitment to improve the quality of legal services for Maine’s poor and disadvantaged populations. I support the goals of the mandatory IOLTA program, but not the Rule amendments that will undermine opportunities for innovation, compel contributions to support political and lobbying activities, and provide no assurance of openness and accountability in spending decisions.

Supporters of the mandatory program estimate that it may nearly double IOLTA funds, adding as much as $1 million to efforts to improve access to justice for our poor and disadvantaged populations. That prospective dramatic increase in resources presented a unique opportunity to engage the courts, the bar, the legal services community and the public in a creative reexamination of what we mean by access to justice, what are our priority needs, and how best to support those needs to assure that legal services funds are spent most productively. The opportunity for creative reexamination would be fostered by recommendations for many new initiatives that are currently being developed by the Justice Action Group. The Court’s action today forfeits the opportunity for creative reexamination, because it assures that no significant pool of funds will be available to support new initiatives that the Justice Action Group or others may recommend.

Over $11 million of IOLTA funds have already spent by the Maine Bar Foundation. These funds have been generated from voluntary contributions by the members of the Maine Bar who maintain trust accounts and choose to participate in the IOLTA Program. The six legal services groups for whom 80°/ci of the IOLTA funds are earmarked have been selected through an ill- defined process with little or no public visibility or participation, and only limited accountability to assure that funds are spent effectively. Such a closed process may be appropriate for a private charity, but this is no longer a private, voluntary charitable venture.

The Court’s action making the IOLTA Program mandatory fundamentally changes the nature of the program. Effective January 1, funding for the program will be generated as a result of a State government mandate, imposed by the Judicial Branch through this rule making.

In early July, the Maine Bar Foundation sent to the Court its proposed rules change to adopt mandatory IOLTA. The draft included no provisions to assure public participation, openness or accountability. It proposed no restriction on use of Court mandated funds for political activity and lobbying. It included no suggestion that the anticipated dramatic expansion in funding be accompanied by any innovative review to better define “access to justice,” identify needs and priorities for funding, and assure that spending will be focused on serving the most urgent needs of Maine’s poor and disadvantaged populations.

In letters to the Court and at the public hearing to consider its proposal to make IOLTA mandatory, the Bar Foundation confirmed its opposition to any change in practices for distributing IOLTA funds and any controls to assure openness, public participation and accountability in its spending decisions.

In effect, the Bar Foundation told the Court, mandate IOLTA, give us the money, but Court and public oversight as to how we spend that money is not welcome. Today the Court grants the Bar Foundation its wish. I do not concur. When publicly mandated funds are spent to serve important public purposes, public participation, openness and accountability should be welcomed, not scorned. Use of publicly mandated funds for political activity and lobbying to advance particular social viewpoints and oppose others should be prohibited. Innovation should be encouraged.

The Court hands the Maine Bar Foundation the $2 to $2.5 million that it estimates will be generated annually as a result of the court-mandated IOLTA Program. It allows the Maine Bar Foundation to spend IOLTA funds just as it has in the past, with 80% of the funds, old funds and new funds, already earmarked for current programs of the same six specially affiliated groups. In so doing, the Court ends any hope for significant IOLTA funds to start up new legal services programs that JAG or others might recommend.

A. Missed Opportunity for Innovation

In discussion of the access to justice needs of Maine’s poor and disadvantaged populations, it is often suggested that current programs can serve only approximately 20% of the needs for access to justice. If only 20% of the needs are currently being met, it necessarily follows that many needs are going unmet, and that within available resources, there must be a continuing, innovative effort to identify highest priority needs and direct resources to those needs. The JAG study, to be finalized later this fall, may provide that innovative review of needs and priorities and make suggestions for change.

While many would agree that most programs supported by the Maine Bar Foundation are directed to high priority needs of Maine’s poor and disadvantaged populations, there are a number of important needs that, at least in my judgment, appear largely unaddressed in the current fund distribution processes. Those needs include, in a listing that does not suggest any particular order or priority, the following:

1. Better support for children and parents separating as a result of divorce, parental rights, and protection from abuse proceedings: Family structure fractures occurring in divorce, parental rights, and protection from abuse proceedings often have significant, long-term adverse effects on separating parents and the children caught in these proceedings. Despite these impacts, most low-income and poor parents proceed through such actions without legal assistance. Improved access to legal services in these difficult cases would have long term benefits for the parties involved and for society, limiting or avoiding problems resulting from poorly informed self-representation in family matters. A draft of the JAG report suggests that JAG may recommend an important new initiative to provide court based aid for separating families, a program that will require significant new resources.

2. Training for trial and appellate advocacy for indigent clients: Our Constitution guarantees court-appointed counsel for trial and appellate advocacy for indigent citizens facing jail as a result of criminal charges, or facing loss of children in child protective and termination of parental rights proceedings. Case specific costs and fees relating to such proceedings are paid, although not necessarily paid well, by the court system. However, the case specific payment system has no method to pay for generalized training and support for trial and appellate advocacy. The current access to justice programs provide little or no support for trial and appellate advocacy training programs to support the constitutional right to counsel in these critical areas.

3. Credit and collections counseling and advocacy: Problems with credit, debts, and financial obligations are a frequent cause for people falling into and staying in poverty. Many people respond, with over-enthusiasm, to very generous invitations to become indebted provided by banks and other financial institutions. They then become caught in a spiral of bank fees, late fees, and other problems paying their credit obligations that induce or perpetuate a cycle of poverty. Such credit difficulties are particularly problematic in a heavily rural state such as Maine where a vehicle and minimal financial resources are essential to obtain and retain a job. The current access to justice programs supported by IOLTA and other funds provide little or no support for credit counseling and, if necessary, advocacy in the courts or administrative agencies for individuals caught in the easy credit, tough repayment cycle. 4 What credit counseling there is, is often provided by creditor supported institutions and entities that may not counsel consistent with what may be the debtor’s best interest and are not available to go to court to challenge legally

4 This year the Maine Bar Foundation is providing a one-time grant of $35,000 to support a program to aid homeowners victimized by predatory mortgage lending practices. It appears that past short term programs to aid victims of domestic violence were reduced to support this program. Funding was not reduced for any of the six programs that receive the bulk of Bar Foundation support.

questionable credit agreements and arrangements. See Credit Counseling Centers, Inc. v. City of South Portland, 2003 ME 2, 814 A.2d 458.

4. A landlord-tenant conciliation and dispute resolution program: In Maine a significant portion of the rental housing stock available to poor people is owned by individuals who, themselves, are not wealthy and do not have easy access to legal services. Many elderly people, living on fixed incomes, may own one or a few apartment buildings, living in one unit and renting out the others. They depend on the income from these units to maintain their own existence. When a tenant fails to pay the rent, causes disturbances that disrupt the lives of others, or damages the unit, the landlord may seek to evict the tenant, but may not be able to afford an attorney to assist with an eviction. As a result, in some proceedings, a tenant resisting eviction may have counsel, whereas a landlord does not. Many such matters might be resolved by proceedings short of a full court hearing and decision that could achieve resolution of a matter in a way somewhat acceptable to both the tenant and a landlord.

The Legislature recently adopted and provided basic funding for a mediation program in forcible entry and detainer matters. 5 However, a broader conciliation and dispute resolution program, supported by access to justice funds, may be beneficial to many under-funded tenants and landlords in such situations.

Are current programs that are guaranteed funds more important than improved legal services for victims of domestic violence, support for poor families who are separating, or assistance for people caught in the easy credit trap? Perhaps yes; perhaps no. But at least we should have asked the question and given ideas for new programs a chance to receive support from mandatory IOLTA funding. I decline to join an order that forfeits our chance to consider providing significant support for new initiatives through an engaged, innovative study of needs and priorities for access to justice funding. Innovation is not promoted by handing more money to the same groups that presently receive funds so that they can expand and quickly absorb the larger amount of funds that will become available.

5 P.L. 2007, chap. 246, enacting the mediation program as 14 M.R.S. § 6004-A, effective January I,

2008, and providing program support of $11,250 in FY ‘08 and $22,500 in FY ‘09.

B. Accountability

The decision to make the IOLTA Program mandatory fundamentally changes the nature of the program. It is now a government-mandated program with money to be accumulated and distributed in accordance with the government mandate. The Court considered and rejected several proposals to require that the Maine Bar Foundation engage in open and accountable decision-making. The rejected proposals were similar to those that the Court has recently imposed on the companion Maine Civil Legal Services Fund Commission. Among the limitations rejected were:

1. A conflict of interest provision that would have prevented board members and decision makers associated with the Maine Bar Foundation from also being board members or employees, or having immediate family members who were board members or employees, of an organization receiving or requesting IOLTA funds.

2. A requirement that the Maine Bar Foundation publish eligibility criteria and publicly solicit applications for new programs and program renewals on at least a bi-annual basis.

3. A requirement that Bar Foundation meetings to discuss and make decisions about priority setting and awards of IOLTA funds, be held in public, with adequate public notice, preceding public deliberation and selection of those entities and programs to receive IOLTA funds.

4. A requirement that needs for legal services and allocations of funds be reviewed on at least a bi-annual basis to assure that the goals of currently funded programs are being met and that funds are being utilized either in existing or new programs to meet the highest priority identified needs.

These minimal public participation, openness and accountability requirements, imposed on the companion Maine Civil Legal Services Fund Commission, should have been equally imposed upon the Maine Bar Foundation. I decline to join an order that does not impose such minimal, but necessary, openness and accountability requirements on spending of government mandated funds.

C. Political Action and Lobbying

Our rule governing the companion Maine Civil Legal Services Fund includes a prohibition on use of that fund for political action and lobbying. The Court rejected a proposal for a similar prohibition on use of mandatory IOLTA funds. That is unfortunate for three reasons. First, use of funds generated by government mandate for political action and lobbying purposes is of questionable legality. Such uses may be violative of the expressive rights of those forced to pay to support political causes they oppose. Second, the IOLTA funds are sorely needed for front line legal services programs to aid Maine citizens. These scarce funds should not be diverted to support political action and lobbying ventures in support of or opposition to particular social causes. Third, purely as a matter of policy, people who are forced by the government to contribute to a particular program should not be forced to subsidize political action and lobbying for causes with which they may disagree.

There is not much law on the legality of using forced IOLTA contributions for political purposes. What law there is suggests that a challenge to use of compulsory contributions for political purposes might succeed. In Phillips v. Washington Legal Foundation, the U.S. Supreme Court held that the interest income generated by funds held in IOLTA accounts is the private property of the owner of the principle. 524 U.S. 156, 172 (1998). This conclusion was reached after a Texas businessman filed suit alleging that the Texas IOLTA program violated the Fifth Amendment by taking his property without just compensation. Id. at 163. The Court based its holding on the premise that the Constitution merely protects, rather than creates, private property interests, and therefore property interests must be independently created. Id. at 171. (“The State’s having mandated the accrual of interest does not mean the State or its designate is entitled to assume ownership of that interest, as the State does nothing to create value; the value is created by respondents’ funds.”)

Although Phillips held that the interest generated by IOLTA programs was the private property of the owner of the principle, the Court subsequently held in Brown v. Legal Foundation of Washington, that IOLTA funds constituted a public use, and that just compensation is “measured by the property owner’s loss rather than the government’s gain.” 538 U.S. 216, 237 (2003). Therefore, the private party “is entitled to be put in as good a position pecuniarily as if his property had not been taken.” Id. at 236. Nevertheless, the Court held that by the very construct of IOLTA, the owner’s opportunities to earn net interest in a separate, individual account must be zero, and thus there is no taking in violation of the Fifth Amendment. Id. at 240. Brown involved a takings challenge. The concern here is the potential for a First Amendment challenge. Justice Kennedy, dissenting in Brown, warned that the Court would one day be confronted with First Amendment challenges to IOLTA programs and suggested “one constitutional violation (the taking of property) likely will lead to another (compelled speech). These matters may have to come before the Court in due course.” 538 U.S. 216, 253 (2003) (Kennedy, J., dissenting). Justice Kennedy stated that “the First Amendment consequences of the State’s action have not been addressed in this case, but the potential for a serious violation is there.” Id.

Recent jurisprudence on similar issues suggests that a First Amendment challenge would present a real risk that could seriously damage the IOLTA program. In Locke v. Karass, --- F.3d ---, 2007 U.S. App. LEXIS 18763 (1st Cir. 2007), the First Circuit approved the compulsory taking of deductions from public employee salaries to support legal services related to union organizing and bargaining activities. In so holding, the court distinguished what it held to be the proper use of funds for legal services related activities from what it suggested would be improper use of funds to “subsidize or financially support the political or ideological activities of the union” Id., *12 (citing Machinists v. Street, 367 U.S. 740, 744 ((1961) (it is a violation of First Amendment to permit forcible collection of funds from employees “to promote the propagation of political and economic doctrines, concepts and ideologies with which [they] disagreed”).6 It is not much of a stretch to say the same about political uses of government mandated attorney and client contributions to IOLTA.

Beyond First Amendment issues, authorizing use of IOLTA funds for political action and lobbying is bad policy because it diverts funds needed to support core legal services activities. While many needs discussed above are not being addressed more than minimally, and while some very high priority needs, such as protection for victims of domestic violence, are being addressed inadequately, IOLTA funds are being used for lobbying and political action programs about which there may be uncertainty as to their proper place in the priority structure. According to the reports provided to the Court by the Maine Bar Foundation, programs that IOLTA funds supported this past year included

6 See also Davenport v. Washington Education Assoc., --- U.S. ---, 127 S. Ct. 2372, 2377 (2007) (“Agency-shop arrangements in the public sector raise First Amendment concerns because they force individuals to contribute money to unions as a condition of government employment.”)

(1) advocacy favoring citizens of foreign nations receiving in-state tuition rates at the University of Maine, while American citizens of other states would continue to be charged higher out-of-state tuition rates, (2) successful opposition to legislation to hold tenants criminally responsible for vandalism in their apartments, and (3) support for reforms in immigration practices to make it easier for citizens of foreign nations to relocate to the United States and to Maine.

To some, these efforts may be the most important initiatives that IOLTA funds support. Others may disagree. But debate over the legality and propriety of such political uses of funds may erode public support for the IOLTA program and divert attention from the important legal services work that is the justification for mandating IOLTA. I do not join an order that invites use of mandated IOLTA funds for political action and lobbying purposes.