HB 1395 - Repealing the IOLTA program

posted Apr 4, 2012, 2:49 AM by Bill Duncan

AN ACT revoking amendments to supreme court rules 50 and 50-A.

SPONSORS: Rep. Sorg, Graf 3; Rep. B. Murphy, Rock 18; Rep. Itse, Rock 9; Rep. Mirski, Graf 10; Rep. Ingbretson, Graf 5

COMMITTEE: Judiciary


This bill revokes amendments to supreme court rules 50 and 50-A.

"....purporting to require attorneys to create or maintain a pooled interest-bearing trust account for clients' funds nominal in amount or to be held for a short period of time, and to remit the interest earned thereby to the New Hampshire Bar Foundation, are hereby declared to be unconstitutional and are rescinded and revoked.... "

HB 1395, revoking amendments to supreme court rules 50 and 50-A.  MAJORITY:  OUGHT TO PASS.  MINORITY:  INEXPEDIENT TO LEGISLATE.

Rep. Gregory M Sorg for the Majority of  Judiciary:  The rulemaking authority of the supreme court under Part 2, Article 73-a of the New Hampshire constitution is limited to “rules governing the administration of all courts in the state and the practice and procedure to be followed in all such courts.” Notwithstanding this express limitation, the supreme court on December 29, 2010, ostensibly under authority of Article 73-a, issued a rule, to take effect on March 1, 2011, requiring attorneys to create or maintain a pooled interest-bearing trust account for clients’ funds nominal in amount or to be held for a short period of time, and to remit the interest earned to the New Hampshire Bar Foundation. The court was thus requiring attorneys to generate money to send to an organization founded by the court and administered by trustees appointed by the court, in order to support charitable activities approved by the court. The separation of powers enshrined in Part 2, Article 37 forbids the creation by the judicial branch of a parallel welfare state in which the supreme court is judiciary, legislature and executive all rolled into one, while the Thirteenth Amendment to the federal constitution forbids slavery or involuntary servitude, even of lawyers. Part 2, Article 73-a creates no exception to either proscription.     Vote 13-4.      

Rep. Lucy M Weber for the Minority of  Judiciary:  Attorneys maintain trust accounts to hold funds belonging to clients separate from funds belonging to the attorney or the law firm.  When a significant sum belonging to one client is held for more than a few days, that client’s money is put into a separate bank account, and the interest on that bank account goes to the client when the account is closed, just as it would if the funds were held by a real estate agent or other agent.  A trust account for pooled client funds is used only for small amounts of client money, or larger sums held for a very short period of time.  Because the interest on this account does not belong to the attorney, lawyer’s trust funds accounts used to be put into non-interest bearing accounts.  Obviously, the entity benefitting from the accrued interest on a non-interest bearing trust account is the bank.  Some years ago, the supreme court created the IOLTA program—Interest On Lawyers’ Trust Accounts.  Rather than being retained by the banks, the interest on IOLTA accounts is remitted by the bank holding the account to the Bar Association to be used for the provision of legal services to those in need, and for legal education programs. 

Proponents of this bill argue that the accrued interest belongs to the client, and that the supreme court has no power to require the payment of the accrued interest to the Bar Foundation.  The minority notes that this bill does not return this interest to any client.  It would be impractical, in any case, to try to compute how much of each day’s interest has accrued to each client with funds in the lawyer’s trust account.  Passage of HB 1395 simply reverts to the old standard of allowing the bank to keep any interest that would otherwise accrue on the lawyer’s trust account.  The minority believes that the inherent power of the supreme court to regulate the practice of law includes the power to require attorneys to participate in the IOLTA program.