Phillips v. Washington Legal Foundation

Summary

The Court, in an opinion by Chief Justice Rehnquist joined by Justices O'Connor, Scalia, Kennedy, and Thomas, held that interest generated by client funds in IOLTA accounts is the client's private property for purposes of the Takings Clause. The traditional rule that interest follows principal applies even when the client cannot realize net interest after expenses. The Court affirmed without deciding whether a taking occurred or what compensation, if any, was due. Justice Souter, joined by Justices Stevens, Ginsburg, and Breyer, dissented, favoring vacatur and remand for consideration of property, taking, and compensation together rather than deciding an abstract property question. Justice Breyer, joined by Justices Stevens, Souter, and Ginsburg, separately dissented, agreeing with that approach and additionally concluding that interest obtainable only through IOLTA's intervention was not the client's private property.