Tuesday, February 2, 2010

Stevenson on Kelo and IOLTA

My colleague Dru Stevenson (South Texas) has posted IOLTA Problems in the Post-Kelo World, a very interesting paper looking into the question of whether anti-Kelo reform statutes and amendments--targeted at restricting the use of eminent domain for land--might also have an unintended impact on the legality of "takings" of money for IOLTA programs.  The Supreme Court has ruled that IOLTA programs do qualify as takings but do not trigger the federal Just Compensation Clause; new state laws banning private-to-private transfers, though, may be problematic.  The abstract:

IOLTA programs are a very popular mechanism for funding legal services for the poor, and are now operating in every state. As a result, however, IOLTA has become the most frequent and widespread instance of government takings of private property in America. The post-Kelo era has seen increasing legislative restrictions on takings, and the post-Kelo reforms in several states appear to have inadvertently made their respective IOLTA programs illegal by banning all takings where the government immediately gives the taken property to another private party (in this case, private poverty-law foundations and legal aid clinics).

IOLTA takings also highlight a puzzling gap in our legal system between eminent domain law and administrative law. Eminent domain law tends to downplay the importance of procedure itself for government actions, often allowing states to proceed without regard to procedural due process as long as the victims of takings can bring inverse condemnation actions after the fact. Administrative law, in contrast, includes a long line of Supreme Court precedents that emphasize the importance of procedure itself as a component of due process and fairness; state infringements on the “property interests” of individuals can face reversal simply because an agency failed to provide a fair hearing beforehand.

The ensuing discussion also reaches three inherent tensions or puzzles with public funding of legal services for the poor: crowding-out effects, monopoly/single-payer system problems, and the moral hazard problems with providing free lawyers for the poor. This article addresses, apparently for the first time, these three (rather significant) concerns as they pertain to IOLTA or legal services in general. I offer some modest policy reforms in response to these issues.

Matt Festa


Property Rights, Scholarship, Takings | Permalink

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