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Monday, February 1, 2010

Stevenson on IOLTA Takings Problems After Kelo

Drury D. Stevenson (South Texas) has posted IOLTA Problems in the Post-Kelo World on SSRN.  Here's 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.

Ben Barros

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