The effort in the 2011 General Assembly to revive mandatory IOLTA is dead for the time being.
Proponents of reinstating mandatory IOLTA as a tool to raise money for legal aid failed to clear the first hurdle – lifting the ban on the concept the Assembly imposed in 1995.
The fight over IOLTA strained relations between the Virginia State Bar and its membership as the VSB Council voted to recommend mandatory participation in 1993, over strong and vocal opposition by solo practitioners. The mandatory program was approved by the Supreme Court of Virginia on a 4-3 vote.
Two years later, then-Del. Glen Croshaw, D-Virginia Beach, filed a number of voluntary IOLTA bills, forcing VSB leaders into a compromise: lawyers could opt out of having interest on their trust accounts paid to the Legal Services Corporation of Virginia. Banks agreed not to oppose IOLTA participation.
With the ban in place, the first task was to get the legislature to remove it. Del. William H. Cleaveland, R-Botetourt, and Sen. A. Donald McEachin, D-Richmond, sponsored repeal legislation, House Bill 1571 and Senate Bill 817.
Cleaveland’s bill died in the House Courts of Justice Committee on a 10-12 vote, but the Senate version squeaked by the Senate, 22-18. That sent the concept to the House, but last week the Courts committee, on an 11-11 vote, failed to report it to the full House.
Just how much money the proposal would generate, at least in the near term, is very much in question. The amount collected through the program dropped from $4.6 million to $700,000 as the economy tanked and interest rates on the accounts dropped to near zero.
Moreover, no one knows how much of the money that might be generated by a mandatory program is already being collected by the opt-out program. About 5,100 trust accounts participate in the program, compared with roughly 23,000 attorneys with active practices in the state. But some of the accounts cover entire law firms, and many lawyers don’t have practices with a need for a trust account that would generate revenue for legal aid.
And, as the close 1993 vote suggests, getting the endorsement of the Virginia State Bar and the approval of the Supreme Court for the program was by no means a certainty.
This time around, VSB leaders had little to say about the new legislation. The VSB was aware of it, but took no position on it, said VSB Executive Director Karen A. Gould.
The Virginia Bar Association was a strong supporter of mandatory IOLTA during the earlier debate and remains behind the idea.
Virginia is among only six states that provide for opt-out IOLTA participation, according to figures from the American Bar Association. LSCV executive director Mark D. Braley reports 43 states and the District of Columbia now have mandatory IOLTA, with New Hampshire recently joining the ranks. South Dakota and the Virgin Islands have voluntary programs, where lawyers have to affirmatively elect to participate.
“We’re now the exception,” Braley said. “We’re the only Southern state without a mandatory rule, and certainly the largest state without a mandatory rule.”