Washington Legal v. Massachusetts Bar
Case Date: 06/04/1993
Court: United States Court of Appeals
Docket No: 92-1775
|
June 3, 1993 UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT ____________ No. 92-1775 WASHINGTON LEGAL FOUNDATION, ET AL., Plaintiffs, Appellants, v. MASSACHUSETTS BAR FOUNDATION, ET AL., Defendants, Appellees. ____________ ERRATA SHEET The opinion of this court issued on May 20, 1993, is amended as follows: Page 4, lines 5-6 from bottom: Delete 1987 after 11th Cir. and add (1987) at end of citation: 484 U.S. 917 (1987). Page 5, line 13: Abbreviate Indiana to Ind. line 18: Change Assoc. to Ass'n footnote 1, line 2: Abbreviate Arkansas to Ark. line 3: Abbreviate Association to Ass'n line 5: Delete 1984 Page 11, footnote 4, line 9: change and add as follows: (1st Cir.), cert. denied, 494 U.S. 1082 (1990). _____ ______ Page 17, line 8: Abbreviate Educational to Educ. line 9: Abbreviate Foundation to Found. Page 22, line 18: Delete (1979) Page 24, line 3: Delete (1979) Page 36, footnote 15, line 3: add after ...newspaper), cert. _____ denied, 113 S. Ct. 1067 (1993); ______ line 10: add after ...organizations), cert. denied, 493 _____ ______ U.S. 1094 (1990); line 11: add after ...NJPIRG), cert. denied, 475 U.S. _____ ______ 1082 (1986); UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT ____________________ No. 92-1775 WASHINGTON LEGAL FOUNDATION, ET AL., Plaintiffs, Appellants, v. MASSACHUSETTS BAR FOUNDATION, ET AL., Defendants, Appellees. ____________________ APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Joseph L. Tauro, U.S. District Judge] ___________________ ____________________ Before Breyer, Chief Judge, ___________ Bownes, Senior Circuit Judge, ____________________ and Boudin, Circuit Judge. _____________ ____________________ Richard A. Samp, with whom Daniel J. Popeo, John C. Scully, and _______________ ________________ _______________ Francis C. Newton, Jr. were on brief, for appellants. ______________________ Allan van Gestel, with whom James C. Rehnquist, John C. __________________ _____________________ ________ Kissinger, Jr., and Goodwin Procter & Hoar were on brief, for _______________ _________________________ Massachusetts Bar Foundation, William W. Porter, Assistant Attorney _________________ General, and Scott Harshbarger, Attorney General, on brief for __________________ Massachusetts IOLTA Committee, Donald K. Stern, S. Tara Miller, and ________________ _______________ Hale and Dorr on brief for Boston Bar Foundation, Joseph L. Kociubes, _____________ __________________ Stephanie A. Kelly, Diane E. Cooley, and Bingham, Dana & Gould on __________________ ________________ ______________________ brief for Massachusetts Legal Assistance Corporation, appellees. William W. Porter, Assistant Attorney General, and Scott ____________________ _____ Harshbarger, Attorney General, on brief for The Chair of the ___________ Massachusetts Board of Bar Overseers, appellee. William W. Porter, Assistant Attorney General, and Scott ___________________ _____ Harshbarger, Attorney General, on brief for The Justices of the ___________ Massachusetts Supreme Judicial Court, appellees. Peter M. Siegel, Randall C. Berg, Jr., and Arthur J. England, ________________ ______________________ ___________________ Jr., and Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A. on ___ __________________________________________________________ brief for Alabama Law Foundation, Inc., Alabama State Bar, Arkansas IOLTA Foundation, State Bar of Arizona, Arizona Bar Foundation, The State Bar of California, The Legal Services Trust Fund Commission of the State Bar of California, Colorado Bar Association, Colorado Lawyer Trust Account Foundation, Connecticut Bar Foundation, Connecticut Bar Association, Delaware Bar Foundation, Delaware State Bar Association, The Florida Bar, The Florida Bar Foundation, Georgia Bar Foundation, State Bar of Georgia, Hawaii Bar Foundation, Hawaii State Bar Association, Idaho Law Foundation, Inc., Idaho State Bar, Illinois State Bar Association, Lawyers Trust Fund of Illinois, The Iowa State Bar Association, Kansas Bar Foundation, Kentucky IOLTA Fund, Louisiana State Bar Association, Maine Bar Foundation, Maine State Bar Association, Maryland Legal Services Corporation, Maryland State Bar Association, Inc., State Bar of Michigan, Michigan State Bar Foundation, Inc., Minnesota Lawyer Trust Account Board, The Missouri Bar, Missouri Lawyer Trust Account Foundation, National Association of IOLTA Programs, Inc., National Legal Aid & Defender Association (NLADA), Nevada Law Foundation, New Hampshire Bar Association, New Hampshire Bar Foundation, New Jersey State Bar Association, New Jersey State Bar Foundation, The IOLTA Fund of the Bar of New Jersey, New Mexico Bar Foundation, New York State Bar Association, Interest on Lawyer Account Fund of the State of New York, North Carolina Bar Association, North Carolina State Bar Plan for Interest on Lawyers' Trust Accounts, State Bar Association of North Dakota, Ohio Legal Services Program of the Ohio Public Defender Commission, Oklahoma Bar Foundation, Inc., Oregon Law Foundation, Oregon State Bar, Pennsylvania Bar Association, Lawyer Trust Account Board [Pennsylvania], Philadelphia Bar Association, Rhode Island Bar Foundation, Seattle-King County Bar Association, South Carolina Bar, The South Carolina Bar Foundation, South Dakota Bar Foundation, Tennessee Bar Association, Tennessee Bar Foundation, Texas Equal Access to Justice Foundation, State Bar of Texas, Utah Bar Foundation, Utah State Bar, Vermont Bar Association, Vermont Bar Foundation, The Virginia Bar Association, Virginia Law Foundation, Virginia State Bar, Washington State Bar Association, Legal Foundation of Washington, West Virginia Bar Foundation, Inc., West Virginia State Bar, amici curiae. J. Michael McWilliams, Dennis A. Kaufman, and John H. Morrison on _____________________ _________________ ________________ brief for The American Bar Association, amicus curiae. Gerald B. Gallagher, on brief pro se, amicus curiae. ___________________ Kathleen McDonald O'Malley, Chief Counsel, Patrick A. Devine, ____________________________ __________________ Assistant Attorney General, Lee Fisher, Attorney General of Ohio, ___________ Winston Bryant, Attorney General of Arkansas, Richard Blumenthal, _______________ ___________________ Attorney General of Connecticut, Larry EchoHawk, Attorney General of ______________ Idaho, Roland W. Burris Attorney General of Illinois, Bonnie J. __________________ _________ Campbell, Attorney General of Iowa, Michael E. Carpenter, Attorney ________ _____________________ General of Maine, J. Joseph Curran, Jr., Attorney General of Maryland, _____________________ Hubert H. Humphrey, III, Attorney General of Minnesota, Mario J. _________________________ _________ Palumbo, Attorney General of West Virginia, Mike Moore, Attorney _______ __________ General of Mississippi, Frankie Sue Del Papa, Attorney General of ______________________ Nevada, Robert J. Del Tufo, Attorney General of New Jersey, Tom Udall, __________________ _________ Attorney General of New Mexico, Nicholas J. Spaeth, Attorney General __________________ of North Dakota, Earnest D. Preate, Jr., Attorney General of __________________________ Pennsylvania, Dan Morales, Attorney General of Texas, Jeffrey L. ____________ ___________ Amestoy, Attorney General of Vermont, Robert Abrams, Attorney General _______ _____________ of New York, Charles W. Burson, Attorney General of Tennessee, Ken __________________ ___ Eikenberry, Attorney General of Washington, and Mary Sue Terry, __________ ________________ Attorney General of Virginia, on brief for the States of Ohio, Arkansas, Connecticut, Idaho, Illinois, Iowa, Maine, Maryland, Minnesota, Mississippi, Nevada, New Jersey, New Mexico, New York, North Dakota, Pennsylvania, Tennessee, Texas, Vermont, Washington, West Virginia, and Virginia, amici curiae. ____________________ May 20, 1993 ____________________ BOWNES, Senior Circuit Judge. This appeal involves BOWNES, Senior Circuit Judge ____________________ a challenge to the Massachusetts Interest on Lawyers' Trust Accounts ("IOLTA") program. The district court granted the defendants' motion to dismiss the plaintiffs' claims that the IOLTA program violated their First Amendment rights of freedom of speech and association, and effected a taking of their property in violation of the Fifth and Fourteenth Amendments. We affirm. I. I. BACKGROUND BACKGROUND __________ Traditionally, in Massachusetts and in other states, clients' funds which lawyers held for a short term or in nominal amounts were deposited into non-interest bearing pooled trust accounts. See, e.g., In Re Mass. Bar Ass'n, 478 ___ ____ _____________________ N.E.2d 715, 716 (Mass. 1985); In Re Minn. State Bar Ass'n, ____________________________ 332 N.W.2d 151, 155-56 (Minn. 1982). Banking laws and the ethical obligation of lawyers to maintain clients' funds so that they were immediately available for reimbursement prevented such pooled trust accounts from accruing interest. Cone v. State Bar of Fla., 819 F.2d 1002, 1005 (11th Cir.), ____ __________________ cert. denied, 484 U.S. 917 (1987). Interest earned by pooled _____ ______ trust accounts remained with the banking institution which held the funds. Id. With the advent of Negotiable Order of ___ Withdrawal ("NOW") accounts authorized by the Consumer Checking Account Equity Act, interest became available on -4- checking accounts for eligible depositors. Id. at 1005-06. ___ Eligible depositors include individual owners of deposited funds and certain charitable, non-profit or public interest entities including IOLTA programs. See id.; In Re N. H. Bar ___ ___ ________________ Ass'n, 453 A.2d 1258, 1259 (N.H. 1982). During the late _____ 1970's and through the 1980's, Florida and many other states proposed IOLTA programs and courts upheld the programs finding them constitutionally and ethically permissible.1 As of January, 1992, forty-nine states and the District of Columbia had authorized IOLTA programs. ABA/BNA Lawyers' Manual on Professional Conduct 45:202 (1992). Indiana remains the only state which has not adopted an IOLTA program. Id.; In Re Public Law No. 154-1990, 561 N.E.2d 791 ___ _____________________________ (Ind. 1990); In Re Ind. State Bar, 550 N.E.2d 311 (Ind. ______________________ 1990). The Massachusetts IOLTA program was established by amendment to Canon 9, DR 9-102 of Rule 3:07 of the Rules of the Supreme Judicial Court, effective September 1, 1985, the "IOLTA Rule." Mass. Bar Ass'n, 478 N.E.2d at 720-21. From _______________ 1985 until 1990, the IOLTA program operated as a voluntary ____________________ 1 See, e.g., Cone, 819 F.2d 1002; In Re Interest on Trust ___ ____ ____ _______________________ Accounts, 402 So.2d 389 (Fla. 1981); In Re Ark. Bar Ass'n, ________ _____________________ 738 S.W.2d 803 (Ark. 1987); Mass. Bar Ass'n, 478 N.E.2d 715; _______________ Carroll v. State Bar of California, 213 Cal. Rptr. 305 (4th _______ ________________________ Dist.), cert. denied sub nom. Chapman v. State Bar of Calif., _____ ______ ___ ____ _______ ___________________ 474 U.S. 848 (1985); In Re Interest on Lawyers' Trust ____________________________________ Accounts, 672 P.2d 406 (Utah 1983); N. H. Bar Ass'n, 453 A.2d ________ _______________ 1258; Minn. State Bar Ass'n, 332 N.W.2d 151. _____________________ -5- system. Attorneys could elect to participate by establishing an interest-bearing IOLTA account and by complying with DR 9- 102(C) requirements which included choosing a recipient charity from a group designated by the IOLTA Committee. In 1989, the Massachusetts Supreme Judicial Court ("SJC") converted the voluntary IOLTA program into a mandatory program by amending the IOLTA Rule, effective January 1, 1990. As amended, the rule required all Massachusetts lawyers to deposit client funds into interest bearing accounts: either (1) a pooled IOLTA account if, in the judgment of the lawyer, the deposits were nominal in amount or to be held for only a short period of time; or (2) individual accounts for all other client funds. The Rule required lawyers or law firms to direct the banks holding their IOLTA accounts to disburse accrued interest to a charitable entity selected by the lawyer or firm from a group designated by the SJC. The designated charities were Massachusetts Legal Assistance, the Massachusetts Bar Foundation, and the Boston Bar Foundation. The SJC again amended the IOLTA Rule, effective January 1, 1993, to change the process for disbursement of IOLTA funds.2 The IOLTA Rule now vests responsibility for ____________________ 2 The Massachusetts Supreme Judicial Court amended Rule 3:07, DR 9-102(C) by Order 92-18, effective January 1, 1993. A copy of DR 9-102 and the amendment appear in the appendix following this opinion. -6- disbursement of IOLTA funds in the IOLTA Committee and eliminates choice by lawyers of recipient eligible charities. The IOLTA Committee must disburse sixty-seven percent of all IOLTA funds to Massachusetts Legal Assistance and the remaining thirty-three percent to "other designated charitable entities." The parties have not briefed or argued any issues in the context of the 1993 amendment to the IOLTA Rule.3 Although the amendment of the IOLTA Rule affects the process of funds disbursement, the changes are not material to this decision. None of the parties argued that the lawyers' choice of recipient charities, as provided by the 1990 version of the IOLTA Rule, was significant. The funds are still disbursed primarily to Massachusetts Legal Assistance with the remainder to "other designated eligible charities" which are still the Massachusetts Bar Foundation and the Boston Bar Foundation. In addition, the mission of IOLTA funds remains the same: "The Massachusetts Legal Assistance Corporation may use IOLTA funds to further its corporate purpose and other designated charitable entitles [sic] may use IOLTA funds either for (1) improving the administration of justice or (2) delivering civil legal services to those who cannot afford them." Mass. Sup. J. C. R. 3:07, DR 9- ____________________ 3 The Massachusetts Attorney General's Office sent this court a copy of the amendment to DR 9-102(C) by letter dated February 12, 1993. -7- 102(C), as amended by Order 92-18, effective Jan. 1, 1993. __ _______ __ The corporate purpose of the Massachusetts Legal Assistance Corporation is to provid[e] financial support for legal assistance programs that provide representation to persons financially unable to afford such assistance in proceedings or matters other than criminal proceedings or matters, except those proceedings or matters in which the commonwealth is required to provide representation. Mass. Gen. L. ch. 221A, 2 (West Supp. 1992). Unless further designation is necessary for clarity, we will refer to the currently effective Massachusetts Supreme Judicial Court Rule 3:07, DR 9-102(C) as "DR 9-102(C)" or the "IOLTA Rule." A. The Plaintiffs' Claims ______________________ There are five plaintiffs in this action. The Washington Legal Foundation ("WLF") is a non-profit, public interest law and policy center operating in Washington, D.C. Karen Parker is a citizen of Massachusetts who has employed lawyers in connection with her real estate business and other businesses, which has resulted in her money being deposited in IOLTA accounts. Stephanie Davis is a citizen of Massachusetts who has not had her money placed in IOLTA accounts, but she anticipates that, in the future, she may need to hire an attorney which would cause her money to be deposited in an IOLTA account. William R. Tuttle is an -8- attorney practicing in Abington, Massachusetts, without an IOLTA account. Timothy J. Howes is an attorney in Springfield, Massachusetts, where he maintains an IOLTA account in the Shawmut Bank. Howes is suing on behalf of himself and on behalf of his clients whose funds are deposited in his IOLTA account. The defendants are the Massachusetts Bar Foundation, the Boston Bar Foundation, the Massachusetts Legal Assistance Corporation, Katherine S. McHugh (in her capacity as chair of the Massachusetts IOLTA Committee), Fran F. Burns (in his capacity as chair of the Board of Bar Overseers), and the Justices of the Supreme Judicial Court of Massachusetts. The plaintiffs allege, pursuant to 42 U.S.C. 1983, that they have been deprived, under color of state law, of their rights secured by the First, Fifth and Fourteenth Amendments of the Constitution by operation of the Massachusetts IOLTA program. 1. Count One: First and _________________________ Fourteenth Amendments _____________________ WLF alleges that it sent a check to cover costs and expenses related to this legal action to a Massachusetts attorney (not a party to the action) who deposited the check in his IOLTA account as required by the IOLTA Rule. Parker alleges that she has and will continue to use lawyers in connection with her real estate business and that her funds -9- deposited with lawyers have and will be deposited in IOLTA accounts. WLF and Parker allege that: The collection of and use of interest, under color of state law, generated from the IOLTA trust account of [their attorneys] for litigation, especially for litigation that involves political or ideological causes, and for legislative or other forms of lobbying, deprive [them] of their rights to freedom of speech and association guaranteed by the First and Fourteenth Amendments to the U.S. Constitution. Davis alleges that although she has not yet had money deposited in an IOLTA, the IOLTA Rule creates "the risk that she will be forced to choose between employing an attorney or financially supporting organizations with which she disagrees." Davis alleges her constitutional claims in substantially similar terms to those quoted above. Attorney Howes alleges that he has had to deposit client funds in his IOLTA as required by the IOLTA Rule and that the Rule "forces [him] to choose between not practicing law and or [sic] practicing law and associating with organizations whose actions offend his political and ideological beliefs and thereby depriving him of his right to freedom of speech and association as guaranteed by the First and Fourteenth Amendments to the U.S. Constitution." Finally, Attorney Tuttle alleges that the IOLTA Rule has forced him "to forego, to his professional and financial detriment, depositing certain client funds into non-interest bearing accounts in -10- order to avoid associating with organizations whose actions offend his political and ideological beliefs" thereby depriving him of the same constitutional rights as alleged by Attorney Howes. In summary, Count I alleges violation of the plaintiffs' rights of freedom of speech and association. -11- 2. Count Two: Fifth and Fourteenth Amendments ___________________________________________ Plaintiffs WLF and Parker allege that the IOLTA Rule constitutes an illegal taking of the beneficial use of their funds for public use without just compensation and without due process of law in violation of the Fifth and Fourteenth Amendments to the Constitution.4 Howes makes the same claim on behalf of his clients whose funds he has deposited into his IOLTA account. Neither Davis, Howes (on his own behalf) nor Tuttle make claims under Count II. 3. Relief Requested ________________ The plaintiffs ask for declaratory and injunctive relief to dismantle the operation of the mandatory IOLTA program. Specifically, the plaintiffs request that the court: (1) require the defendants to refund the interest which has been earned on their funds while in IOLTA accounts; (2) declare the IOLTA Rule void as an unconstitutional violation of the plaintiffs' First, Fifth and Fourteenth ____________________ 4 The plaintiffs have not pursued their claims alleged in Count III based on the Fourteenth Amendment that the IOLTA program has unconstitutionally deprived them of their property without due process of law. The plaintiffs' statement of issues on appeal is limited to the constitutional rights of the plaintiffs under the First and Fifth Amendments. Therefore, we assume that the plaintiffs' claims under the Fourteenth Amendment have been abandoned and are waived. United States v. Zannino, 895 F.2d 1, 17 (1st ______________ _______ Cir.) cert. denied, 494 U.S. 1082 (1990). Of course, the _____ ______ Fourteenth Amendment is properly included in each count as the basis upon which the First and Fifth Amendment prohibitions apply to the states. -12- Amendment rights; (3) issue permanent injunctions prohibiting the defendants from requiring attorneys to comply with the IOLTA Rule and from disciplining attorneys for failure to comply with the IOLTA Rule; (4) issue a permanent injunction directing the SJC to require attorneys to make full disclosure to their clients of uses of IOLTA funds if the attorney elects to participate in IOLTA, and (5) grant reasonable attorneys fees to the plaintiffs pursuant to 42 U.S.C. 1988. B. Dismissal of Claims ___________________ The defendants moved to dismiss the plaintiffs' action on the grounds that their constitutional claims lacked merit and that some of the plaintiffs lacked standing.5 The district court found that there was no serious dispute that at least two of the plaintiffs, Parker and Howes, had standing to bring their constitutional claims. The district court dismissed the plaintiffs' claims holding "that the plaintiffs have no property interest in the funds subject to ____________________ 5 On appeal, the record includes only the defendants' bare motion to dismiss which states the grounds as lack of subject matter jurisdiction and failure to state a claim upon which relief may be granted. The district court summarized the defendants' grounds for the motion to dismiss: "In addition to arguing that the plaintiffs' constitutional challenges are without merit, the defendants contend that two plaintiffs lack standing." Washington Legal Found., 795 F. Supp. at 52, _______________________ n.3. We assume, therefore, that the defendants' assertion of lack of subject matter jurisdiction referred to lack of standing. -13- the SJC Rule," and that the SJC Rule did not compel association with speech and "speech, in the constitutional sense, is not a factor of the challenged SJC Rule." Washington Legal Found., 795 F. Supp. 50, 53, 56 (D. Mass. ________________________ 1992). The plaintiffs appeal the district court's dismissal of their claims. C. Standard of Review __________________ Our standard of review of a dismissal pursuant to Fed. R. Civ. P. 12(b)(6) is well established. We begin by accepting all well-pleaded facts as true, and we draw all reasonable inferences in favor of the appellants. Coyne v. _____ City of Somerville, 972 F.2d 440, 442-43 (1st Cir. 1992). ___________________ Because a dismissal terminates an action at the earliest stages of litigation without a developed factual basis for decision, we must carefully balance the rule of simplified civil pleading against our need for more than conclusory allegations. Dewey v. University of New Hampshire, 694 F.2d _____ ___________________________ 1, 3 (1st Cir. 1982), cert. denied, 461 U.S. 944 (1983). _____ ______ Because only well-pleaded facts are taken as true, we will not accept a complainant's unsupported conclusions or interpretations of law. United States v. AVX Corp., 962 F.2d _____________ _________ 108, 115 (1st Cir. 1992) ("a reviewing court is obliged neither to 'credit bald assertions, periphrastic circumlocutions, unsubstantiated conclusions, or outright vituperation,'... nor to honor subjective characterizations, -14- optimistic predictions, or problematic suppositions." (citations omitted)). We may affirm the district court's order on any independently sufficient grounds. Willhauck v. _________ Halpin, 953 F.2d 689, 704 (1st Cir. 1991). ______ D. Standing ________ The issue of standing has not been raised by the parties on appeal, and therefore we address standing only because it presents a threshold jurisdictional question. Bender v. Williamsport Area School Dist., 475 U.S. 534, 541 ______ _______________________________ (1986) ("every federal appellate court has a special obligation to 'satisfy itself not only of its own jurisdiction, but also that of the lower courts in a cause under review,' even though the parties are prepared to concede it." (citations omitted)); Warth v. Seldin, 422 U.S. _____ ______ 490, 498 (1975) ("[Standing] is the threshold question in every federal case, determining the power of the court to entertain the suit."). Standing requirements are most strictly enforced in cases involving constitutional questions. Bender, 475 U.S. at 541-42. ______ The standing doctrine is derived from Article III of the Constitution which requires the existence of a "case or controversy" before a claim may be resolved by judicial process. Allen v. Wright, 468 U.S. 737, 750 (1984). To show _____ ______ a case or controversy, a plaintiff must first "clearly -15- demonstrate that he has suffered an 'injury in fact[]'" which means "an injury to himself that is 'distinct and palpable,'... as opposed to merely '[a]bstract,' ... and the alleged harm must be actual or imminent, not 'conjectural' or hypothetical.'" Whitmore v. Arkansas, 495 U.S. 149, 155 ________ ________ (1990) (citations omitted). Second, the claimant must allege facts which show "that the injury 'fairly can be traced to the challenged action' and, third, 'is likely to be redressed by a favorable decision.'" Id. (quoting Simon v. Eastern ___ _____ _______ Kentucky Welfare Rights Organization, 426 U.S. 26, 38, 41 ______________________________________ (1976) and Valley Forge Christian College v. Americans United ______________________________ ________________ for Separation of Church and State, Inc., 454 U.S. 464, 472 _________________________________________ (1982); see also Rumford Pharmacy v. City of East Providence, ___ ____ ________________ _______________________ 970 F.2d 996, 1001 (1st Cir. 1992); AVX Corp., 962 F.2d at _________ 113. Our standing inquiry depends on whether the plaintiffs have established the existence of a case or controversy as to each of their claims, but does not involve the merits of particular claims. Warth, 422 U.S. at 500. _____ The district court found that at least Howes and Parker had standing to bring the constitutional challenges in this case. Karen Parker alleges that she has and will continue to employ lawyers for transactions related to her business and that she has and will have her funds placed in IOLTA accounts by the lawyers she employs. She claims that the IOLTA program collects and uses for political and -16- ideological causes interest generated by her funds placed in IOLTA accounts, and therefore the operation of the IOLTA program deprives her of freedom of speech and association in violation of the First Amendment. Parker also claims that the IOLTA program constitutes an illegal taking of the beneficial use of her funds deposited in IOLTA accounts in violation of the Fifth Amendment. She asks this court to declare the IOLTA Rule unconstitutional and to enjoin the operation of the rule. Based upon her allegations, which we take as true for this purpose, she has stated an actual injury to herself which is traceable to the IOLTA rule and which may be remedied by the relief sought. We agree with the district court that Parker has standing to maintain her claims made in this action. Howes presents a more complex standing situation. Howes brings the First Amendment claim on his own behalf and on behalf of his clients, and the Fifth Amendment claim only on behalf of his clients.6 As to the First Amendment claim ____________________ 6 Howes' standing on behalf of third parties is more difficult. The general rule is that a plaintiff has standing to assert only his own rights, not those of third parties. Playboy Enterprises, Inc. v. Public Service Comm'n, 906 F.2d _________________________ _____________________ 25, 36-37 (1st Cir.), cert. denied, sub nom. Rivera Cruz v. _____ ______ ___ ____ ____________ Playboy Enterprises, Inc., 498 U.S. 959 (1990). An exception _________________________ to the rule against jus tertii standing exists if other ___ ______ considerations, such as the representative's relationship with the third party and the opportunity of the third party to assert its own rights, overcome prudential concerns. Id. ___ at 37. We do not address the third party standing issue, however, because it is unnecessary for our limited purpose of determining jurisdiction. -17- on his own behalf, Howes alleges that he has been compelled by the IOLTA Rule to participate in the IOLTA program and thereby to associate with IOLTA funded organizations which offend his political and ideological beliefs. Howes also alleges that the operation of the IOLTA Rule forces him to choose between practicing law and not practicing law. He asks for the same relief requested by Parker. Without addressing the merits of Howes' personal claims, we find that he has alleged an injury which may be remedied by the requested relief which is sufficient to establish his standing to maintain his First Amendment claim. Because we find that at least two of the plaintiffs, Parker, a client, and Howes, a lawyer, have standing to maintain each claim, we need not address the standing of all plaintiffs as to each claim. Watt v. Energy ____ ______ Action Educ. Found., 454 U.S. 151, 160 (1981); Buckley v. ____________________ _______ Valeo, 424 U.S. 1, 12 (1976) (finding appellants had standing _____ because "at least some of the appellants have a sufficient 'personal stake' in a determination of the constitutional validity of each of the challenged provisions to present 'a real and substantial controversy admitting of specific relief through a decree of a conclusive character'" (citation and footnote omitted)). We find, therefore, that based on Parker's and Howes' standing, we have jurisdiction in this case. -18- II. II. ANALYSIS ANALYSIS ________ The plaintiffs7 allege that the Massachusetts IOLTA program violates their First Amendment rights by collecting the interest generated by clients' funds which are deposited in IOLTA accounts and distributing the money to designated organizations. The plaintiffs further allege that the recipient organizations use the money for litigation involving political or ideological causes and for lobbying. The IOLTA program, the plaintiffs allege, therefore compels them to support political and ideological causes depriving them of freedom of speech and association. The plaintiffs also allege that the IOLTA program's appropriation of interest from lawyers' trust accounts takes the beneficial use of client funds which constitutes an unconstitutional taking in violation of the Fifth and Fourteenth Amendments.8 A. The Fifth Amendment Taking Claim ________________________________ ____________________ 7 As noted above, all of the plaintiffs do not join in all counts of the complaint. In addition, we have not resolved the standing of all plaintiffs. "Plaintiffs" as used throughout this opinion will refer to the particular plaintiffs making the claims discussed without resolving standing. 8 We address the plaintiffs' Fifth Amendment claim first, although it is raised in Count II of the plaintiffs' complaint, in order to resolve the plaintiffs' property rights to funds deposited in IOLTA accounts before discussing the First Amendment claim which also involves that issue. -19- The Fifth Amendment provides that "private property [shall not] be taken for public use, without just compensation." There is no dispute that clients' money or property held by lawyers belongs to the clients and must be returned to the clients at their request. Mass. S. J. C. Rule 3:07, Cannon 9, DR 9-102(B)(4); Mass. Gen. L. Ann. ch. 221, 51 (1986). Many courts, including the Supreme Judicial Court of Massachusetts, have held that clients do not have a constitutionally protected property right to the interest earned on IOLTA accounts.9 Mass. Bar Ass'n, 478 ________________ N.E.2d at 718; see also Cone, 819 F.2d at 1007; Carroll, 213 ___ ____ ____ _______ Cal. Rptr. at 312; Minn. State Bar Ass'n, 332 N.W.2d at 158; _____________________ N. H. Bar Ass'n, 453 A.2d at 1260-61. Perhaps in response, _______________ the plaintiffs have eschewed a right to the interest itself, and instead claim a property right to the beneficial use of their deposited funds, and more specifically, the right to control and to exclude others from the beneficial use of those funds. To make a cognizable claim of a taking in violation of the Fifth Amendment, the plaintiffs must first show that they possess a recognized property interest which may be protected by the Fifth Amendment. Penn Cent. Transp. Co. v. ______________________ ____________________ 9 We accept as true, as do all of the parties, the assumption that there are no feasible accounting procedures which would allow individual client funds deposited into pooled accounts to earn net interest. -20- New York City, 438 U.S. 104, 124-25 (1978). The plaintiffs _____________ must point to credible sources for their claimed property interest: Property interests, of course, are not created by the Constitution. Rather, they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law rules or understandings that secure certain benefits and that support claims of entitlement to those benefits. Board of Regents v. Roth, 408 U.S. 564, 577 (1972). ___________________ ____ Intangible property rights, "'the group of rights inhering in the citizen's relation to the physical thing, as the right to possess, use and dispose of it[,]'" which are recognized by state law are protected by the Takings Clause. Ruckelshaus ___________ v. Monsanto Co., 467 U.S. 986, 1003 (1984) (quoting United _____________ ______ States v. General Motors Corp., 323 U.S. 373, 377-78 (1945)); ______ ____________________ see also Bowen v. Gilliard, 483 U.S. 587, 603-09 (1987) ___ ____ _____ ________ (finding no unconstitutional taking of child's right to have support payments used for child's best interest by an amendment to the AFDC statute). Not all asserted property interests are constitutionally protected, however, as "a mere unilateral expectation or an abstract need is not a property interest entitled to protection." Webb's Fabulous _________________ Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 161 (1980). ________________ ________ 1. Beneficial Use of Deposited Funds _________________________________ -21- The plaintiffs rely on trust law to establish their right to control the beneficial use of their funds as a protected property interest. IOLTA deposits do not require a trust agreement and the plaintiffs have not argued that formal trust agreements exist. Rather, the plaintiffs contend that because the acronym "IOLTA" includes the word "trust," a trust relationship is created between lawyer and client when client funds are deposited into IOLTA accounts. The relationship between lawyer and client in Massachusetts is fiduciary as a matter of law. Markell v. Sidney B. _______ _________ Pfeifer Found., Inc., 402 N.E.2d 76, 94 (Mass. App. 1980). _____________________ The lawyer-client relationship presumes that the client trusts the lawyer to handle the client's funds appropriately and the lawyer assumes the fiduciary obligation subject to the regulation of the profession. We are not convinced that the deposit of clients' funds into IOLTA accounts transforms a lawyer's fiduciary obligation to clients into a formal trust with the reserved right by the client to control the beneficial use of the funds as claimed by the plaintiffs. The plaintiffs also claim that they have a protected property right to exclude others from the beneficial use of their funds while they are deposited in IOLTA accounts. In support of the right to exclude, the plaintiffs rely on cases which have established that property owners have a right to exclude others from their real -22- property. See, e.g., Kaiser Aetna v. United States, 444 ___ ____ ____________ _____________ U.S. 164, 176; Loretto v. Teleprompter Manhattan CATV Corp., _______ _________________________________ 458 U.S. 419, 435-36 (1982). The plaintiffs have cited no sources which recognize a similar constitutionally protected property right to control or exclude others from intangible property and we have found none.10 2. IOLTA Program Does Not Cause a Taking _____________________________________ Assuming arguendo that the plaintiffs could ________ establish their claimed property interests in the beneficial use of their funds subject to the IOLTA Rule, the IOLTA program does not cause an illegal taking of those interests. The analysis of Fifth Amendment takings claims has evolved through a series of cases in which Supreme Court decisions "engaging in ... essentially ad hoc, factual inquiries ... have identified several factors that have particular significance." Penn Central, 438 U.S. at 124. The Court has ____________ repeatedly used the significant factors enunciated in Penn ____ Central to analyze takings claims: "(1) 'the economic impact _______ of the regulation on the claimant'; (2) 'the extent to which ____________________ 10 The plaintiff has not discussed, and we do not find analogous, intangible property rights which, by their nature or by agreement, require the exclusion of others to preserve the property interest. See, e.g., Monsanto, Co., 467 U.S. at ___ ____ _____________ 1002 ("Because of the intangible nature of a trade secret, the extent of the property right therein is defined by the extent to which the owner of the secret protects his interest from disclosure to others."). -23- the regulation has interfered with distinct investment-backed expectations'; and (3) 'the character of the governmental action.'" Connolly v. Pension Benefit Guaranty Corp., 475 ________ ______________________________ U.S. 211, 225 (1986) (citation omitted); see also Hodel v. ___ ____ _____ Irving, 481 U.S. 704, 714-15 (1987); Kaiser, 444 U.S. at 175. ______ ______ The government may impose regulations to adjust rights and economic interests among people for the public good, as long as the government does not force "some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole." Armstrong v. United States, _________ _____________ 364 U.S. 40, 49 (1960); see also Andrus v. Allard, 444 U.S. ___ ____ ______ ______ 51, 65 (1979). a. Character of governmental action. _________________________________ The plaintiffs claim that the character of governmental action, through the IOLTA Rule, is a physical invasion of their beneficial interests in their funds held in IOLTA accounts. The physical invasion occurs, the plaintiffs argue, because the IOLTA program borrows the principal to generate income by collecting the interest earned on IOLTA accounts. The plaintiffs do not claim that they have any rights to the interest, rather they assert the right to control who uses and benefits from the principal which generates the interest. The IOLTA program, the plaintiffs -24- claim, "involves a permanent physical invasion of the funds" while they are held in IOLTA accounts. The Supreme Court has recognized that a taking is more obvious when the governmental action can be characterized as a physical invasion. Penn Central, 438 U.S. ____________ at 124. The Court has identified particular governmental action as categorical or per se takings which generally ___ __ occur: (1) when government action compels property owners to acquiesce in permanent physical invasion or occupation of their private property, and (2) when "regulation denies all economically beneficial or productive use of land." Lucas _____ v. South Carolina Coastal Council, 112 S. Ct. 2886, 2893 _______________________________ (1992); see also Yee v. City of Escondido, Cal., 112 S. Ct. ___ ____ ___ _______________________ 1522, 1526 (1992). The plaintiffs argue that the IOLTA program causes a physical taking similar to the takings found in Kaiser, 444 ______ U.S. 164 (1979); Loretto, 458 U.S. 419; and Webb's, 449 U.S. _______ ______ 155. In Kaiser, owners of a private marina, who had ______ connected their private pond to the Pacific Ocean, challenged the federal government's imposition of a navigational servitude on their property requiring that they allow a right of access to the public. The Court found that the government's regulation of the marina amounted to a physical invasion of their private property by the public, and was, therefore, an unconstitutional taking of the marina owners' -25- right to exclude others from their private property. Kaiser, ______ 444 U.S. at 180. In Loretto, 458 U.S. 419, government regulation _______ required private property owners to allow conduits for cable television to be attached to their buildings even when the property owners did not subscribe to cable television. The Court found that the regulation authorized a physical occupation, however small, of the plaintiff's private property which was unconstitutional without compensation. We find no logical analogy between the physical invasion of real property, as in Kaiser and Loretto, and the ______ _______ operation of the IOLTA Rule. The plaintiffs' takings claim involves intangible property rights not real property. To bolster their claim of physical invasion, the plaintiffs contend that their property rights are nearly identical to the claimants' property rights in Webb's, 449 U.S. 155, in ______ which the Court stated "the [government's] appropriation of the beneficial use of the fund is analogous to the appropriation of the use of private property." Id. a |