Wisconsin Lawyer
Vol. 77, No. 11, November 2004

Should Lawyers Fund Civil Legal Services for the Indigent?

• In Support of the WisTAF Petition

• In Opposition to the WisTAF Petition

In Support of the WisTAF Petition

by Deborah M. Smith

The creation of the Wisconsin Interest on Lawyers Trust Account (IOLTA) program in 1986 was one way in which the Wisconsin Supreme Court attempted to address the unmet need for legal services of low-income people in this state. In 1994, State Bar President John Skilton established the Commission on Delivery of Legal Services to look for ways to improve the delivery of legal services to the poor. The commission did its work during a time when the U.S. House of Representatives had voted to cut Legal Services Corporation (LSC) funding by one-third and a combination of depressed interest rates and bank fees had reduced IOLTA funds from $1.7 million annually to $812,000.

The commission concluded that Wisconsin's civil legal service programs were so grossly underfunded that they served only a fraction of low-income people needing legal assistance. More importantly, the commission concluded that Wisconsin lawyers had fallen far behind their colleagues in other states in which the private bar was successfully implementing different strategies to raise funds for legal services. The commission's report is on the State Bar Web site and makes interesting reading.

A May 2001 article in the Wisconsin Lawyer made the case as follows:

"In Wisconsin, civil legal funding available for legal services is $13.47 per low income citizen, placing Wisconsin as the 38th lowest of the 50 states for such funding."¹

The 2000-2001 Annual Report for the Equal Justice Coalition Fund asserted that more than 500,000 Wisconsin residents live in poverty. It also reported that Wisconsin legal services programs were only able to provide about 20,000 low-income residents with legal services each year. Legal services programs routinely turn away many more families because they lack the resources to help all of those who need legal help. In July 2002, the ABA Journal carried an article quoting Gene R. Nichol, Dean of the University of North Carolina School of Law in Chapel Hill:

"Study after study shows about 80 percent of the legal needs of the poor are unmet.

"We leave the poor unrepresented in the most crushing problems of life: divorce, child custody, domestic violence, housing and benefits disputes. What passes for civil justice among the have-nots is stunning."²

Lawyers have incorporated the duty to provide free legal services into their codes of professional conduct. The comment to Wisconsin SCR 20:6.1 includes the following reminder to lawyers:

"Every lawyer, regardless of professional prominence or professional workload, should find time to participate in or otherwise support the provision of legal services to the disadvantaged. The provision of free legal services to those unable to pay reasonable fees continues to be an obligation of each lawyer as well as the profession generally, but the efforts of individual lawyers are often not enough to meet the need. Thus, it has been necessary for the profession and government to institute additional programs to provide legal services. Accordingly, legal aid offices, lawyer referral services and other related programs have been developed, and others will be developed by the profession and government. Every lawyer should support all proper efforts to meet this need for legal services."

The Wisconsin Trust Account Foundation (WisTAF) effort is not unique. Five states have adopted an assessment on lawyers to assist in funding legal services for the poor. In three states the decision was made by the supreme courts. In 1997, the Minnesota Supreme Court increased the registration fee by $50 for attorneys admitted more than three years and by $25 for attorneys admitted three years or less, with a 50 percent discount for attorneys with adjusted gross income under $25,000. The Minnesota State Bar Association, a voluntary bar, strongly endorsed the assessment. The Ohio Supreme Court decided on an assessment to assist legal services over the opposition of the Ohio State Bar Association, a voluntary bar. In late 2002, the Illinois Supreme Court, on its own motion, authorized an attorney registration fee increase of $42 for the purpose of funding civil legal services providers.

In the fall of 2002, the Board of Governors of the Missouri Bar, a mandatory bar, increased bar dues by $20 for every member eligible to practice law in Missouri. The dues increase was precipitated by a reduction in LSC revenue due to the 2000 census redistribution, a decrease in IOLTA revenues, and an anticipated elimination of appropriated money by the Missouri Legislature. In 2003, the Texas Legislature increased bar dues by $65. The money generated will be split evenly between civil legal assistance and innovative criminal indigent defense projects.

Mindful of lawyers' efforts to provide legal serviceS, the WisTAF Board considered alternatives to an assessment. Several options were reviewed but rejected as not politically feasible or not a reliable source of revenue:

• Funding from the state legislature was discussed, but even the modest $100,000 per year in TANF (Temporary Assistance to Needy Families) funds previously given to WisTAF was discontinued in the last budget.
• The board felt there was little political support for proposing increased court costs or filing fees. Further, court fees enacted to fund specific programs in the past have been diverted to other purposes.
• A voluntary check-off on the dues statement was considered, but based on the State Bar's past experience with check-offs, the board doubted that enough revenue would be generated to cover even the administrative cost of the check-off.

Funding through IOLTA income is at a crisis stage. IOLTA programs are completely dependent on interest rates, which are at a 45-year low. In addition, there is less money going into lawyers' trust accounts. The result is that Wisconsin IOLTA revenue went from a high of $2.1 million in 2000 to projected revenue of only $800,000 in 2004. Grants made by WisTAF to its legal aid and legal services program recipients in 2000 totaled $1.98 million; grants for 2005 are currently expected to be $411,000. The board's grants committee has recommended defunding four programs solely due to lack of funds.

In the end, most of us agree that it is the collective responsibility of society, not just the bar, to both implement and fund legal services for the indigent. However, the proposed assessment is the only practical solution to address the immediate needs of legal services programs and the needs of the poor next year.

Endnotes

¹Hannah C. Dugan, Who's Providing Legal Counsel to Wisconsin's Poor? 74 Wis. Law. 10 (May 2001).

²Margaret Graham Tebs, Lag in Legal Services, ABA J. 67 (July 2002).

In Opposition to the WisTAF Petition

by Gwendolyn G. Connolly

The Wisconsin Trust Account Foundation (WisTAF) has petitioned the Wisconsin Supreme Court requesting that all attorneys licensed to practice in this state be taxed $50 annually for an indefinite period of time. The purpose of the tax is to generate additional revenues for WisTAF grantees who provide legal services to poor and indigent people. While the purpose is noble and should be addressed by our state legislature, this petition overreaches, lacks foresight, and essentially attacks Wisconsin lawyers. It does not merit support.

Before exploring the petition, it is worthwhile to understand that Wisconsin lawyers sought the creation of WisTAF. In 1985, Wisconsin lawyers, through the State Bar of Wisconsin Board of Governors, petitioned the supreme court to establish an independent body that would receive the interest generated on lawyer trust accounts.¹ The following year, in response to that petition, the supreme court established SCR 13 and WisTAF.² WisTAF was created to administer and grant funds that are pooled from lawyer trust accounts.³ Contrary to the claim in WisTAF's petition, there is nothing in the court's order to suggest that it was acting as a legislative body and seeking to create social policy. Moreover, and again contrary to WisTAF's claim, nothing in the court's order indicates that the court meant to provide a certain level of funding through the establishment of WisTAF. In truth, the supreme court was responding to a request made by Wisconsin lawyers, who sought to provide legal aid to poor people based solely on the uncertain income generated from lawyer trust accounts.⁴

Nevertheless, WisTAF ignores the efforts of Wisconsin lawyers and attempts to justify, on the basis of declining revenues, its bold action of reaching beyond the boundaries of SCR 13. According to WisTAF, because lawyer trust account balances have declined at the same time as interest rates, WisTAF has fewer dollars at its disposal. However, a review of WisTAF's financial statements suggests that its current circumstances are, to some degree, of its own making. According to WisTAF's financial statement ending December 2002, it had $2.7 million in revenue during the prior 18 months. However, WisTAF made grants of $2.8 million and paid an additional $300,000 for administrative expenses. The result was that WisTAF overspent its revenue and depleted its net assets or fund balance by more than $400,000, amounting to almost a 25 percent decline in its fund balance, during that period.⁵ Notably, the decision to deplete the net assets was made during a time when interest rates were already low and there was no indication rates would be increasing. Now, after those monies have been spent and the reserves depleted, WisTAF is seeking to have Wisconsin lawyers pay for those decisions.

Providing legal services for the poor and indigent people in our state is a worthy cause but not one that should be borne by Wisconsin lawyers exclusively. Justice Donald Steinmetz articulated this issue almost 20 years ago in his dissent to the creation of WisTAF:

"There can be no argument against the purpose of the Interest on Trust Accounts Program (IOLTA) as stated in SCR 13.01. There is a need for legal aid to the poor, even though that group is not defined by these rules. (SCR 13.04(2)(a).) However, that need should be satisfied by the state of Wisconsin through the tax system. Every taxpayer and citizen of this state has a right and duty to support legal aid to the poor or be recipients of such services, if qualified. It is a function of government to see that the need is met. There is no reason that clients of bar members should be the only persons in society supplying the funds as an investment base for the money to support a legal aid program."⁶ This same analysis applies to the tax proposed by WisTAF currently.

In its petition, WisTAF never cites any authority that would illuminate what substantive areas of legal services are not being met. Without knowing the substantive areas that lack adequate representation, policy-makers have no clear understanding of what assistance can be most appropriate or useful.⁷ Legislative options could include broadened private attorney general statutes, assessments on excessive punitive damage awards, specialty license plates, or income tax check-offs. WisTAF could have pursued private donations, including specific fund-raising efforts or cy pres designations. Or, it could have considered specific fee increases such as civil filing fees or assessments against pro hac vice admissions. And finally, WisTAF could have sought collaboration with the state attorney general's office for negotiation for payment to WisTAF in its settlements. Instead, WisTAF seeks only the easiest course: a tax on Wisconsin lawyers.

It is also notable that WisTAF has failed to explore the two stated reasons for its declining revenues: low interest rates and declining lawyer trust account balances. WisTAF's reference to low interest rates is meaningful only when examined within the short term crisis low interest rates have created. And while interest rates are at a low, it is likely they will rise in the coming months and years. Most significantly, WisTAF does not address the condition that has greatly affected our profession and lawyer trust account balances for the last 20 years: the unauthorized practice of law. For example, almost any real estate lawyer will tell you that he or she has fewer funds in his trust account because realtors and title companies are conducting the closings at which the lawyer previously represented his clients. Encroachments such as this on the practice of law have had a very real impact on the balances maintained by lawyers in their trust accounts. Yet, WisTAF remains silent on this issue that is critical to Wisconsin lawyers, consumers of legal services, and, ultimately, WisTAF.

Contrary to WisTAF's assertion, the tax it proposes has not been imposed in any other state. There is no tax assessed on lawyers by any state supreme court with a mandatory state bar association.⁸ Unlike in Illinois, Minnesota, or Ohio, where those states' supreme courts have imposed an assessment on all state bar members, lawyers in those states do not have a mandatory bar association. In Missouri, the mandatory state bar association approved a dues increase on its own members to create further funding for legal services. But, unlike the WisTAF proposal, that bar association, through elected representatives who could be removed by members, approved the assessment. In Texas, in which the state legislature has imposed the fee on lawyers, the critical difference is that elected officials imposed the tax. These are fundamental and important distinctions.

The most compelling argument WisTAF employs is that a tax on our profession is justified because the legal needs of poor people in our state are not being met. However, if the question is whether a tax on Wisconsin lawyers is appropriate because the ultimate outcome is valid or "good," there is no end in sight to additional taxes. For example, this year in New Jersey, because the rise in medical malpractice insurance is blamed on excessive lawsuits against doctors resulting in the political drum beat against trial lawyers reaching a crescendo, the state legislature has imposed a $75 tax on all lawyers and many medical professionals for the next three years. The revenue generated by this tax will be used to reduce medical malpractice insurance premiums and to assist medical students in paying off student debt.⁹ The New Jersey tax reveals how arbitrary and unfair a tax can be when the focus is on taxing lawyers for perceived wrongs rather than understanding the scope and depth of the societal concern.

Finally, the most offensive aspect of the WisTAF petition is found in its overall indictment of Wisconsin lawyers. WisTAF asserts that one of the reasons there are poor people in our state who lack legal assistance is because Wisconsin lawyers are failing to provide pro bono service, and thus Wisconsin lawyers essentially are unethical.¹⁰ WisTAF concludes that the attorney's oath and the aspirational goals of SCR 20:6.1 are ineffective because there are poor people whose legal needs are not met. Yet, WisTAF has no data to support the contention that Wisconsin lawyers are not providing pro bono service. Instead, it cites the unsuccessful fundraising efforts of the Equal Justice Coalition (EJC) and rejection of mandatory pro bono reporting to support its conclusion. Apparently, because only 5 percent of Wisconsin lawyers chose to donate money to the EJC, WisTAF extrapolates that Wisconsin lawyers do not financially support legal services for the poor and should be forced to pay through a tax. Likewise, because the State Bar of Wisconsin Board of Governors, like many other state bar associations nationwide, rejected a proposal for mandatory reporting of pro bono, WisTAF essentially concludes that Wisconsin lawyers are not providing pro bono service. Such a conclusion is not supported by facts. And the notion that Wisconsin lawyers are greedy because they have not given to a particular charity is unworthy. WisTAF degrades the Wisconsin lawyers who sought its creation and fuels the fires of public disdain for and distrust of our profession.

It should be clearly understood that opposition to this petition is not an opposition to the societal issue of providing legal services to poor and indigent people or an opposition to pro bono service. Indeed, Wisconsin lawyers do volunteer and do provide legal services to the poor and indigent. But, the answer to this larger societal problem is not found in a $50 tax on Wisconsin lawyers. WisTAF's petition is shortsighted, incomplete, and done as a reaction to its own management decisions.

Endnotes

¹See Interest on Lawyers' Trust Account, 58 Wis. B. Bull. 42 (April 1985).

²IOLTA Begins Jan. 1, 1987, 59 Wis. B. Bull. 25 (May 1986).

³SCR 13.03(2)(1). WisTAF acknowledged its limited purpose in its articles of incorporation in 1986 and in its 2003 financial statement: "WisTAF is a nonprofit corporation created to administer the IOLTA program throughout the state of Wisconsin and to disburse the funds collected under this program." WisTAF 2003 Financial Statement 240 KB at 5; see also WisTAF Articles of Incorporation 174 KB.

⁴Before the adoption of the model rules of ethics in Wisconsin, the profession was guided by an ethics code. The code recognized that "every lawyer, regardless of professional prominence or professional workload, should find time to participate in serving the disadvantaged." SCR 20.06(7)(b) (pre-1988). The code also recognized that the "efforts of individual lawyers are often not enough to meet the need" and that the "profession [should] institute additional programs to provide legal services." Id. The creation of WisTAF was in keeping with the ethical construction.

⁵WisTAF 2002 Financial Statement 240 KB

⁶In re the Matter of the Creation of SCR Chapter 13 and Amendment of SCR 11.05 and SCR 20.50: Interest Trust Accounts Program (Steinmetz, J. dissent) (emphasis added).

⁷The Washington Supreme Court organized a Task Force on Civil Equal Justice Funding in 2001 that conducted a civil legal needs study in order to provide a "fresh and long-term approach to recommending solutions to the problem of inadequate funding for these services." Charles W. Johnson & Mary Kay Becker, Moving Beyond Anecdotes: The Washington State Civil Legal Needs Study, BarNews (Wash. State Bar Assoc. Jan. 2004).

⁸The distinction between mandatory and voluntary programs was identified by Justices Steinmetz and Shirley Abrahamson in their respective dissents to the creation of WisTAF. Supra n.6.

⁹Dan Kittay, New Jersey Passes Assessment on Legal, Medical Professionals, Bar Leader 5 (Sept./Oct. 2004).

¹⁰While not the focus of this response, the "long history" of pro bono service, which serves as the foundation for WisTAF's proposed tax, is the subject of debate. B. George Ballman Jr., Note, Amended Rule 6.1: Another Move Towards Mandatory Pro Bono? Is That What We Want? 7 Geo. J. Legal Ethics 1139 (1994). And while some people may question the notion that pro bono service is a long-standing tradition, other people do acknowledge the tradition of volunteerism in the profession. Esther F. Lardent, Mandatory Pro Bono in Civil Cases: The Wrong Answer to the Right Question, 49 Md. L. Rev. 78 (1990).

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