Document ID: ./input/supremecourt_opinions/opinions/boundvolumes/524bv.pdf
Page Number: 219

524US1

Unit: $U81

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174

PHILLIPS v. WASHINGTON LEGAL FOUNDATION

Souter, J., dissenting

ciple and its place in state law,1 but also upon the very reg-
ulatory framework that would prevent a client from obtain-
ing any net interest on funds now subject to IOLTA, even
if IOLTA did not exist.2
It is not, of course, that the fed-
eral and state regulatory combination includes some rule
that is facially inconsistent with the general principle that
interest follows principal; the components of the regulatory
structure do not even directly address the question of who
Indeed, the most obvious relevance of the
owns interest.
regulatory provisions and their effects is to the issues of
whether IOLTA results in a taking of the client’s property
and whether any such taking requires compensation. And
yet by this route the regulatory structure becomes relevant
to the property issue as well, simply because the way we
may ultimately resolve the taking and compensation issues
bears on the way we ought to resolve the property issue.
If it should turn out that within the meaning of the Fifth
Amendment, the IOLTA scheme had not taken the property
recognized today, or if it should turn out that the “just com-
pensation” for any taking was zero, then there would be no
practical consequence for purposes of the Fifth Amendment
in recognizing a client’s property right in the interest in the
ﬁrst place; any such recognition would be an inconsequential

1 The highest court of Texas has not understood the general principle
that a property right in interest always follows property in principle in a
way that supports respondents in this IOLTA challenge. See Sellers v.
Harris County, 483 S. W. 2d 242, 243 (Tex. 1972) (owner of principal is
entitled to interest, less administrative and accounting costs). Webb’s
Fabulous Pharmacies, Inc. v. Beckwith, 449 U. S. 155 (1980), is not on
point precisely because it dealt with interest actually in the hands of the
ﬁduciary, net of any administrative expense.

2 These unchallenged state and federal rules clearly fall within the gen-
eral category of relevant law deﬁning property subject to constitutional
protection, see Board of Regents of State Colleges v. Roth, 408 U. S. 564,
577 (1972) (“Property interests” are “created and their dimensions are
deﬁned by existing rules or understandings that stem from an independent
source such as state law”).