#23 Winter 1998


#23 Winter 1998 Page 1


The Association for Objective Law has filed its first United States Supreme Court brief. The case, Hon. Thomas R. Phillips v. Washington Legal Foundation, is described in the last issue of this Bulletin. It involves the Texas IOLTA (Interest on Lawyers' Trust Accounts) program which requires that lawyers place certain of their clients' funds in interest-bearing bank accounts, the interest from which is used to provide legal services to low-income persons.

Plaintiffs challenged this program on three grounds: that the program violated the constitutional prohibition against taking property without just compensation, that it violated the clients' right to exclude others from the use of the principal, and that it violated their right not to support opinions with which they disagree.

The district court ruled for defendants on all claims, but the Court of Appeals reversed. The Supreme Court agreed to review of the Court of Appeals’ decision on the issue whether "interest earned on client funds held by lawyers in IOLTA accounts [is] a property interest of the client or lawyer, cognizable under the Fifth Amendment of the United States
Constitution . . ."

Defendants, of course, argue for a negative answer. They contend that IOLTA takes no property; without the program, they claim, the clients could earn no interest on the small amounts of money available. This statement is false but, to anyone who takes rights seriously, unimportant. In the context of the case, however, it had to be answered.

Plaintiffs took on this task. Their analysis begins with a discussion of interest in general, emphasizing the criticisms and justifications of it. Aristotle believed that, because of the sterility of money, charging interest for a loan was unnatural. Aristotle was followed by the Scholastics in the thirteenth century. Under their influence, charging interest was made illegal. By the late Middle Ages, however, numerous exceptions to the prohibition were recognized. Eventually, interest came to be viewed as compensation for the temporary loss of use of one's money. Finally, it was justified as a substitute for alternate ways the lender could have invested the principal. This was incorporated into the definition: "Interest is the compensation allowed by law, or fixed by the parties, for the use or forbearance of money or as damages

#23 Winter 1998 Page 2

for its detention." From this, it follows that interest necessarily belongs to the lender. (In the words of an English court, "Interest shall follow the principal, as the shadow the body.") The brief points out that courts, from the English common law through the present, have universally recognized this conclusion. Thus, the program takes the clients' property.

TAFOL's brief takes a related but different approach. It concentrates on the moral right of the owners of money to complete control over their property. It begins by describing IOLTA's intrusion on its victims: the taking of the client's property and the conscription of lawyers and banks in the theft. It goes on to identify the ethical premise of the IOLTA program: that man has an obligation to serve others. It contrasts this premise with the ethics of self-interest and its political consequence: limited government. Essential to the implementation of this form of government, the brief continues, is the right to property: "To the extent a man is forced to let someone else use his belongings, he is not free."

The brief then lists seven illustrations of this statement, each taken from the facts of a previous Supreme Court case. It continues: "Each of these examples illustrate the fact that control over physical objects---the right to exclude others from one's property---is the essence of property rights. In each case, this Court was asked to protect an intellectual or abstract right. (Sometimes the request was successful, sometimes not.) In fact, each of these claims was a demand for undisturbed control over property. This control is necessary for the free exercise of any human activity:

     Just as man can't exist without his body, so no rights can exist without the right
     to translate one's rights into reality---to think, to work and to keep the results---
     which means: the right of property. . . . Only a ghost can exist without material
     property, only a slave can work with no right to the product of his effort. . . .

     The source of property rights is the law of causality. All property and all forms
     of wealth are produced by man's mind and labor. As you cannot have
     effects without causes, so you cannot have wealth without its source:
     without intelligence.

This passage from Atlas Shrugged introduces a series of quotations from John Locke, William Blackstone's Commentaries on the Laws of England, John Adams, a 1797 North Carolina Supreme Court case, Joseph Story (a distinguished early member of the Supreme Court), and Abraham Lincoln. Each of these quotations supports property rights. They show that the right of property is one of the foundations of the United States. Finally, they are summarized in a single statement of Ayn Rand: "Without property rights, no other rights are possible."

The brief concludes: "In the past, this Court disapproved of depredations of the government upon property:

     To lay with one hand the power of the government on the property of the citizen,
     and with the other to bestow it upon favored individuals to aid private enterprises
     and build up private fortunes, is none the less a robbery because it is done
     under the forms of law and is called taxation. [Citing an 1874 case, Citizens'
     Savings & Loan Association v. Topeka

"The Court should return to this approach . . . the judgment of the Court of Appeals should be affirmed."

The brief was written by Steve Plafker with assistance from Tom Bowden, Michael Mazzone, Mark Nitikman, and Dee Tagliavia. A copy will be sent to TAFOL contributors of $50 or more (see below). [no longer available]

#23 Winter 1998 Page 3

TAFOL received requests for copies of the brief from Congressional Quarterly and from National Public Radio.


From time to time, The Ayn Rand Institute asks TAFOL to provide it with legal assistance. TAFOL in turn refers ARI to an appropriate lawyer. We are compiling a list of lawyers who are willing to provide help. For this purpose, we request the name, address, phone number, fax number, e-mail address, bar admissions, and areas of specialization of any attorney who is interested in helping ARI with its legal needs. This information should be sent to Michael v. Conger [address omitted].


In the past years, TAFOL has filed several amicus curiae briefs, written position papers on mandatory pro bono and abortion, onducted informal classes at Objectivist conferences, and
sponsored writing contests for law students. These activities require money. Last year's writing contest cost $1,300 in prizes and printing and mailing costs. Preparation of the IOLTA brief described above cost $1,000. (This does not include the money TAFOL spent supporting Michael Mazzone's efforts.) The printing and mailing this Bulletin averages about $200.

The cost of the IOLTA brief depleted our treasury. Recent contributions have restored it to some extent. We are seeking further contributions so that we can continue our work. Each contributor of at least $50 will receive a copy of our brief. [no longer available]

Copyright © 1998 The Association for Objective Law. All rights reserved. The Association for Objective Law is a Missouri non-profit corporation whose purpose is to advance Objectivism, the philosophy of Ayn Rand, as the basis of a proper legal system.