The True Meaning of the Takings Clause

by | Dec 12, 1998 | LAW

Legal services to the poor should be funded voluntarily, not by expropriation.

By Stephen Plafker

Former TAFOL president Michael Mazzone, one of his clients, and the Washington Legal Foundation have prevailed in the United States Supreme Court in the IOLTA case1 described in the Winter 1998 issue of this Bulletin. The case involves a Texas 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.

Their opponents were the members of the Texas Supreme Court and the Texas Equal Access to Justice Foundation (TEAJF), the organization which spends the money taken. Supporting their opponents with amicus curiae briefs were the federal government, the attorneys general of thirty-four states, the Conference of (State) Chief Justices, the Conference of State Governments and a conglomeration of other governmental organizations, The American Association of Retired Persons, eighty-four bar associations, foundations, and funds, and the American Bar Association. Michael was supported by seven amicus briefs. His supporters included the Texas Justice Foundation, the National Right To Work Legal Defense Foundation, the Mountain States Legal Foundation, Defenders of Property Rights, certain members of the Texas House of Representatives, the Attorneys’ Bar Association of Florida, the Pacific Legal Foundation, and, of course, The Association for Objective Law.

Michael’s claim was based on the “Takings Clause” of the Fifth Amendment2 which reads: “nor shall private property be taken for public use, without just compensation.” This clause presupposes that the government may take private property by force, but only for a public purpose. Property interpreted, the expression “public purpose” would be synonymous with “governmental purpose,” and “governmental purpose” would be determined by reference to the principles found in “The Nature of Government” and in the Declaration of Independence. It would take into account Ayn Rand’s definition of rights. Since any taking is in derogation of rights, it could only be done if necessary, i.e., if the government had no alternative. Finally, the owner would have to receive the full cash value for the lost property. One consequence of this last component is that the government could never take money, for under the “just compensation” requirement, it would have to give the same amount back.

However, no one on the Court now believes in rights (or at least property rights). Under modern theory, the government may take property for any purpose that benefits a large number of people. To prevail on a claim of violation of the Takings Clause, the victim must show three things: that he has an “interest” in the property, that the government has taken the property, and that he has been denied just compensation. In the IOLTA case, The Supreme Court determined only the first: that Michael’s client had the required “property interest.”

Chief Justice Rehnquist wrote the majority opinion. His reasoning proceeds as follows. No one disputes that the principal belongs to the client. History shows that Texas follows the common law rule that “interest follows principal.” Therefore, any interest earned belongs to the owner of the principal: i.e., the client.

There were two dissents. One, written by Justice Breyer, took the position that federal law prevents the clients from realizing interest from the deposits eligible for the IOLTA program. Therefore, there was no property right for the State to take. The other, written by Justice Souter, concentrated on points not raised in the appeal. (This despite the fact that, under the rules, the parties were not permitted to argue these points.) Justice Souter would have decided the two other issues against Michael and his client. His dissent is apparently an attempt to influence the subsequent progress of the case.

The case has been returned to the lower courts for a determination of the other two issues. Michael will now have to convince the courts in Texas that his client’s property was taken and that it had some value. This may require him to show that his client could earn interest on the money.

Richard Pena, President-elect of the Texas State Bar, sent a fax ” blast” to Texas Bar members: “The Supreme Court decision is disappointing, but it by no means signals the end of funding legal services to the poor through IOLTA programs . . . . Darrell Jordan of Dallas, who represented the TEAJF and Texas Supreme Court in the appeal, assured me that the Texas IOLTA program is alive and well and that TEAJF will conduct business as usual.”

Two TAFOL supporters and Texas State Bar members replied to this “blast.” Dee Tagliavia sent an e-maIl to President Pena: “I for one applaud the Supreme Court’s decision. I hope that control over the disposition of property belonging to persons who have sought legal counsel in this and other states will ultimately reside with those persons. Legal services to the poor should be funded voluntarily, not by expropriation. It is of absolutely no significance whatsoever that, unaggregated, the property may have little or no value. What is paramount is the rightful owner’s control over that property; and he may legitimately object to the use to which it is put by the Bar.”

Michael sent a letter. It began: “Why would anyone want ‘access to justice’ if, once granted access, the courts did not respect individual rights and in particular the right to property? The State Bar and the Supreme Court of Texas should not be trying to fund ‘access’ to justice at the expense (and in violation) of individual rights. The two entities in this State that should be most vigilant in the protection of individual rights—the State Bar and the State’s highest court—have done everything in their power to dodge the question: why are you funding legal services using other people’s money and without their knowledge and consent?” It went on to conclude that, in light of the Supreme Court decision, the State Bar was “on the wrong side of the issue.” As a direct representative of the lawyers, and therefore an indirect representative of the clients, it “should have done what I have done—defend and protect the rights of lawyers’ clients in Texas . . . [The State Bar] does not do what it is supposed to do, and does what it is not supposed to do.”

The fight continues.


  1. Phillips v. Washington Legal Foundation, 118 U.S. 1925 (1998)
  2. Originally, this provision (and the rest of the Bill of Rights) applied to the federal government only; it did not restrict the states. In 1897, the Supreme Court held that the Fourteenth Amendment made it applicable to the states.

Copyright © The Association for Objective Law. All rights reserved. Republished in Capitalism Magazine by permission of TAFOL.

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

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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