BigLaw attorneys, firm leaders, and various legal groups have criticized New York Gov. Kathy Hochul’s plan to redirect $100 million in interest from lawyer trust accounts, funds that are usually allocated towards legal aid for low-income New Yorkers. They have decried the initiative as “misguided”, warning that it could present an “existential threat” to civil legal services.
The managing partners, along with the CEOs and chairs of several notable law firms including Arnold & Porter Kaye Scholer LLP, Blank Rome LLP, Cooley LLP, Mayer Brown LLP and Paul Weiss Rifkind Wharton & Garrison LLP, are among the hundreds of law professionals and groups that are opposing this plan. According to them, the funds drawn from the New York Interest on Lawyer Account Fund (IOLA) will be redirected into the state’s general fund in the fiscal year 2025.
The critics have expressed deep concern that this unprecedented diversion of funds may inflict lasting damage on low-income New Yorkers by taking money away from legal aid organizations. They contribute that it could significantly undermine a crucial financial source for legal services and may violate the statute that established IOLA.
The state’s IOLA program necessitates attorneys to maintain specialized interest-bearing trust accounts for “qualified funds”, which are funds the attorney determines to be too insignificant or held for too brief a period to generate net interest. The New York City Bar Association, which also opposed Hochul’s plan, stated that nonprofit legal services organizations that received IOLA grants in the last year successfully closed cases benefitting several hundreds of thousands of New Yorkers.
If these IOLA funds are diverted, it would put at risk food security, shelter, jobs, and healthcare among other life necessities. The money directed towards the New York general fund might jeopardize the legal profession’s ethical basis for participating in the IOLA fund, according to a letter penned by the firm leaders.
The trustees of the IOLA Board also opposed the plan in a letter sent late last month. They emphasized that the New York Legislature had created the IOLA fund in 1983 for the specific purpose of funding civil legal services providers. Despite numerous crises that the state of New York has faced over the years, they argue that the funds from IOLA should not be diverted to the general fund.
The full details of this matter, as well as subsequent developments, can be found in the original Law360 article.