by Hon. John Dooley
A Short History of the Vermont Bar Foundation
As I write this, we are approaching the thirtieth anniversary of the creation of the Vermont Bar Foundation, one of the most important achievements of the Vermont Bar Association. I hope this history will ex- plain some of the successes of the VBF and illuminate the contributions of the many Vermonters—most members of the VBA— who brought these successes about. As part of the anniversary, these people de- serve the thanks of all lawyers in Vermont. The articles of the VBF were signed on October 29th
, 1982 with the single incor-
porator of Larry Wright of the Burlington firm of Gravel, Shea and Wright. The arti- cles created a charitable corporation with a Board of Directors of five persons: Don Hackel, Wynn Underwood, Joe Frank, Ted Tyler, and George Rice. They were all lead- ers of the VBA at the time, and, in fact, the initial bylaws stated that the executive di- rector of the VBA would serve as the exec- utive director of the VBF and the immedi- ate past president of the VBA would serve as an ex officio sixth member of the board. The object of the VBF was stated broadly in the articles:
To advance the science of jurispru- dence and improve the administration of justice; to seek uniformity in judi- cial decisions; to contribute to schools, foundations and colleges and their de- partments engaged in the teaching and study of law, and their law libraries and law scholarship funds; to support legal aid facilities for the indigent and legal service corporations; to expend funds to provide for the defense of persons accused of unpopular crimes, acts or beliefs who are financially un- able to employ counsel or defray the cost of proper defense; to contribute to public law libraries; to contribute to public programs providing for the physical improvement of courts and other agencies engaged in the admin- istration of justice.
While the VBA Board of Managers hoped that the VBF could raise money for these purposes, the real impetus for the creation of the VBF was the opportunity to establish an IOLTA (interest on lawyer trust accounts) program in Vermont. New Hampshire had recently started such a program, and it was already showing signs of success. IOLTA came to the United States from our neighbors to the north in Canada. Law-
20
yers in Canada became concerned that cli- ent money was being held by them in banks that were paying no interest on the funds. Of course, the main part of the solution was to require that client funds be placed in interest bearing accounts, with the inter- est paid to the client. But there was a sec- ond part to the solution: to channel the re- turn on funds to public interest activities if the amount was too small, or the holding period too short, for crediting the return to the client to be economically viable. This solution started to be adopted in Canadian provinces in the late 60s and early 70s. The Florida Bar picked up the idea in 1976 and began working through the im- plementation hurdles for an IOLTA pro- gram that pooled the small amounts and used them for charitable purposes. There were two major initial hurdles: (1) was law- yer participation in the program lawful and ethical?; (2) would the interest generated be taxable to the lawyer or the client? In 1978, the Florida Supreme Court ruled that a bar-sponsored IOLTA program did not il- legally divert client money and approved such a program for Florida.1
In 1981, the
IRS ruled in Revenue Ruling 81-209 that the interest paid to the Florida Bar Foundation under its voluntary IOLTA program was not taxable to the client or the lawyer. In 1982, The ABA ethics committee issued Formal Opinion 348 (1982) stating that the Code of Ethics did not prohibit lawyers from participating in bar-sponsored IOLTA pro- grams.2
IOLTA was off and running.
By the time that the VBA started the VBF and presented an IOLTA proposal to the Vermont Supreme Court, eleven oth- er states had adopted IOLTA programs including New Hampshire. Participation in most of these programs was voluntary, and the programs were established by law- yer ethics rules as adopted by the highest court of the state. The proposal in Vermont noted that in the first six months, the IOLTA program in New Hampshire, operated on a volunteer basis, raised $17,000. The Vermont Supreme Court referred the VBA proposal to the Civil Rules Com- mittee, which drafted and recommended rules for a voluntary program. On October 28, 1983, the Supreme Court unanimous- ly approved amendments to the Code of Professional
Responsibility establishing
the program effective March 1, 1984. The Code provided two permissible uses of IOLTA funds: “support of legal services to the disadvantaged,” and “public education
THE VERMONT BAR JOURNAL • FALL 2011
relating to the courts and legal matters.” Once it was up and running, the initial voluntary program earned about $120,000 per year, and most of the money went to le- gal services for the disadvantaged through Vermont Legal Aid. That was a very impor- tant supplement to the federal money sup- porting Vermont Legal Aid, primarily from the Legal Services Corporation. Still, only a minority of the lawyers participated in the program.
The limited participation caused a num- ber of lawyers to request that the VBA of- ficially support a conversion to a compre- hensive—that is, mandatory—IOLTA pro- gram. In 1988, the VBA Board of Managers appointed a special committee to study the conversion proposal. Chaired by Joe Frank, the committee included Ralph Foote, Rich- ard Franco, John Kristensen, Sheldon Pren- tice, Peter Welch, and Joan Wing. It unani- mously supported the conversion to man- datory IOLTA, noting that only 25% of Ver- mont lawyers had participated in the vol- untary program despite active recruitment efforts by the VBA and two chief justices. The membership of the VBA endorsed the committee report at the mid-winter meeting in 1989. The VBA petitioned the Supreme Court for the rule change later that year, and the Court adopted it in No- vember. Comprehensive IOLTA began on March 1, 1990. Comprehensive IOLTA was an immedi- ate success, and a challenge for the VBF to implement. With the expected tripling of lawyer members and revenues, the foun- dation decoupled administration from the VBA and hired its first executive director, Althea Kroger.3
In 1990, revenues went up
to $313,000 and reached almost $600,000 in 1991. Virtually overnight, the VBF went from a supplemental funder of legal servic- es to the poor to a substantial funder, par- ticularly necessary as federal funding lev- eled off and, in some years, declined. At the mid-winter VBA meeting in 1990, the VBF board held a public hearing on an allocation policy in light of the increased revenue. One of the issues discussed was whether to spend some of the funds in re- sponse to competitive proposals, in addi- tion to providing a base amount to Ver- mont Legal Aid. In response to the com- ments received, the VBF in 1992 awarded a non-competitive grant of $260,000 (lat- er supplemented) to Vermont Legal Aid and $219,000 in competitive grants to about ten projects. The competitive grants
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