Interest on client trust funds held in IOLTA accounts are the private property of clients, not the government or lawyers, said the U.S. Supreme Court in a 5-4 ruling last month.

The court, however, declined to rule on the constitutionality of the “taking” of such funds and remanded the case to a lower court. The ruling stemmed from a Texas case, Phillips v. Washington Legal Foundation, which has been closely followed by the nation’s legal services programs.

The State Bar shut down most of its operations last month as lawmakers remained at an impasse over bar reform and the California Supreme Court declined to order the state’s lawyers to pay dues.

A last-minute flurry of negotiations in Sacramento to break the months-long deadlock looked hopeful at the end of June, but no resolution was reached in time to avert the layoffs of more than 400 bar employees June 26.

Another 20 were scheduled to lose their jobs July 10.

Most bar functions were reduced to bare bones, and others were eliminated entirely.

As the State Bar last month launched what organization executives called “The Ark,” the Ethics Hotline shut down, news reporters seeking details about disciplined attorneys found little information, and clients disputing their lawyer’s bill were referred to a local bar association for help.

All staffers in the offices of legal services, bar relations, appointments, the Conference of Delegates and the California Young Lawyers Association were laid off. The Sacramento office was to close.

With the exception of several financially self-supported departments, such as the Committee of Bar Examiners and the Client Security Fund, which remain at full force, nearly every other program was reduced to bare bones.

The Board of Governors agreed to support any volunteer committee or commission which can limp along without staff support or funds; many remain in existence but are examining how to operate without a staff.

Some activities, such as the election of a new board of governors and consolidating all northern California employees in a single building, are in limbo.