Legal-services decision

A Supreme Court decision this week over a state funding program for legal services was not the defeat some conservative groups described, but it was a warning for states, including Maine, to be prepared to defend its legal-services programs.

Interest on Lawyers Trust Accounts (IOLTA) helps fund legal services in Maine and 48 other states for the poor and disadvantaged elderly by pooling the interest on some of the money that clients deposit with lawyers for brief periods. The funds generated $100 million nationwide last year, including $500,000 in Maine, making it the state’s third-largest source of funding for these services.

In a 5-4 decision, the court narrowly held Monday in Phillips v. Washington Legal Foundation that “interest income generated by funds held in IOLTA accounts is the `private property’ of the owner of the principal.” The Supreme Court sent the Texas case back to the trial court to determine whether IOLTA accounts represented a taking and whether compensation would be due under them. The conservative Cato Institute called the decision “a ringing rejection of efforts by state bar associations around the country to siphon off interest from client accounts and then use that interest for `public-interest’ litigation.”

So if things continue to go against the state bar associations, you might think clients around the nation will begin to see all that interest on the funds they entrust to lawyers. You would be wrong, because, individually, these short-term accounts don’t add up to anything. In fact, before IOLTA, whatever interest was gained was eaten up in bank transaction fees. It is only through combining and maintaining these accounts statewide that they add up to significant money. (The question of whether IOLTA leads to a taking of property deserving compensation when, without IOLTA, there would be no property is a wonderful puzzle for the lower court to decide.) In a dissenting opinion, Justice David Souter argues that recognizing a taking for which a just compensation was zero “would be an inconsequential abstraction.”

Naturally, politics plays into this. Conservatives in Congress have for years tried to limit or eliminate legal-service programs for the poor, which provide representation in civil cases — housing evictions and foreclosures, Social Security and disability questions, protection-from-abuse orders. Federal funds for these programs have been cut repeatedly and advocacy work has been sharply limited, but the programs overall have survived. The Texas case was a signal that opponents were changing tactics: If federal funds couldn’t be totally eliminated, perhaps money generated at the state level could.

That has yet to be decided.

Texas and Maine handle IOLTA money differently. Texas automatically uses the interest from the trust accounts; Maine requires approval from each attorney before using the interest from his or her accounts. Further client approval may someday be necessary.

For now, however, nothing happens, despite the “ringing rejection.” Nothing except bracing the state for another assault on services that help hundreds of Mainers each year.