The ethics of subscription legal services (Part 3)

Note: This is the third in a series of posts on the what, why, and how of subscription legal services. You can find our first post “What are subscription legal services?” here. Our second post, "The 'why' of subscription legal services (Part 2)" is here.  We at Confido Legal recently launched a suite of tools that make offering subscription legal services easy. If you'd like to learn more about the tools we’ve built, contact us.  

We also have three episodes of our Financially Legal podcast featuring lawyers who have built and are offering subscription legal services. Check out those episodes with Jon Tobin, Beth Lebowitz, and Kimberly Bennett. You can also hear me and Megan Zavieh discuss the ethics of subscription legal services on her Financially Legal podcast episode.

With a solid understanding of the “what” of subscription legal services (post #1 in this series) and having answered for yourself the question “Does this fit in my practice?” (post #2 in this series) the next question is “can I do this?”

Lawyers tend to jump to this question too quickly, assuming that the rules of professional conduct will save them from having to get out of their comfort zones. Using the rules of professional conduct these lawyers often conclude that because something is unconventional, it’s prohibited.

In this post we’ll discuss many of the central ethical issues around subscription legal services. And (spoiler alert!) we demonstrate that, while a lawyer must always be mindful of their professional obligations, lawyers can offer subscription legal services offerings in complete compliance with the rules of professional conduct.

Applicable Ethics Rules

As with most issues, lawyers committed to spotting potential risk can find a whole lot wrong with subscription legal services vis-à-vis the rules of professional conduct. And, of course, the ethics rules that apply to your specific subscription offering may vary depending upon your practice area, the details of what you are selling, and your jurisdiction’s rules. However, stepping back, for a basic legal subscription offering there is a relatively small number of common rules to keep in mind:

• Protecting client funds
• Unconscionable fees
• Limited scope representation
• Subscription vs legal insurance vs legal plan vs installment
• Get expert help

We’ll cover each of these in turn.

Protecting Client Funds

The ABA Model Rule 1.15, Safekeeping Property, and the model rules for client protection provide the framework for the rules governing lawyers who want to accept client funds into their trust accounts in most states – at least the framework for the rules most closely related to subscriptions. You’ll note we emphasized “most” in the previous sentence. Of course, each state’s rules are different and you know that, as a lawyer, it’s on you to insure that you are following the relevant rules in your state. However, for simplicity (and brevity!), we’ll focus on the ABA Model Rules in this discussion.

Model Rule 1.15 says that lawyers must “hold property of clients . . . in connection with a representation separate from the lawyer's own property . . . . “

Contrast property of clients held in connection with a representation, be that money or otherwise, with funds that a client pays to a lawyer for services that have already been rendered. Those are “earned fees” which can be considered the lawyer’s property and do not have to be placed in the trust account.

This may not seem like that big of a distinction, but a relatively modest volume of legal subscription payments can get really complicated when you layer on some of the model rules for client protection which require a lawyer holding client money in trust to account for interest earned on that money, rules around when the revenue can be considered “earned” and moved into the operating account, and other obligations. This stuff gets complicated really quickly.

But the bottom line is: are subscription legal fees “fees for services to be rendered in the future,” which should be properly deposited in the trust account? Or are they earned fees that can be put straight into the operating account?

Like any good legal question the best answer is “it depends.” But we can unpack that a bit further.

Deal with it in the engagement letter

As ethics attorney Megan Zavieh said in her Financially Legal podcast episode, at least in California, you can draft your engagement letter to enable you to deposit the subscription funds directly into your operating account. For example, if a subscription client’s ability to reserve time with you during the month is part of the value you are providing through the subscription offering, make sure that the engagement letter specifically says that clients are paying not for the time but for the ability to schedule your time. That way, you have a decent argument that the fees are earned upon receipt and can be placed in your operating account.

Offer value beyond hours or shift your billing timing

Zavieh also mentioned the possibility of creating subscriber-only content or features that establish clear value in the subscription offering without your having to provide hourly services on a monthly basis. Jonathan Tobin’s Creator’s Legal Plan, which offers webinars and a library of legal resources to subscribers, is a great example of this. Tobin also reinforces the value by reaching out to subscribers on a quarterly basis, at a minimum, to remind them that he is available to them.

You can also manipulate the timing of your subscription payments. Most non-legal subscription offerings like Netflix or your gym membership tend to be paid in advance early in the month. But if you are concerned that subscription legal fees should be placed in trust, simply bill at the end of the month for the previous month’s services. That way the services can be considered to have already been performed and the money earned when payment is made.

Reasonable fee

Some lawyers raise concern that subscription legal fee paid but unused could be considered to be a violation of ABA Model Rule 1.5 which states that a lawyer’s fee must be reasonable.

The good news is that this concern can be addressed in many of the same ways that the trust account concerns are mitigated: by providing ongoing value in the form of content or otherwise and/or clearly substantiating the value of the subscription offering in the engagement agreement

You can also blunt criticism of unreasonable fees by doing your homework in advance. Roughly estimate how much you expect to offer in terms of time on a monthly basis as a part of the legal subscription offering. Then, multiply that by your hourly rate. One two-page contract review per month at roughly ninety minutes plus a separate thirty-minute consultation equals two hours. At $200/hour, that’s $400 per month. Charge anything less on a monthly basis and, provided you’re willing to deliver that time, you’re certainly within the realm of a reasonable fee.

Limited scope representation

The next concern isn’t so much an ethics concern as a business one with an ethics solution.

Lawyers often worry that a subscription offering will turn the firm into an “all-you-can-eat” legal buffet. But there’s a fairly straightforward solution to this problem: limited scope representation. The ABA defines limited scope representation as “a lawyer agreeing with a client to handle only some part(s) of the client's legal matter.” Nearly every state permits a lawyer or law firm to utilize limited scope representation as an alternative to costly full-scope representation.

Again, do the research on the rules of limited scope representation in your own jurisdiction (here’s an ABA whitepaper on some of them) but every lawyer or firm that we’ve talked to who is offering subscription legal services - be that Kim Bennett who talked about them in her Financially Legal podcast, Melissa Hall and her “legal primary care” offering, or many others - is limiting the scope of their representation to insure that the offering works for both the client and the lawyer.

Finally, don’t roll your subscription offering out to every client all at once. That way if you do offer more than you’re prepared to deliver for the flat monthly fee, you’re only exposed to a small number of clients for a limited period of time. This was another recommendation from Megan Zavieh in her Financially Legal podcast episode. Test the offering with one or two clients for a month or so to begin with, then tweak, adjust, and iterate before making it broadly available.

Limited scope representation also allows you to adjust or terminate your arrangement with a subscription client if they want more than you’ve agreed to offer and/or just become difficult. If your representation agreement clearly establishes the scope of representation then it’s fairly easy to tell a client that work outside of that scope is either an additional cost or work for which the client will need to find some additional representation.

Subscription vs legal insurance vs legal plan vs installment

The first reaction many lawyers have when they hear about the subscription-based model is to compare it to a lawyer retainer agreement. Retained payments are typically considered trust account payments. So, hopefully our discussion about whether subscription funds are trust funds or earned operating funds helped you understand how this model can differ from a retainer.

Legal Insurance and Legal Plans

Legal insurance, offered by companies like Hyatt or ARAG, or legal plans, offered by LegalShield and others, are similar to subscriptions but they are different. According to this helpful article by ARAG, legal plans are programs under which “people receive discounted hourly rates on legal services through screened attorneys.” With legal insurance, on the other hand, “people pay a set premium and receive legal services from a plan attorney. Most covered matters for an insured legal plan are 100% paid-in-full when people use an attorney in the network.” Distinguish these from a subscription which is with a single law firm, not a network, and which is probably limited to that firm’s particular practice area or areas. Legal insurance is even more complicated because the insurer is holding and paying out funds on behalf of the insured, so it’s often regulated like regular insurance.

Installment options

Lastly, the idea of monthly payments from a client might remind you of installment plans. There are some pretty obvious differences though: installment plans are typically used for one-off legal projects that a client may not be able to afford to pay in one lump sum, yet the idea of paying as you go with the billable hour was not a feasible or desirable alternative to the parties involved. But there can be some overlap here: many family law attorneys operate on flat fees and installment payments, while one of the pioneers in the subscription model is Lee Rosen, who also offers a monthly subscription to a DIY divorce service that includes a library of resources and advice from an attorney.

Get expert help

If you’re still unsure about your subscription offering or want to feel surer that what you’re doing complies with the rules of professional conduct, run your plans past an ethics attorney. It’s their job to keep track of this stuff and they can help you avoid pitfalls that you likely haven’t considered. If you practice in California, we can even recommend one who offers ethics advice via subscription.

There are ethics issues that you need to address in order to offer subscription legal services but they’re far from insurmountable. The dozen or so examples of attorneys that we’ve named in these posts that are offering subscription legal services today are proof. But every good lawyer should think through the ethics issues of any business decision. Don’t make yourself – and your burgeoning legal subscription service – any exception.

Previous posts have covered the what and why of legal subscriptions. This post hit a very lawyer-specific version of how, but our next post is a juicy one. In our next post we’ll really dig in on the “how:” we’ll talk about getting started and we’ll offer suggestions for tools. Until then.

Read Part 4,  How to launch your subscription legal services offering. Or, download our in-depth subscription legal services white paper which combines this 5-part series into one digestible guide and includes bonus tips and suggestions.

Image credit: “subscribe” by Lawton Chiles is licensed under CC BY 2.0.