If you’re thinking of offering a subscription model for your legal services, better brush up on the ethics rules – especially Rule 1.5 regarding fees and billing.
While you’re at it, take a look at Rule 1.15 on client trust accounts and retainer fees.
And don’t overlook Rule 1.4, which provides guidance on client communication, including the duty to explain what and how you charge for your services.
“Subscription legal practices are all the rage and with good reason,” writes attorney Megan Zavieh, author of “The Modern Lawyer: Ethics and Technology in an Evolving World,” for Attorney at Work. “[But] just because everyone else is doing it does not mean it is permitted. As is typical in the legal profession, the business model for subscription legal practices has developed faster than the ethics rules can evolve.”
Step one in your due diligence is to research your state’s ethics rules on subscription law services. Has your State Bar or Supreme Court issued any guidelines? Are there any ethics opinions on point?
This 2020 opinion from the Maryland State Bar Association is instructive.
Read “Subscription Legal Practices: Ethical Considerations” in Attorney at Work here. Below are three key takeaways from that article.
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1. Is the Subscription Fee Ethical and Reasonable?
Under ABA Model Rule 1.5, the following factors should be weighed in determining whether an attorney’s fee is reasonable:
- the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
- the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment of the attorney;
- the fee customarily charged in the locality for similar legal services;
- the amount involved and the results obtained;
- the time limitations imposed by the client or by the circumstances;
- the nature and length of the professional relationship with the client;
- the experience, reputation, and ability of the attorney or attorneys performing the services; and
- whether the fee is fixed or contingent.
2. When is a fee “earned” and when should it be placed in the client trust account?
From Zavieh: “In traditional representations, it is easy to see that a fee paid upfront before work is done is an unearned fee (and should be in trust or have necessary disclosures if your state allows that), and fees paid for work already completed are earned and should not go into the trust. But what of subscription fees?”
“A safe route to take for subscription fees is to charge them at the end of the month for which the subscription was provided, and then they are clearly earned. Another safe route is to put all subscription fees in trust until the period of service they cover has passed and then withdraw them. Unfortunately, both of those options are undesirable to the lawyer. The first means risk of not getting paid after services are rendered, though, with credit card automated processing, the risk can certainly be mitigated. The second means two accounting steps every month — once to collect and put into the trust at the beginning of the month, and a second to withdraw from the trust at the end of the month.”
“Another option is to describe the fees and the services in such a way that the fees are earned at the time they are charged at the beginning of the service period. Since trust accounting violations are a common basis for disciplinary actions, it is worth spending a fair amount of time running down your state’s rules on this question.”
3. What Services are Included?
“Perhaps the biggest practical worry for lawyers is how to avoid subscribers taking advantage of the subscription service to the detriment of the lawyer’s profitability,” writes Zavieh. “But, in reality, this is also an ethics question: Providing a clear description of included services is necessary to prevent ethics issues. If your services are not clearly defined, the client may expect more from you than you intend to give. This could mean you breach your duty to diligently represent the client because you fail to do something the client expects. On the flip side, if you believe you are supposed to be doing more for the client than they anticipate, you might overstep your bounds. Acting without client authorization would also be an ethics violation.”
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