My Shingle

Legal Subscription Services, Revisited: Ethics Edition

by Carolyn Elefant on February 27, 2014 · 1 comment

in Ethics Do's & Don'ts, Marketing Ideas

Print Friendly

Legal subscription services go by many names: prepaid legal, toll bridge agreements, outside general counsel plans, Legal Counsel Services or lawyer-on-retainer.  Essentially, a subscription service is a catch-all for a business model where users pay for ongoing access to a product or service. In any event, legal subscription services have been around for a long time; they’re neither disruptive nor innovative as some would claim. Yet lately, there’s been a resurgence of interest by lawyers in the subscription model.  In today’a post, I’ll focus on legal subscription services, discussing why lawyers might consider a subscription model, what they might sell and how to do it ethically, after the jump.

Why Subscription Services?

A few reasons account for increasing popularity of subscription services. For starters, today’s clients are accustomed to purchasing all kinds of goods and services – from cloud storage to makeup via a subscription model. So the idea of paying monthly fees for services is a concept that consumers understand and are comfortable with.

Of course, from a lawyer’s perspective, subscription services are golden. They generate a steady stream of revenue and keep you in regular contact with your clients so your firm will come to mind when they have additional work or have business to refer. Even form-giant Legal Zoom recognizes the advantages of ongoing revenue versus one-off deals, and included subscription services as one of its intended offerings in its IPO papers last year.

Subscription services also enable lawyers to practice preventatively. The ongoing relationship allows lawyers to keep clients out of trouble by addressing small problems before they erupt into major matters or simply conducting year round audits to check in on your client’s legal health. That’s potentially one of the biggest selling points of a subscription plan to clients: they can pay less now to avoid paying more later.

Subscription services are hot in the consumer industry for many of the same reasons. As  Entrepreneur describes, subscription services are relatively inexpensive to start – and with today’s technology, automating payments is easy. Plus, overhead costs are low because you’re simply repurposing and repackaging products and services that you’re already creating.

On the other hand, subscription services have a downside too, particularly lack of market demand. In other words, many consumers — or prospective clients — simply don’t want to purchase a subscription service. In fact, I’ve known many lawyers who years ago, tried offering these services without success.

So, if you’ve tried subscription services and failed, there’s reason to give them another shot. Times have changed and today’s clients are more familiar with the subscription concept. Plus, automated online payment removes the inconvenience of having to cut a check every month. Finally, with websites and other online tools, it far easier to promote and explain the concept of subscription services than it was years ago.

What to Sell?

Subscription services vary by practice area and offerings. They’re most commonly offered for business clients. Some programs consist of advisory services where clients can call with questions, others include products such as a incorporation or trademark registration.  If you’re interested in sample offerings and terms, check out these materials from UK-based Riverview Law or Nevada-based Bunker Law Group, or Texas StartUp Lawyer’s Virtual Business Counsel.

But subscription services aren’t limited to corporate clients. North Carolina divorce lawyer Lee Rosen offers a subscription service to provide ongoing support to pro se’s either considering divorce or handling their case on their own.  And like many specialized regulatory practice, my firm provides regulatory monitoring, updates and reports to clients on a subscription basis.  One could imagine an appellate subscription service – a monthly payment to an appeals lawyer during a trial to review transcripts and call on for advice on properly preserving issues. Or an employment or Internet lawyer who provides a Birchbox of different template-products each month – like website terms of service, independent contract agreements or employee handbooks – with instructions on how to implement them and a free information call included. In short, the possibilities for subscription services are endless.

Subscription services can also be ancillary to the legal services a firm provides. For example, lawyers can use subscription as a value-add to facilitate client planning or document storage. For example, estate planning lawyers purchase plans through Estate Map, that provide a single spot for clients to house estate planning documents, as well as a portal for easy updates.  IP lawyers can use a service called Traklight, which helps clients identify and protect their IP. Though these services aren’t strictly legal and won’t generate cash for your practice (since firms have to pay for these services), they make clients’ lives easier which in turn can distinguish your firm from competitors. Moreover, these storage and monitoring services make lawyers’ jobs easier by ensuring that clients’ documents are all in one place and up-to-date if and when the lawyer needs to take action down the line.

How to Keep Subscription Services Ethical

Subscription services, particularly those that cover actual legal services (as opposed to a more generic monitoring report or video series) raise a couple of ethics considerations summarized below.

Conflicts

First, when providing a subscription legal services, conflicts rules still apply.  Most obviously, a firm offering advisory subscription services to Company A couldn’t then register Company A’s litigation adversary for the subscription program a few days later.  

But here’s a trickier scenario. Let’s say that Company and Company B are both corporate subscription clients. You register a trademark for Company A, and a few months later, Company B asks you to register a competing mark.  In that case, you’ll need to have some plan in place that allows you to either refer Company B to another attorney for the trademark matter – or if necessary, discontinue B’s subscription plan entirely. Conflicts issues aren’t insurmountable, but they just require planning and advance notice up front – (for example, advising clients of how conflicts will be handled should they arise. Will you refund the subscription plan? Refer the client at your cost?). Or you can try to avoid conflicts altogether by pre-screening clients accepted to the subscription plan at the outset.

Advance Payments

Some ethics boards require lawyers to deposit and hold advance flat fees in a trust account until the work is complete. That kind of requirement puts a damper on the auto-pilot nature of subscription services, since it’s a hassle to deposit a monthly payment into trust and withdraw and transfer it every month. The easiest way to circumvent this prospect is to bill for the program at the end of the month, rather than at the beginning. If you take an advance payment as security, you could hold that in the retainer initially, then collect at the end of each month.  

In addition, in my view, there’s an argument to be made that subscription service payments are deemed “earned on receipt” and therefore, immediately become the property of the lawyer rather than clients. Most jurisdictions treat “true retainers” – i.e., a payment to keep a lawyer on reserve to remain available and conflict free – as earned on receipt.  Subscription services are analogous to true retainers – because the client pays for the lawyer’s availability to handle the work promised under the subscription service. Under this rationale, lawyers could charge up front and remit the payment directly into their operating fund. (NOTE – not clear whether all ethics boards will accept this rationale, but that’s how I would frame the argument)

Excessive Fees and Refundability

Subscription services are also subject to bar rules on reasonable fees. Where clients pay a monthly amount, but don’t receive concomitant value in return, ethics boards have expressed concerns that the fees might be unreasonable.  Thus, a prepaid program cannot have so many exceptions and limitations that monthly fee would become excessive because members will likely have to pay extra for many types of services.  <I> See District of Columbia Ethics Op. 170 (1986).

Refundability is another concern related to reasonableness of fees. If clients pay a large amount up front for services and can’t get the money back, in effect, the fees for services (or lack thereof) are excessive. For that reason, both the New York and D.C. bars also require that subscription plans be refundable. See, e.g.,DC Bar Opinion 264NYC Bar Ethic 1996-5 (permitted prepaid legal services so long as fees are refundable).

In addition, the DC Bar has also elaborated that a full refund is not required where a client has taken advantage of a service. So for example, if a firm offers an annual plan that includes an incorporation or trademark and the client uses those services in Month 1 and asks to discontinue the plan in Month 2, the firm could still recover quantum merit payment for the work performed.

Deceptive Advertising

Many times, firms will promote the value of a subscription plan by proclaiming that clients will receive the equivalent of $50,000 in legal services for the low monthly cost of $99.99!!  However, when providing price comparisons, law firms cannot inflate the amount that they would ordinarily charge to make the subscription service appear to be a better value by comparison. So, if a firm ordinarily charges $1500 for a trademark registration and $1000 for incorporation, and offers a subscription plan of $100/month that includes both of these services, comparing the $1200 annual charge to the $2500 per diem rate is reasonably accurate. By contrast, if the same firm claims that trademark registrations and incorporations are $5000, so the client receives $10,000 in value, that type of communication might be considered deceptive.

To be clear, none of these ethics matters are insurmountable or even particularly difficult to deal address. It’s just that lawyers starting subscription services should keep them in mind.

So if you’re tired of the peaks and valleys in revenue common to small firm practice, or if you want to explore ways to diversify your offerings to attract new clients and better serve the ones you have now, maybe legal subscription services are an idea worth subscribing to.

NOTE:  This is the second in an ongoing series of in-depth posts exploring Ethics and 21st Century Law practices. Here’s the first post What’s in a Trade Name: Ethics Considerations. If you have a 21st ethics topic you’d like MyShingle to explore, drop me a note at elefant@myshingle.com (subject heading: MyShingle – Ethics Request) 

 

 

Previous post:

Next post: