I’ll Be There For You

Rule 1.04(a) of the Texas Disciplinary Rules of Professional Conduct prohibits legal fees that are “unconscionable.” The Rule says that a fee is unconscionable if “a competent lawyer could not form a reasonable belief that the fee is reasonable.”

Ethics Opinion 701(2024) found that subscription agreements for legal services are not “inherently unconscionable,” though they may be unconscionable in some circumstances. For example, the Opinion notes that a subscription fee for family law services for an unmarried client with no children might be considered unconscionable because the client is unlikely to need the lawyer’s services. The opinion advises that the terms of the subscription agreement be carefully weighed at the outset and periodically reevaluated because a reasonable fee agreement could become unconscionable over time.

The Opinion offers a couple of caveats to law firms offering a subscription fee arrangement. First, any prepaid fee for services must be kept in a trust account until the end of the fee period in which it is earned. Therefore, a monthly subscription fee must be held in trust until the end of the month. Second, because clients have the right to terminate a representation at any time, with or without cause, an agreement in which no portion of the monthly fee is refundable upon cancellation is unethical. The Opinion finds that “when the client cancels the subscription service before the end of the month, the lawyer must refund an appropriate portion of the subscription fee.”

The Opinion concludes:

Under the Texas Disciplinary Rules of Professional Conduct, a lawyer may enter into a subscription fee agreement with a client, and charge and collect a subscription fee under that agreement, if the fee is not unconscionable under the circumstances. A lawyer should ordinarily retain subscription legal fees in the lawyer’s trust account until the end of the recurring subscription period. A contract provision forfeiting the entire amount of a monthly subscription fee if the subscription is cancelled before the end of the month is impermissible.

ABC’s subscription fee does not appear to be unconscionable in its entirety under Rule 1.04. However, two of its provisions are prohibited by Ethics Opinion 701: (1) permitting the firm to collect and deposit the fee at the beginning of each month, and (2) requiring the client to forfeit the entire monthly fee if they cancel before the end of the month. The correct answer is D.