I have no idea about lavabit's financials but maybe they were not making enough money from the paid accounts. I am assuming a lawyer on retainer would be very expensive.
If the business ran into legal trouble and had to use up the 40 hours, it wouldn't automatically result in the attorney cutting off services. Most likely, if the attorney thought the business was solvent, s/he would continue working, and would invoice the business for anything above the $10,000.