(CN) – The California Supreme Court unanimously rule On Thursday, attorney Thomas John Spielbauer must pay more than half a million in restitution to a non-client as part of his discipline ordered by the state bar for acts of misconduct.
The ruling overturns the state bar review department’s conclusion that Spielbauer did not have to pay restitution as part of his discipline because the injured party was not a client of his.
“We find that the reviewing department misinterpreted our precedents and that a remand is appropriate in this case,” Associate Justice Kelli M. Evans wrote for the court. “We therefore order that Spielbauer make restitution in accordance with the terms set forth at the end of this opinion. We otherwise approve the department’s recommended discipline.”
In a statement, Rachel Grunberg, assistant chief trial judge for the State Bar of California, praised the decision.
“We are very pleased with the decision, which finds the restitution order appropriate in this case as a disciplinary condition,” she said. “More broadly, the court’s opinion clarifies the role of restitution in attorney discipline proceedings, recognizing, as the state bar argued, that in a wide range of cases, restitution furthers the protective and rehabilitative purposes of discipline by forcing a lawyer to accept the results of their misconduct.”
By contrast, in an interview with Courthouse News, Spielbauer’s attorney, Glen L. Moss of Moss & Murphy, called the decision a “disaster” and warned it could negatively impact the legal profession.
“It’s a significant expansion of the restitution obligation that lawyers have, even in situations like this, where they’re not even practicing as lawyers,” he said, adding later, “it’s going to significantly increase their malpractice rates, which is also unfortunate because many lawyers won’t be able to afford the increased fees.”
The state attorney’s case against Spielbauer stems from a 2010 real estate deal he entered into on behalf of Devine Blessings, Inc., of which Spielbauer was the president and sole shareholder.
In 2013, a court found that Spielbauer had intentionally provided an incorrect, inflated claim for payment to the other party involved in the transaction. The following year, a judge ordered Spielbauer to pay more than $860,000 in restitution, fees and costs. Spielbauer then filed for bankruptcy. He never paid the judgment.
Moss added that the case was best illustrated by the saying “a man with himself for a lawyer has a fool for a client”, claiming that Spielbauer’s “failure to mount a defence” and explain how he arrived at the payment claim led to “what appeared to be an egregious discrepancy between the amount due and the amount that should have been paid”.
The Office of the Chief Prosecutor of the State Bar Court later learned of the civil fraud verdict and filed five counts of misconduct against Spielbauer, including fraud, two counts of moral turpitude and failure to report the civil fraud verdict. A state bar hearing found Spielbauer guilty of four counts and recommended disciplinary measures of suspension and probation, but declined to recommend reinstatement.
The review department found similarly and denied the return recommendation, noting that the other party to the real estate deal was “a non-client entity,” citing the high court’s decision in Sorensen v. State’s Attorney.
In Thursday’s opinion, Evans said the review department had misread it Sorensen and other precedents when it concluded that Spielbauer did not have to pay damages to a non-customer.
“Our view was not, as the review department concluded, that an award of restitution is impermissible insofar as it ‘compensates the victim of the wrongdoing,'” he wrote. “Rather, it was that the primary purposes of ordering ‘restitution (as) a necessary condition of probation’ in attorney discipline cases are to ‘rehabilitate’ the attorney and . . . to protect the public from similar future misconduct,’ and that compensating the victim through a ‘compensatory award(s) is pecuniary. incidental to’ these ‘proper, primary purposes . . .'”
The court further rejected some of Spielbauer’s arguments he made to the state bar hearing judge and the review department, including that the 2014 decision had expired and was unenforceable, that he believed his conduct was justified, and that the other party was never his client and had no out-of-pocket loss.
The Supreme Court ordered that Spielbauer be suspended from practicing law for two years and placed on probation for two years. He will be barred from practicing law for the first six months of probation and until he pays nearly $540,000 in restitution, plus interest. He will be required to pay one-fifth of the total return every year for the next five years.
Evans wrote that the court was skeptical that Spielbauer would end up paying what he was owed, given that he never made payments on his 2014 judgment, but concluded that the amount was “adequate to protect the public.”
“Spielbauer’s misconduct was not garden-variety civil misconduct, but was fraudulent activity, which raises questions about his ability to represent clients in a manner consistent with his professional obligations,” he said.
Chief Justice Patricia Guerrero, Associate Justices Carol A. Corrigan, Goodwin H. Liu, Leondra R. Kruger and Joshua P. Groban, and Associate Justice Jose S. Castillo, sitting by designation, concurred.
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