In re Spielbauer, S283172

Spielbauer helped his brother acquire and refinance loans secured by the 167 E. William Street property, then caused Devine Blessings to purchase Mitchell’s loans and later issued a payoff demand falsely inflating the amount owed on the property. 1
William LLC relied on the payoff demand, canceled a sale, and later sued Spielbauer; the superior court found he knowingly made a false demand and committed fraud, slander of title, and interference torts, awarding compensatory and punitive damages. 2
After the civil judgment was held nondischargeable in bankruptcy, the State Bar charged Spielbauer with misconduct, and the hearing judge and Review Department imposed discipline but declined restitution. 3
The Review Department refused restitution because William LLC was a nonclient and the judgment sounded in tort damages, reading Sorensen to bar restitution based on tort-based civil judgments. 4
The Supreme Court granted review to decide whether tort-based harm to a nonclient can support restitution in attorney discipline. 5
The Court held restitution was proper and ordered Spielbauer to pay William LLC $536,726.55 plus interest, with probation conditions tied to payment. 6

Issue	Plaintiff's Argument	Defendant's Argument	Held
Can restitution be ordered for nonclient tort losses? 7	OCTC said Sorensen allows restitution for specific out-of-pocket losses from misconduct.	Spielbauer said tort damages to a nonclient cannot justify restitution.	Yes; restitution may rest on nonclient tort losses. 8
Does nonclient status bar restitution? 9	OCTC argued client status is unnecessary.	Spielbauer said William LLC was not his client.	No; nonclient victims may receive restitution. 10
Must the civil judgment be enforceable or unpaid? 11	OCTC said discipline restitution is independent of collection limits.	Spielbauer said the judgment had expired and was unenforceable.	No; enforceability is not required. 12
Did William LLC suffer recoverable out-of-pocket loss? 13	OCTC relied on compensatory damages, fees, and costs from the civil case.	Spielbauer said fees were unpaid or offset by supposed gains.	Yes; the record showed compensable losses. 14
What restitution terms and suspension conditions should apply? 15	OCTC sought suspension until restitution and a payment-plan safeguard.	Spielbauer urged no restitution or immediate reinstatement.	Six-month actual suspension plus restitution, with a payment-plan mechanism if unable to pay. 16

Sorensen v. State Bar, 52 Cal.3d 1036 (Cal. 1991) (restitution in discipline serves rehabilitation and public protection, including for specific out-of-pocket losses 17)
Brookman v. State Bar, 46 Cal.3d 1004 (Cal. 1988) (restitution is a rehabilitative measure and not merely compensation for pecuniary loss 18)
Coppock v. State Bar, 44 Cal.3d 665 (Cal. 1988) (discipline may include restitution to protect the public and encourage professional integrity 19)
Galardi v. State Bar, 43 Cal.3d 683 (Cal. 1987) (restitution may be imposed for misconduct involving nonclients and business dealings 20)
Morse v. State Bar, 11 Cal.4th 184 (Cal. 1995) (restitution can be ordered despite overlapping civil restitution and public-protection rationales 21)
Frazer v. State Bar, 43 Cal.3d 564 (Cal. 1987) (actual suspension may continue until restitution to a nonclient lender is paid 22)
Slavkin v. State Bar, 49 Cal.3d 894 (Cal. 1989) (restitution can include amounts beyond client trust funds, including losses from nonclient dealings 23)
Bach v. State Bar, 52 Cal.3d 1201 (Cal. 1991) (disciplinary restitution is independent of private collection remedies 24)
Howell v. Hamilton Meats & Provisions, Inc., 52 Cal.4th 541 (Cal. 2011) (collateral source rule discussion distinguished from attorney-discipline restitution 25)
West Coast Development v. Reed, 2 Cal.App.4th 693 (Cal. Ct. App. 1992) (attorney fees need not be actually paid to be recoverable as incurred fees 26)