Restitution Burden Allocation in Attorney Discipline: Shifting the Burden When Restitution Is Not Reasonably Ascertainable

Introduction

The Supreme Court of Wisconsin’s decision in Office of Lawyer Regulation v. Carl Robert Scholz (2025 WI 13) addresses not only the appropriate sanction for widespread trust‐account violations and repeated misrepresentations but also clarifies the procedure for handling restitution when the amount owed is obscured by an attorney’s own misconduct. The Office of Lawyer Regulation (“OLR”) brought a 48-count complaint against Attorney Carl Robert Scholz, alleging repeated conversion of client funds, trust account violations, failures to communicate, false statements to clients and tribunals, unlicensed practice, and non-cooperation with disciplinary investigators. The Court revoked Scholz’s license, ordered $4,000 in restitution to one former client, and imposed full costs, while announcing a key principle: when restitution amounts become “not reasonably ascertainable” because of an attorney’s misconduct, the burden shifts to the attorney to demonstrate the correct offset or repayment.

Summary of the Judgment

By per curiam order, the Supreme Court of Wisconsin adopted the referee’s factual findings based on two partial stipulations in which Attorney Scholz withdrew his answers and admitted the allegations. The Court concluded that Scholz had knowingly converted client funds from at least 19 matters spanning 2012–2019, made material misrepresentations to clients, courts, and the OLR, practiced while suspended, and refused to cooperate in investigations. It affirmed revocation of his law license (not made retroactive to his prior suspension), ordered $4,000 in restitution to S.J.C. (the only amount explicitly stipulated), and assessed $10,905.68 in costs. In doing so, the Court cautioned the OLR that any future waiver of restitution claims must be supported by detailed explanation, and that under its Board of Administrative Oversight’s January 16, 2020 policy, when restitution is not readily measurable due to attorney misconduct, the attorney must establish what restitution, if any, is owed.

Analysis

Precedents Cited

The Court relied on and clarified several prior decisions:

• In re Disciplinary Proceedings Against Ruppelt, 2017 WI 80: Established that if client restitution is not “reasonably ascertainable” because of attorney misconduct, the attorney bears the burden to show an appropriate offset.
• In re Medical Incapacity Proceedings Against Muwonge, 2017 WI 12: Applied the same burden‐shifting principle to restitution in disciplinary contexts.
• In re Disciplinary Proceedings Against Woods, 2011 WI 46: Confirmed that retroactive suspensions are disfavored absent “compelling circumstances.”
• In re Disciplinary Proceedings Against Mandelman (Mandelman IV), 2009 WI 40, and Mandelman V, 2014 WI 100: Addressed when retroactive sanctions may be appropriate and reaffirmed the general rule against retroactivity unless overlap of misconduct and suspension justifies leniency.
• In re Disciplinary Proceedings Against Cooper, 2013 WI 55: Approved retroactivity when misconduct fully overlapped a prior unappealed suspension.
• In re Disciplinary Proceedings Against Menard, 2020 WI 50, and Weigel, 2012 WI 124: Highlighted that repeated, systemic trust‐account conversions justify revocation.

Legal Reasoning

The Court’s reasoning unfolded in two dimensions:

1. Sanction and Retroactivity:

   Adopting the referee’s findings as uncontested admissions, the Court held that Scholz’s repeated and systemic misappropriation of trust funds, coupled with false statements and unlicensed practice, warranted license revocation under ABA Standard 4.11 and Wisconsin cases such as O’Byrne and Hinnawi. It declined to make revocation retroactive because Scholz presented no mitigating factor sufficiently compelling to override the default rule against retroactive sanctions (Woods, Jelinske, Mandelman IV).

2. Restitution Procedure:

   Noting the OLR’s last-minute decision to drop restitution claims totaling over $79,000 (beyond the $4,000 agreed for S.J.C.), the Court reaffirmed the BAO’s January 16, 2020 recommendation: when OLR cannot prove a reasonably ascertainable restitution amount because the attorney’s recordkeeping or conduct obscures it, the burden shifts to the attorney to identify any offsets or repayments. Moreover, if a third party waives a restitution claim, OLR must document the waiver circumstances and reasons for acceptance. In the present case, although the OLR failed to meet that standard, the Court nevertheless accepted the parties’ stipulation to $4,000 restitution to S.J.C., but put OLR on notice that future waivers must be carefully supported.

Impact

This decision will have significant effects on attorney discipline and restitution practice in Wisconsin:

• It cements the burden‐shifting rule: attorneys causing unclear restitution obligations must come forward with evidence of offset or repayment. OLR can no longer simply drop claims when funds are untraceable.
• Disciplinary referees and OLR staff must document any client or third‐party waiver of restitution with specifics—amounts explained, legal advice on waiver, and OLR’s rationale.
• The Court’s reiteration that revocations are generally not retroactive absent strong mitigation will guide future sanction briefs.
• Lawyers will be on notice that systemic trust‐account misuse and deception will result in revocation, with no second chances absent exceptional factors.

Complex Concepts Simplified

• IOLTA and Trust Accounts: Interest‐on‐Lawyer‐Trust‐Accounts are special bank accounts in which client funds must be held separately. Converting such funds is professional misconduct.
• Referee’s Report: An independent hearing officer’s findings and recommendation in an attorney discipline case, reviewed de novo by the Supreme Court if unappealed.
• Retroactive Sanction: Making a suspension or revocation run back to an earlier date; generally disfavored unless overlap of misconduct and suspension justifies leniency.
• Restitution Burden Shifting: If the disciplinary agency cannot determine how much a client is owed because the attorney’s misconduct destroyed or obscured records, the attorney must show what amount was repaid or what offsets exist.
• Plea-by-Stipulation: When an attorney withdraws an answer and agrees that allegations may be taken as admitted, those factual assertions serve as uncontested findings.

Conclusion

Office of Lawyer Regulation v. Scholz reinforces that attorneys who treat client funds as a “slush fund” and repeatedly lie to clients, courts, and disciplinary investigators face revocation without retroactive relief. Equally important, it establishes a clear procedural rule: when attorney misconduct renders restitution amounts “not reasonably ascertainable,” the burden shifts to the attorney to prove any offsets or repayments, and any waiver of restitution by clients must be documented in detail by the OLR. This decision will guide referees, the OLR, and practitioners in future disciplinary proceedings and protect clients’ financial interests.