Criminal Convictions & Real Estate Broker Discipline
in California

If you ever needed to close the deal, it's now.

Maybe you got hit with a fraud accusation or a drug charge.and suddenly you're facing jail time, probation, loss of reputation and loss of livelihood.

Unfortunately, if you're a licensed broker / agent or salesperson in California the problems don't end when you leave the courthouse. You still have to deal with the Department of Real Estate, which can suspend or revoke your license based on a criminal conviction.

Luckily our California Criminal Defense Lawyers are just a phone call away. We're veteran criminal defense attorneys with proven track records.1 We can help you consider the whole picture, illuminating how prosecutors and judges and enforcement officers think, and assessing how plea deals will impact employment opportunities.

If you're staring down a criminal charge and professional discipline, or have further questions after reading this article, we invite you to contact us for a consultation.

This article covers:

1. Who regulates real estate brokers in
California?
2. What counts as a conviction?
3. What is a substantially related conviction?
4. What can I do to fight for my real
estate license?

(Click on a title to proceed directly to that section)

1. Who regulates real estate brokers in California?

The Department of Real Estate regulates California's 450,000-plus real estate brokers / agents and salespeople.

The DRE's goal is to protect the public in real estate transactions. As part of its job the Commissioner oversees licensee discipline in accordance with real estate laws and regulations.2

Criminal convictions are among the most common reasons for enforcement action, including license denials based on failure to disclose convictions and licensee discipline for sustaining substantially related convictions.

There were at least 60 conviction-related disciplinary actions in May 2010, ranging from application denials to license revocations to (more optimistically) grants of restriction removals.3

In April 2010 that number was 92. In March 2010 it was 108.

2. What counts as a conviction?

For starters, let's take a look at what counts as a conviction for license discipline purposes.

Not surprisingly, convictions include guilty pleas and guilty verdicts. More surprisingly, convictions also include pleas of nolo contendere or "no contest" pleas.

Still more surprising, the Commissioner can even count as a conviction one that has been expunged under California Penal Code Section 1203.4. We recognize this seems unfair, but an expungement can still be beneficial for rehabilitation and our California Criminal Defense Lawyers can help you take care of this.

3. What is a substantially related conviction?

Convictions that are "substantially related" to the qualifications, functions or duties of a real estate licensee can trigger discipline.4

This is a requirement grounded in the Constitution, as people's right to practice their chosen professions can only be denied for reasons that relate to their fitness to practice that profession.5

When our clients come to us with a discipline accusation, one of our first tasks is to assess whether the criminal conviction at issue is truly substantially related to real estate work. Just because the Department of Real Estate says it is, we might be able to argue that no nexus exists under the particular facts and circumstances of your case.

There is no precise, ironclad definition of what substantially related means. But we can find guidance in regulations and case law.6

Dishonesty

A big area of concern for the Department of Real Estate Commissioner is dishonesty-related convictions, such as fraudulently taking someone else's property, engaging in bribery, forgery or tax evasion.

Let's look at an example.

Example:  A Southern California broker was convicted of felony embezzlement, identify theft and offering a false document in connection with two land transactions. The broker signed other people's names to loan documents and, while acting as an escrow agent, paid out thousands of dollars more than authorized.

After the criminal convictions, the Department of Real Estate initiated disciplinary proceedings. The administrative law judge concluded that the DRE had proven a case for license revocation as well as the more drastic action of debarment. A bar order enables the DRE to prevent an individual from circumventing discipline by participating in real estate-type work by way of related enterprises.7

In a case that reached California's highest court, a real estate broker was disciplined after pleading no contest to federal conspiracy in connection with filing false reports. The Supreme Court of California discussed the importance of honesty in professional dealings:

These charges included wilful participation in dummy land sales transactions which were entered into for illegal and fraudulent purposes. Similar offenses involving dishonest or fraudulent conduct frequently have been held to constitute grounds for administrative discipline.8

However, in another case a court decided that a salesman's one-time conviction for making a false statement to obtain unemployment benefits could not justify the DRE's denial of his broker's license:

The evidence was uncontradicted as to the isolated nature of his offense; he was highly regarded by persons--brokers--in his profession. In short, there is a total lack of evidence to support the finding that the misdemeanor offense committed in 1974 was substantially related to the 1978 qualifications of Mr. Pieri as a real estate broker. All evidence points to an opposite conclusion.9

Drugs and alcohol and driving

Convictions involving drugs and alcohol also can be a problem. The Department of Real Estate Commissioner's regulations say that two or more criminal convictions involving the consumption or use of alcohol or drugs count when at least one of those convictions involves driving.

Let's look at some example of drug cases:

Example: A California real estate broker and certified pilot flew a small plane from Mexico to the Central Valley. The plane was stocked with nearly 1,000 pounds of marijuana with an approximate street value of $250,000. The broker was caught and pled guilty to felony possession of marijuana for sale.

The DRE revoked the broker's license based on the conviction, although he was issued a restricted salesman's license. The reviewing court emphasized the dishonesty aspect of selling drugs in upholding the decision.10

Change the facts:  A Bay Area man with a clean record and a great reputation got mixed up with some unfortunate business. He arranged a meeting (for fee) between two people with a vague understanding that a drug deal may be involved.

In fact drugs were involved.100 grams of cocaine.and the whole thing went down under the watch of federal narcotics officers. He was convicted of distribution of a controlled substance and later denied a real estate broker's license based on that conviction.

But this man fought his case and found a friend in the appellate court. The judges decided that "substantially related" could not be evaluated in a vacuum and that no such nexus could be found in this case given all the facts and circumstances, including his exemplary record and peripheral part in the deal.11

Sex offenses

The Commissioner's regulations include as substantially related convictions those that involve "sexually related conduct affecting a person who is an observer or non-consenting participant in the conduct or convictions which require registration pursuant to the provisions of Section 290 of the Penal Code."

But as we have seen in the dishonesty and drug contexts, things are not always clear-cut. In  Donaldson v. Department of Real Estate, an appellate court decided that this regulation did not cover a case where a licensee pled no contest to unlawful intercourse with a minor (his wife's 16-year-old sister) where there was no showing of lack of consent.

Moral turpitude is not the issue

You might have heard about real estate brokers being disciplined for committing crimes of "moral turpitude."  That was the law up until a few years ago, when the state legislature changed the law to clarify that the key question is whether the conviction is  "substantially related" to real estate work and not whether it involves "moral turpitude."13

Rehabilitation

In evaluating a discipline case or application denial based on a conviction, the Department of Real Estate Commissioner is required to look at evidence that the individual in question has been rehabilitated.14 This means that the Board will look at such factors such as

  • passage of time since the conviction
  • restitution to the injured party
  • expungement of convictions
  • expungement of sex offender registration
  • substance abuse therapy
  • stability of family life
  • educational courses
  • discharge of debts
  • correction of sketchy business practices
  • change in attitude
  • change in social and business relationships
  • community involvement

Title 10 of the California Code of Regulations sets out more comprehensive lists of rehabilitation criteria. Section 2911 covers license denials.15 Section 2912 covers license revocations and suspensions.16

Our California Criminal Defense Lawyers can help you develop a viable "rehabilitation" plan to show the Commissioner that what happened in the past does not reflect who are in the present or will be in the future.

4. What can I do to fight for my real estate license?

You go the extra mile for clients pursuing lifelong dreams all the time. Why do any less when the client is you?

Strategy and negotiation are keys to discipline cases just like real estate transactions. Sometimes the best approach is an informal sit-down with the Department of Real Estate. Other times what's needed is no less than a full-on march to court.

Regardless, it's critical to stay on top of things from the earliest possible minute. We recommend you find a good  criminal defense attorney who can help you sort all this stuff out.

We're lawyers who know the value of a case just like you know the value of a deal.

We can be a valuable ally in helping you close the most important transaction of all -- keeping your license and staying in the game.

Our California Criminal Defense Lawyers Can Help.
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If you or loved one is charged with crime and are a real estate broker and you are looking to hire an attorney for representation, we invite you to contact us at Shouse Law Group. We can provide a free consultation in office or by phone. We have local offices in Los Angeles, the San Fernando Valley, Pasadena, Long Beach, Orange County, Ventura, San Bernardino, Rancho Cucamonga, Riverside, San Diego, Sacramento, Oakland, San Francisco, San Jose and throughout California.

You might also be interested in reading our related articles Administrative Hearings, Doctor License Revocation, Nurse License Revocation, Dentist License Revocation, Pharmacist License Revocation, Attorney License Revocation, Accountant License Revocation, Teacher License Revocation, Social Worker License Revocation, Contractor License Revocation and Police Officer Discipline.

We also have articles on DUI's, drug crimes, fraud crimes and probation hearings, among many others.

Helpful links:

Department of Real Estate

California Office of Administrative hearings

References:

1Our California Criminal Defense Lawyers have local offices in Beverly Hills, Burbank, Glendale, Lancaster, Long Beach, Los Angeles, Pasadena, Pomona, San Diego, San Francisco, Torrance, Van Nuys, West Covina, and Whittier.

2See California Business and Professions Code Section 10000 et seq; California Code of Regulations Title 10, Chapter 6 (Real Estate Commissioner).

3Underlying documentation regarding these actions is not readily available, but the online breakdown provided by the DRE lists as the relevant "violation" California Business and Professions Code Section 10177(b), discussed below.

4California Business and Professions Code Section 10177 (a) and (b) provide:  "The commissioner may suspend or revoke the license of a real estate licensee, or may deny the issuance of a license to an applicant, who has done any of the following, or may suspend or revoke the license of a corporation, or deny the issuance of a license to a corporation, if an officer, director, or person owning or controlling 10 percent or more of the corporation's stock has done any of the following:   (a) Procured, or attempted to procure, a real estate license or license renewal, for himself or herself or a salesperson, by fraud, misrepresentation, or deceit, or by making a material misstatement of fact in an application for a real estate license, license renewal, or reinstatement.  (b) Entered a plea of guilty or nolo contendere to, or been found guilty of, or been convicted of, a felony, or a crime substantially related to the qualifications, functions, or duties of a real estate licensee, and the time for appeal has elapsed or the judgment of conviction has been affirmed on appeal, irrespective of an order granting probation following that conviction, suspending the imposition of sentence, or of a subsequent order under Section 1203.4 of the Penal Code allowing that licensee to withdraw his or her plea of guilty and to enter a plea of not guilty, or dismissing the accusation or information."  California Business and Professions Code Section 490 provides:  "(a) In addition to any other action that a board is permitted to take against a licensee, a board may suspend or revoke a license on the ground that the licensee has been convicted of a crime, if the crime is substantially related to the qualifications, functions, or duties of the business or profession for which the license was issued.  (b) Notwithstanding any other provision of law, a board may exercise any authority to discipline a licensee for conviction of a crime that is independent of the authority granted under subdivision (a) only if the crime is substantially related to the qualifications, functions, or duties of the business or profession for which the licensee's license was issued.  (c) A conviction within the meaning of this section means a plea or verdict of guilty or a conviction following a plea of nolo contendere.  Any action that a board is permitted to take following the establishment of a conviction may be taken when the time for appeal has elapsed, or the judgment of conviction has been affirmed on appeal, or when an order granting probation is made suspending the imposition of sentence, irrespective of a subsequent order under the provisions of Section 1203.4 of the Penal Code.  (d) The Legislature hereby finds and declares that the application of this section has been made unclear by the holding in Petropoulos v. Department of Real Estate (2006) 142 Cal.App.4th 554, and that the holding in that case has placed a significant number of statutes and regulations in question, resulting in potential harm to the consumers of California from licensees who have been convicted of crimes.  Therefore, the Legislature finds and declares that this section establishes an independent basis for a board to impose discipline upon a licensee, and that the amendments to this section made by Senate Bill 797 of the 2007-08 Regular Session do not constitute a change to, but rather are declaratory of, existing law."

5See Hughes v. Board of Architectural Examiners, 17 Cal.4th 763, 788 (1998) ("It is axiomatic that the right of an individual to engage in any of the common occupations of life is among the several fundamental liberties protected by the due process and equal protection clauses of the Fourteenth Amendment.  Therefore, for example, a statute constitutionally can prohibit an individual from practicing a lawful profession only for reasons related to his or her fitness or competence to practice that profession." (internal citations omitted)

6California Code of Regulations Title 10, � 2910 provides:  "(a) When considering whether a license should be denied, suspended or revoked on the basis of the conviction of a crime, or on the basis of an act described in Section 480(a)(2) or 480(a)(3) of the Code, the crime or act shall be deemed to be substantially related to the qualifications, functions or duties of a licensee of the Department within the meaning of Sections 480 and 490 of the Code if it involves:  (1) The fraudulent taking, obtaining, appropriating or retaining of funds or property belonging to another person.  (2) Counterfeiting, forging or altering of an instrument or the uttering of a false statement.  (3) Willfully attempting to derive a personal financial benefit through the nonpayment or underpayment of taxes, assessments or levies duly imposed upon the licensee or applicant by federal, state, or local government.  (4) The employment of bribery, fraud, deceit, falsehood or misrepresentation to achieve an end.  (5) Sexually related conduct affecting a person who is an observer or non-consenting participant in the conduct or convictions which require registration pursuant to the provisions of Section 290 of the Penal Code.  (6) Willfully violating or failing to comply with a provision of Division 4 of the Business and Professions Code of the State of California.  (7) Willfully violating or failing to comply with a statutory requirement that a license, permit or other entitlement be obtained from a duly constituted public authority before engaging in a business or course of conduct.  (8) Doing of any unlawful act with the intent of conferring a financial or economic benefit upon the perpetrator or with the intent or threat of doing substantial injury to the person or property of another.  (9) Contempt of court or willful failure to comply with a court order.  (10) Conduct which demonstrates a pattern of repeated and willful disregard of law.  (11) Two or more convictions involving the consumption or use of alcohol or drugs when at least one of the convictions involve driving and the use or consumption of alcohol or drugs.  (b) The conviction of a crime constituting an attempt, solicitation or conspiracy to commit any of the above enumerated acts or omissions is also deemed to be substantially related to the qualifications, functions or duties of a licensee of the department.  (c) If the crime or act is substantially related to the qualifications, functions or duties of a licensee of the department, the context in which the crime or acts were committed shall go only to the question of the weight to be accorded to the crime or acts in considering the action to be taken with respect to the applicant or licensee."

7In the Matter of the Bar Order Against William John Vroom, DRE No. H-4083 SD.  California Business and Professions Code Section 10087 provides:  "(a) In addition to acting pursuant to the authority provided under Sections 10086, 10176, and 10177, the commissioner may, after appropriate notice and opportunity for a hearing, by order, suspend, or bar from any position of employment, management, or control, for a period not exceeding 36 months, a real estate salesperson or real estate broker, or an unlicensed person issued an order under Section 10086, if the commissioner finds either of the following:  (1) That the suspension or bar is in the public interest and that the person has committed or caused a violation of this division or rule or order of the commissioner, which violation was either known or should have been known by the person committing or causing it or has caused material damage to the public.  (2) That the person has been convicted of or pleaded nolo contendere to any crime, or has been held liable in any civil action by final judgment, or any administrative judgment by any public agency, if that crime or civil or administrative judgment involved any offense involving dishonesty, fraud, or deceit, or any other offense reasonably related to the qualifications, functions, or duties of a person engaged in the real estate business in accordance with the provisions of this division.  (b) Within 15 days from the date of a notice of intention to issue an order pursuant to subdivision (a), the person may request a hearing under the Administrative Procedure Act (Chapter 4.5 (commencing with Section 11400) of Division 3 of Title 2 of the Government Code).  If no hearing is requested within 15 days after the mailing or service of that notice and none is ordered by the commissioner, the failure to request a hearing shall constitute a waiver of the right to a hearing.  (c) Upon receipt of a notice of intention to issue an order pursuant to this section, the person who is the subject of the proposed order is immediately prohibited from engaging in any business activity involving real estate that is subject to regulation under this division.   (d) Persons suspended or barred under this section are prohibited from participating in any business activity of a real estate salesperson or a real estate broker and from engaging in any real estate-related business activity on the premises where a real estate salesperson or real estate broker is conducting business.  Persons suspended or barred under this section are also prohibited from participating in any real estate-related business activity of a finance lender, residential mortgage lender, bank, credit union, escrow company, title company, or underwritten title company."

8Arneson v. Fox, 28 Cal.3d 440, 451 (1980).  The court found that neither public policy nor constitutional considerations stand in the way of no contest plea-based administrative discipline so long as legislatively prescribed and limited by the "substantially related" requirement.

9Pieri v. Fox, 96 Cal.App.3d 802, 806 (1979).

10Golde v. Fox, 98 Cal.App.3d 167, 176 (1979) ("Illegal possession and transportation by airplane with the attendant sophisticated planning of a quarter of a million dollars worth of marijuana, admittedly for the purpose of personal gain, is clearly an illicit act of deceit and dishonesty in a fundamental sense.  The crime here, of course, does not relate to the technical or mechanical qualifications of a real estate licensee, but there is more to being a licensed professional than mere knowledge and ability.  Honesty and integrity are deeply and daily involved in various aspects of the practice.")

11Brandt v. Fox, 90 Cal.App.3d 737, 747 (1979) ("In summary, the evidence shows that on one isolated occasion, relatively remote in time, plaintiff was peripherally involved in an illegal drug transaction which, in view of his character, his remorseful attitude and his otherwise exemplary conduct, was unlikely to recur.  Under the authorities previously discussed, it appears that, only by indulging in the sort of abstract characterization which has been condemned by the California courts, can the connection between this plaintiff's one instance of misbehavior and his qualifications to act as a real estate salesman be established.  The Attorney General's argument that, having once violated the law to make a quick profit, plaintiff might be tempted to engage in overreaching and dishonest conduct as a real estate salesman, is not convincing.  While we do not condone the conduct which resulted in plaintiff's conviction, yet it did not involve fraud or dishonesty in any fundamental sense.  Given the isolated nature of the incident, the fact that it occurred over four years ago, the lack of any evidence that plaintiff's subsequent conduct has been other than exemplary, or that such conduct bore a substantial relationship to the qualifications, functions or duties of, or otherwise rendered him unfit to engage in, the activity for which he sought a license, we must conclude that the Commissioner's decision to deny plaintiff's application was not supported by substantial evidence.")

12Donaldson v. Department of Real Estate, 134 Cal.App.4th 948, 969 (2005) ("What the record suggests is that when faced with this case the Commissioner first issued a factual finding that, as the Department has implicitly conceded, lacked substantial evidentiary support.  When the superior court set that order aside, the Commissioner resorted to what she supposed was a general rule of law, i.e., that all minor victims of sex offenses are categorically incapable of consent and are thus "non-consenting participants" in the conduct.  As noted in the previous section, that rule was abrogated 35 years ago.  If the Department wished to adopt it as a regulatory matter, it was required to comply with the APA.  Having made no attempt to do so, it cannot rely on a supposed rule or presumption of nonconsent to justify revocation based on conduct which, so far as this record shows, was never disclosed to licensees as a potential ground for discipline.")

13See Robbins v. Davi, 175 Cal.App.4th 118 (2009) [in case upholding discipline of broker convicted of building code violations as substantially related, court discusses these recent legislative changes as well as those clarifying that BPC � 490, supra, provides an independent basis for discipline and not merely a modification or limitation to BPC � 10177(b)]

14California Business and Professions Code Section 482 provides:  "Each board under the provisions of this code shall develop criteria to evaluate the rehabilitation of a person when:  (a) Considering the denial of a license by the board under Section 480; or  (b) Considering suspension or revocation of a license under Section 490.  Each board shall take into account all competent evidence of rehabilitation furnished by the applicant or licensee."

15California Code of Regulations, Title 10, �2911 provides: "The following criteria have been developed by the department pursuant to Section 482(a) of the Business and Professions Code for the purpose of evaluating the rehabilitation of an applicant for issuance or for reinstatement of a license in considering whether or not to deny the issuance or reinstatement on account of a crime or act committed by the applicant:  (a) The passage of not less than two years since the most recent criminal conviction or act of the applicant that is a basis to deny the departmental action sought.  (A longer period will be required if there is a history of acts or conduct substantially related to the qualifications, functions or duties of a licensee of the department.)  (b) Restitution to any person who has suffered monetary losses through "substantially related" acts or omissions of the applicant.  (c) Expungement of criminal convictions resulting from immoral or antisocial acts.  (d) Expungement or discontinuance of a requirement of registration pursuant to the provisions of Section 290 of the Penal Code.  (e) Successful completion or early discharge from probation or parole.  (f) Abstinence from the use of controlled substances or alcohol for not less than two years if the conduct which is the basis to deny the departmental action sought is attributable in part to the use of controlled substances or alcohol.  (g) Payment of the fine or other monetary penalty imposed in connection with a criminal conviction or quasi-criminal judgment.  (h) Stability of family life and fulfillment of parental and familial responsibilities subsequent to the conviction or conduct that is the basis for denial of the agency action sought. (i) Completion of, or sustained enrollment in, formal education or vocational training courses for economic self-improvement.  (j) Discharge of, or bona fide efforts toward discharging, adjudicated debts or monetary obligations to others.  (k) Correction of business practices resulting in injury to others or with the potential to cause such injury.  (l) Significant or conscientious involvement in community, church or privately-sponsored programs designed to provide social benefits or to ameliorate social problems.  (m) New and different social and business relationships from those which existed at the time of the conduct that is the basis for denial of the departmental action sought.  (n) Change in attitude from that which existed at the time of the conduct in question as evidenced by any or all of the following:  (1) Testimony of applicant.  (2) Evidence from family members, friends or other persons familiar with applicant's previous conduct and with his subsequent attitudes and behavioral patterns.  (3) Evidence from probation or parole officers or law enforcement officials competent to testify as to applicant's social adjustments.  (4) Evidence from psychiatrists or other persons competent to testify with regard to neuropsychiatric or emotional disturbances.  (5) Absence of subsequent felony or misdemeanor convictions that are reflective of an inability to conform to societal rules when considered in light of the conduct in question.  (o) Each of the above criteria notwithstanding, no mortgage loan originator license endorsement shall be issued to an applicant for such license endorsement where the applicant has been convicted of any felony within seven (7) years from the date of his or her application for a license endorsement.  This ban is not subject to mitigation or rehabilitation.  (p) Each of the above criteria notwithstanding, no mortgage loan originator license endorsement shall be issued to an applicant for such license endorsement where the applicant has ever been convicted of a felony where such felony involved an act of fraud, dishonesty, a breach of trust, or money laundering.  This ban is not subject to mitigation or rehabilitation."

16California Code of Regulations Title 10, �2912 provides:  "The following criteria have been developed by the department pursuant to Section 482(b) of the Business and Professions Code for the purpose of evaluating the rehabilitation of a licensee against whom an administrative disciplinary proceeding for revocation or suspension of the license has been initiated on account of a crime committed by the licensee. (a) The passage of not less than two years from the most recent criminal conviction that is "substantially related" to the qualifications, functions or duties of a licensee of the department. (A longer period will be required if there is a history of criminal convictions or acts substantially related to the qualifications, functions or duties of a licensee of the department.)  (b) Restitution to any person who has suffered monetary losses through "substantially related" acts or omissions of the licensee.  (c) Expungement of the conviction or convictions which culminated in the administrative proceeding to take disciplinary action.  (d) Expungement or discontinuance of a requirement of registration pursuant to the provisions of Section 290 of the Penal Code.  (e) Successful completion or early discharge from probation or parole.  (f) Abstinence from the use of controlled substances or alcohol for not less than two years if the criminal conviction was attributable in part to the use of a controlled substance or alcohol.  (g) Payment of any fine imposed in connection with the criminal conviction that is the basis for revocation or suspension of the license.  (h) Correction of business practices responsible in some degree for the crime or crimes of which the licensee was convicted.  (i) New and different social and business relationships from those which existed at the time of the commission of the acts that led to the criminal conviction or convictions in question.  (j) Stability of family life and fulfillment of parental and familial responsibilities subsequent to the criminal conviction.  (k) Completion of, or sustained enrollment in, formal educational or vocational training courses for economic self-improvement.  (l) Significant and conscientious involvement in community, church or privately-sponsored programs designed to provide social benefits or to ameliorate social problems.  (m) Change in attitude from that which existed at the time of the commission of the criminal acts in question as evidenced by any or all of the following:  (1) Testimony of applicant.  (2) Evidence from family members, friends or other persons familiar with the licensee's previous conduct and with subsequent attitudes and behavioral patterns.  (3) Evidence from probation or parole officers or law enforcement officials competent to testify as to applicant's social adjustments.  (4) Evidence from psychiatrists, clinical psychologists, sociologists or other persons competent to testify with regard to neuropsychiatric or emotional disturbances  (5) Absence of subsequent felony or misdemeanor convictions that are reflective of an inability to conform to societal rules when considered in light of the conduct in question."

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