O bien

[Rusty]

The word le refers to the kidney, as you surmised. This is a direct object pronoun, and is correctly written. The word se is the indirect object pronoun, and it means to him, as you stated. Usually to him is written lo, which is the correct indirect object pronoun, but Spanish doesn't allow lo le because it sounds bad. So, to avoid cacophony, lo is replaced with se. The same goes for la le, by the way.

The lawyer demands that either the woman returns the kidney or she pays/compensates him for it.

[cmon]

?????????????????
According to my grammar books, the indirect object pronouns for 3rd person are
le, les, or se.

direct object pronouns: lo, la. los, las

Kidney is the direct object?

[Rusty]

You're right. I got very confused while writing. Let me restate things.

When both an indirect object pronoun and a direct object pronoun occur in the same phrase, the indirect object pronoun precedes the direct object pronoun.
The indirect object pronoun (le for 3rd person) changes to se if both objects begin with the letter l.
In se le devuelva, the second pronoun (the direct object pronoun) is technically incorrect. It should have been lo, unless you're in certain regions where leismo is accepted. The direct object pronoun refers to the kidney (so, le refers to the kidney). It is perfectly good Spanish to use a direct object pronoun and then turn right around and say the direct object in the sentence.
But, it was about at this point where I got mixed up. I was thinking about the leismo and then messed up everything.
My apologies.

[cmon]

You so don't need to apologize, did a forum search and found posts from May 20, 2008 that revealed the mysteries of leismo.