Judge Mark Wallace Dismisses Adversaries Based on Unclean Hands, Great Opinion

Law students love unclean hands.  The guy they like is the good guy which obviously gives the other guy unclean hands.  The same with unjust enrichment.  Judge Wallace explains very nicely In re John Olaf Halvorson that unclean hands can be a bar to the access to courts, at least when the court is sitting as a court of equity.  He quotes the Supreme Court in Keystone Driller Co v. General Excavator Co., 290 U.S. 240, 244-45, 54 S. Ct. 146, 78 L.Ed. 293 (1933):

“It is one of the fundamental principles upon which equity jurisprudence is founded, that before a complainant can have a standing in court he must first show not only that he has a good and meritorious cause of action, but he must come into court with clean hands . . . The governing principle is ‘that whenever a party who, as actor, seeks to set the judicial machinery in motion and obtain some remedy, has violated conscience, or good faith, or other equitable principle, in his prior conduct, then the doors of the court will be shut against him in limine; the court will refuse to interfere on his behalf, to acknowledge his right or to award him any remedy’ . . . ‘A court of equity acts only when and as conscience commands, and if the conduct of the plaintiff be offensive to the dictates of natural justice, then, whatever may be the rights he possesses and whatever use he may make of them in a court of law, he will be held remediless in a court of equity.’” [italics in original].

Judge Wallace conducted five days of trial on the unclean hands issue only and concluded:

the Court concludes that equity’s unclean hands doctrine squarely applies and requires this Court to shut its doors against the guilty parties, and to refuse to interfere on their behalf, to acknowledge their right or to award them any remedy in these adversary proceedings.

He thereby dismissed two pending adversaries against the debtor – with prejudice thank you.  The debtor’s cross-complaints remain intact.

What in the world did the plaintiff’s do that was unclean hands?  Well they arranged to have the debtor arrested in the middle of a mediation with Judge Jury in Riverside – which sort of scuttled the mediation thank you.  And it was a mediation ordered by Judge Wallace n the first place!  Judge Jury was so upset at the event that she immediately ended the mediation.

The opinion has a very nice discussion of the history behind the creation of court’s of equity.  Judge Wallace says:

The purpose of the unclean hands doctrine is not to protect the defendant – it is to protect the court from becoming an aider and abettor of iniquity. (citing) Karpenko v. Leendertz, 619 F.3d 259, 267 (3d Cir. 2010) (“As we have explained previously, the equitable doctrine of unclean hands is not a matter of defense to the defendant.  Rather, in apply it[,] courts are concerned primarily with their own integrity, and with avoiding becoming the abettor of iniquity.” Aldisert, J., dissenting, citing Ne. Women’s Ctr., Inc. v. McMonagle, 868 F.2d 1342, 1354 (3d Cir. 1989).