pari delicto doctrine in California

2025Pertinent Law The doctrine of unclean hands is an affirmative defense “in both equitable actions decided by a court and legal actions . . . decided by a jury.” (Padideh, supra, 89 Cal.App.5th at p. 437; Fladeboe v. American Isuzu Motors Inc. (2007) 150 Cal.App.4th 42, 56 .) Unclean hands encompasses “a number of disparate doctrines,” all of which are grounded in equity and apply “‘where it would be inequitable to grant the plaintiff any relief.’” (Blain v. Doctor’s Co. (1990) 222 Cal.App.3d 1048, 1059 ; Bank of America, N.A. v. Roberts (2013) 217 Cal.App.4th 1386, 1400 .) Of particular relevan

2025Pertinent Law The doctrine of unclean hands is an affirmative defense “in both equitable actions decided by a court and legal actions . . . decided by a jury.” (Padideh, supra, 89 Cal.App.5th at p. 437; Fladeboe v. American Isuzu Motors Inc. (2007) 150 Cal.App.4th 42, 56 .) Unclean hands encompasses “a number of disparate doctrines,” all of which are grounded in equity and apply “‘where it would be inequitable to grant the plaintiff any relief.’” (Blain v. Doctor’s Co. (1990) 222 Cal.App.3d 1048, 1059 ; Bank of America, N.A. v. Roberts (2013) 217 Cal.App.4th 1386, 1400 .) Of particular relevan

2016Lafferty, supra, 267 F.3d at p. 358 ; accord, In re Derivium Capital LLC, supra, 716 F.3d at p. 367 [distinguishing cases that “involved receivers who, unlike trustees, are not subject to Section 541”]; In re Hedged-Investments Associates, Inc., supra, 84 F.3d at p. 1285 [“bankruptcy law, apparently unlike the law of receivership, expressly prohibits [considering the innocent status of the trustee]”, fn. omitted]; Jones v. Wells Fargo Bank, N.A. (5th Cir. 2012) 666 F.3d 955, 967 [“cases that have applied the in pari delicto doctrine against bankruptcy trustees . . . are plainly distinguishable

2005Lafferty Co. (3d Cir. 2001) 267 F.3d 340, 355 (Lafferty) [“If wrongdoing is imputed, then the in pari delicto doctrine comes into play and bars a suit”].) The court based this conclusion on two specific findings: First, “the Trustee has alleged that all of the relevant decision makers of the corporate debtor were involved in the fraud.” Second, that there was a “complete unity between the debtor and its management in orchestrating the fraudulent scheme. . . .” But neither of these findings is supported by the allegations in the complaint.

2025Pertinent Law The doctrine of unclean hands is an affirmative defense “in both equitable actions decided by a court and legal actions . . . decided by a jury.” (Padideh, supra, 89 Cal.App.5th at p. 437; Fladeboe v. American Isuzu Motors Inc. (2007) 150 Cal.App.4th 42, 56 .) Unclean hands encompasses “a number of disparate doctrines,” all of which are grounded in equity and apply “‘where it would be inequitable to grant the plaintiff any relief.’” (Blain v. Doctor’s Co. (1990) 222 Cal.App.3d 1048, 1059 ; Bank of America, N.A. v. Roberts (2013) 217 Cal.App.4th 1386, 1400 .) Of particular relevan

2025Pertinent Law The doctrine of unclean hands is an affirmative defense “in both equitable actions decided by a court and legal actions . . . decided by a jury.” (Padideh, supra, 89 Cal.App.5th at p. 437; Fladeboe v. American Isuzu Motors Inc. (2007) 150 Cal.App.4th 42, 56 .) Unclean hands encompasses “a number of disparate doctrines,” all of which are grounded in equity and apply “‘where it would be inequitable to grant the plaintiff any relief.’” (Blain v. Doctor’s Co. (1990) 222 Cal.App.3d 1048, 1059 ; Bank of America, N.A. v. Roberts (2013) 217 Cal.App.4th 1386, 1400 .) Of particular relevan

2016Such estate is comprised of all the following property, wherever located and by whomever held: [¶] (1) Except as provided in subsections (b) and (c)(2) of this section, all legal or equitable interests of the debtor in property as of the commencement of the case.” 4 See also Nisselson v. Lernout (1st Cir. 2006) 469 F.3d 143, 153 [“there is no ‘innocent successor’ exception available to a bankruptcy trustee in a case in which the defendant successfully could have mounted an in pari delicto defense against the debtor”]; In re Derivium Capital LLC (4th Cir. 2013) 716 F.3d 355, 367 [“to the extent

2016Such estate is comprised of all the following property, wherever located and by whomever held: [¶] (1) Except as provided in subsections (b) and (c)(2) of this section, all legal or equitable interests of the debtor in property as of the commencement of the case.” 4 See also Nisselson v. Lernout (1st Cir. 2006) 469 F.3d 143, 153 [“there is no ‘innocent successor’ exception available to a bankruptcy trustee in a case in which the defendant successfully could have mounted an in pari delicto defense against the debtor”]; In re Derivium Capital LLC (4th Cir. 2013) 716 F3d 355, 367 [“to the extent

2016Lafferty, supra, 267 F.3d at p. 358 ; accord, In re Derivium Capital LLC, supra, 716 F.3d at p. 367 [distinguishing cases that “involved receivers who, unlike trustees, are not subject to Section 541”]; In re Hedged-Investments Associates, Inc., supra, 84 F.3d at p. 1285 [“bankruptcy law, apparently unlike the law of receivership, expressly prohibits [considering the innocent status of the trustee]”, fn. omitted]; Jones v. Wells Fargo Bank, N.A. (5th Cir. 2012) 666 F.3d 955, 967 [“cases that have applied the in pari delicto doctrine against bankruptcy trustees . . . are plainly distinguishable

2016Such estate is comprised of all the following property, wherever located and by whomever held: [¶] (1) Except as provided in subsections (b) and (c)(2) of this section, all legal or equitable interests of the debtor in property as of the commencement of the case.” 4 See also Nisselson v. Lernout (1st Cir. 2006) 469 F.3d 143, 153 [“there is no ‘innocent successor’ exception available to a bankruptcy trustee in a case in which the defendant successfully could have mounted an in pari delicto defense against the debtor”]; In re Derivium Capital LLC (4th Cir. 2013) 716 F3d 355, 367 [“to the extent

2016Such estate is comprised of all the following property, wherever located and by whomever held: [¶] (1) Except as provided in subsections (b) and (c)(2) of this section, all legal or equitable interests of the debtor in property as of the commencement of the case.” 4 See also Nisselson v. Lernout (1st Cir. 2006) 469 F.3d 143, 153 [“there is no ‘innocent successor’ exception available to a bankruptcy trustee in a case in which the defendant successfully could have mounted an in pari delicto defense against the debtor”]; In re Derivium Capital LLC (4th Cir. 2013) 716 F.3d 355, 367 [“to the extent

2016Such estate is comprised of all the following property, wherever located and by whomever held: [¶] (1) Except as provided in subsections (b) and (c)(2) of this section, all legal or equitable interests of the debtor in property as of the commencement of the case.” 4 See also Nisselson v. Lernout (1st Cir. 2006) 469 F.3d 143, 153 [“there is no ‘innocent successor’ exception available to a bankruptcy trustee in a case in which the defendant successfully could have mounted an in pari delicto defense against the debtor”]; In re Derivium Capital LLC (4th Cir. 2013) 716 F3d 355, 367 [“to the extent

2006In his testimony, Warren freely admitted to these and other derelictions. 25 Watson v. Poore (1941) 18 Cal.2d 302, 312-313 [ 115 P.2d 478 ], quoting Birney v. Birney (1933) 217 Cal. 353, 359 [ 18 P.2d 672 ], 26 See also Johnson v. Johnson (1987) 192 Cal.App.3d 551, 556-557 [ 237 Cal.Rptr. 644 ] (although using a straw person to secure a GI loan was improper and against public policy, applying the in pari delicto rule to preclude relief was improper because both parties were not equally at fault); Norwood v. Judd (1949) 93 Cal.App.2d 276 [ 209 P.2d 24 ] (although the *116 painting and sandblast

2006In his testimony, Warren freely admitted to these and other derelictions. 25 Watson v. Poore (1941) 18 Cal.2d 302, 312-313 [ 115 P.2d 478 ], quoting Birney v. Birney (1933) 217 Cal. 353, 359 [ 18 P.2d 672 ], 26 See also Johnson v. Johnson (1987) 192 Cal.App.3d 551, 556-557 [ 237 Cal.Rptr. 644 ] (although using a straw person to secure a GI loan was improper and against public policy, applying the in pari delicto rule to preclude relief was improper because both parties were not equally at fault); Norwood v. Judd (1949) 93 Cal.App.2d 276 [ 209 P.2d 24 ] (although the *116 painting and sandblast

2021(Tri-Q, supra, 63 Cal.2d at p. 218 .) “At its most fundamental level, the exception allows an illegal contract to be enforced ‘so long as the party seeking its enforcement is less morally blameworthy than the party against whom the contract is being asserted, and there is no overriding public interest to be served by voiding the agreement.’ ” (McIntosh, at p. 347.) The Tri-Q court adopted a formulation of the in pari delicto doctrine articulated in Norwood v. Judd (1949) 93 Cal.App.2d 276 : “ ‘[T]he courts should not be so enamored with the Latin phrase “in pari delicto” that they blindly exte

2006In his testimony, Warren freely admitted to these and other derelictions. 25 Watson v. Poore (1941) 18 Cal.2d 302, 312-313 [ 115 P.2d 478 ], quoting Birney v. Birney (1933) 217 Cal. 353, 359 [ 18 P.2d 672 ], 26 See also Johnson v. Johnson (1987) 192 Cal.App.3d 551, 556-557 [ 237 Cal.Rptr. 644 ] (although using a straw person to secure a GI loan was improper and against public policy, applying the in pari delicto rule to preclude relief was improper because both parties were not equally at fault); Norwood v. Judd (1949) 93 Cal.App.2d 276 [ 209 P.2d 24 ] (although the *116 painting and sandblast

2016Such estate is comprised of all the following property, wherever located and by whomever held: [¶] (1) Except as provided in subsections (b) and (c)(2) of this section, all legal or equitable interests of the debtor in property as of the commencement of the case.” 4 See also Nisselson v. Lernout (1st Cir. 2006) 469 F.3d 143, 153 [“there is no ‘innocent successor’ exception available to a bankruptcy trustee in a case in which the defendant successfully could have mounted an in pari delicto defense against the debtor”]; In re Derivium Capital LLC (4th Cir. 2013) 716 F.3d 355, 367 [“to the extent

2016Such estate is comprised of all the following property, wherever located and by whomever held: [¶] (1) Except as provided in subsections (b) and (c)(2) of this section, all legal or equitable interests of the debtor in property as of the commencement of the case.” 4 See also Nisselson v. Lernout (1st Cir. 2006) 469 F.3d 143, 153 [“there is no ‘innocent successor’ exception available to a bankruptcy trustee in a case in which the defendant successfully could have mounted an in pari delicto defense against the debtor”]; In re Derivium Capital LLC (4th Cir. 2013) 716 F3d 355, 367 [“to the extent

2016(Etcheverry v. Tri-Ag Service, Inc. (2000) 22 Cal.4th 316, 320 (Etcheverry), disapproved on another ground as recognized in Barrett v Rosenthal (2006) 40 Cal.4th 33, 58, fn.18 .) However, “they are persuasive and entitled to great weight,” and “where the decisions of the lower federal courts on a federal question are ‘both numerous and consistent,’ we should hesitate to reject their authority.” (Etcheverry, at pp. 320–321.) The Trustee has not persuaded us to reject these numerous and consistent federal circuit court decisions construing 11 U.S.C. § 541.5 The Trustee refers to legislative hist

2016(Etcheverry, supra, 22 Cal.4th at p. 321 .) The Trustee points to Camerer v. California Sav. etc. Bank (1935) 4 Cal.2d 159 [ 48 P.2d 39 ], in which the California Supreme Court held, as a matter of state law, a receiver was not subject to an in pari delicto defense based on the wrongful conduct of the insolvent bank.

2016The trial court granted the attorney’s demurrer without leave to amend, finding the Trustee’s claims barred by the in pari delicto doctrine. 1 Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP (2005) 133 Cal.App.4th 658 [ 35 Cal.Rptr.3d 31 ] {Peregrine Funding) held that if this doctrine would have barred claims if asserted by a company prior to bankruptcy, the doctrine also bars them when asserted by the bankruptcy trustee suing on behalf of the company’s bankruptcy estate.

2016The trial court granted the attorney’s demurrer without leave to amend, finding the Trustee’s claims barred by the in pari delicto doctrine. 1 Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP (2005) 133 Cal.App.4th 658 [ 35 Cal.Rptr.3d 31 ] {Peregrine Funding) held that if this doctrine would have barred claims if asserted by a company prior to bankruptcy, the doctrine also bars them when asserted by the bankruptcy trustee suing on behalf of the company’s bankruptcy estate.

2016(Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455 [ 20 Cal.Rptr. 321 , 369 P.2d 937 ].) However, Camerer did not involve a claim asserted by a bankruptcy trustee.

2016(Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455 [ 20 Cal.Rptr. 321 , 369 P.2d 937 ].) However, Camerer did not involve a claim asserted by a bankruptcy trustee.

2016Ball Sons (1957) 48 Cal.2d 141 (Lewis), and Smith v. Bach (1920) 183 Cal. 259 , which the Righettis cite in support of their argument that the in pari delicto defense cannot apply because the “very goal and purpose of the SMA is to protect buyers of real property,” are similarly unavailing.

1955Our conclusion in this respect is fully supported by several California cases, including the following: Smith v. Bach, 183 Cal. 259, 263-264 [ 191 P. 14 ]; McAllister v. Drapeau, 14 Cal.2d 102, 112 [ 92 P.2d 911 , 125 A.L.R. 800 ]; Carter v. Seaboard Finance Co., 33 Cal.2d 564, 574 [ 203 P.2d 758 ]; Miller v. California Roofing Co., 55 Cal.App.2d 136, 143-144 [ 130 P.2d 740 ]; Norwood v. Judd, 93 Cal.App.2d 276, 289 [ 209 P.2d 24 ]. *Supp. 896 While none of the above cited cases involved a violation of the Labor Code, the pari delicto rule as announced in them clearly shows that such rule shou

2014They cite federal case law that holds the doctrine of in pari delicto does not apply to bar recovery in a federal antitrust action (Perma Mufflers v. Int’l Parts Corp. (1968) 392 U.S. 134, 138-139 ) and California case law that holds the doctrine of unclean hands is not a defense to an unfair trade or business practices claim based on a violation of the Unfair Competition Law (§ 17200 et seq.).

1978In Perma Mufflers v. Int’l Parts Corp., supra, 392 U.S. 134 , Justice Black discussed the application of the in pari delicto doctrine in the context of antitrust violations.

2016Lafferty, supra, 267 F.3d at p. 358 ; accord, In re Derivium Capital LLC, supra, 716 F.3d at p. 367 [distinguishing cases that “involved receivers who, unlike trustees, are not subject to Section 541”]; In re Hedged-Investments Associates, Inc., supra, 84 F.3d at p. 1285 [“bankruptcy law, apparently unlike the law of receivership, expressly prohibits [considering the innocent status of the trustee]”, fn. omitted]; Jones v. Wells Fargo Bank, N.A. (5th Cir. 2012) 666 F.3d 955, 967 [“cases that have applied the in pari delicto doctrine against bankruptcy trustees . . . are plainly distinguishable

2016Such estate is comprised of all the following property, wherever located and by whomever held: [¶] (1) Except as provided in subsections (b) and (c)(2) of this section, all legal or equitable interests of the debtor in property as of the commencement of the case.” 4 See also Nisselson v. Lernout (1st Cir. 2006) 469 F.3d 143, 153 [“there is no ‘innocent successor’ exception available to a bankruptcy trustee in a case in which the defendant successfully could have mounted an in pari delicto defense against the debtor”]; In re Derivium Capital LLC (4th Cir. 2013) 716 F3d 355, 367 [“to the extent