unclean hands doctrine in Delaware

2022As an initial matter, the doctrine of unclean hands does not apply to the plaintiffs’ legal claims seeking declaratory judgments. “[A] party may not assert an equitable defense against a purely legal claim, even when the legal claim is pending in a court of equity.”213 The doctrine could apply only to the plaintiffs’ request for equitable remedies.214 210 Nakahara, 718 A.2d at 523 . 211 Id. at 522 ; see Keystone Driller Co. v. Gen.

2022As an initial matter, the doctrine of unclean hands does not apply to the plaintiffs’ legal claims seeking declaratory judgments. “[A] party may not assert an equitable defense against a purely legal claim, even when the legal claim is pending in a court of equity.”213 The doctrine could apply only to the plaintiffs’ request for equitable remedies.214 210 Nakahara, 718 A.2d at 523 . 211 Id. at 522 ; see Keystone Driller Co. v. Gen.

2022“The application of the doctrine of unclean hands is not ‘bound by formula or restrained by any limitation that tends to trammel the free and just exercise of discretion.’” Id. (quoting Keystone Driller Co. v. Gen.

2022“The application of the doctrine of unclean hands is not ‘bound by formula or restrained by any limitation that tends to trammel the free and just exercise of discretion.’” Id. (quoting Keystone Driller Co. v. Gen.

2025Mkts., LLC v. Jervis, 129 A.3d 816, 876 (Del. 2015) (explaining that “whether to apply the doctrine of unclean hands” is a matter of the court’s discretion) (citation omitted). 196 Brody’s Opening Br. 51-52. 37 that the Buyers breached the implied covenant of good faith and fair dealing by “threatening the Audit with malpractice and then refusing to sign” a revised engagement letter.197 Brody also insists that the Buyers are in default on the Note, which is “immediately due and payable.”198 In response to these claims, the Buyers advance an equitable estoppel defense.

2020P. Rule 1. 15 Whittington v. Dragon Grp., L.L.C., 991 A.2d 1, 7 (Del. 2009). 16 RBC Capital Markets, LLC v. Jervis, 129 A.3d 816 , 875–76 (Del. 2015). 8 discretion in determining whether to apply the doctrine of unclean hands.”17 Because “the question of unclean hands is factual, our review will be limited to an inquiry as to whether the findings below support the conclusion that [Biddle] had unclean hands.”18 (15) Biddle’s argument appears to be that the court did not base its bad faith finding on clear and convincing evidence and that, therefore, its unclean hands conclusion could not stand.

2024Aug. 16, 1991) (“[The doctrine of unclean hands] is a rule of public policy to protect the public and the court against misuse by persons who, because of their conduct, have forfeited the right to have their claims considered.” (citing Skoglund v. Ormand Indus., Inc., 372 A.2d 204, 213 (Del.

2021“The purpose of the unclean hands doctrine is to protect the public and the court against misuse by one who, because of his conduct, has forfeited his right to have the court consider his claims . . . .”166 “The Court of Chancery has broad discretion in determining whether to apply the doctrine of unclean hands.”167 And in certain circumstances, an unclean hands defense will fail when applying it or allowing it to impede summary judgment would eschew well-settled principles of Delaware 164 2020 WL 1188052 , at *4. 165 Id. (alteration and internal quotation marks omitted). 166 Id. (alterations

2022But the label doesn’t matter, and the defenses were equated in McKennon v. Nashville Banner Publishing Co., 513 U.S. 352 , 360–61 (1995) . . . .”); Kuehnert v. Texstar Corp., 412 F.2d 700, 704 (5th Cir. 1969) (“Although [the plaintiff] is not seeking equitable relief, the doctrine [of unclean hands] remains applicable, since it expresses a general principle equally suited to damage actions.”); Kohler v. Staples the Office Superstore, LLC, 291 F.R.D. 464, 470 (S.D.

2022But the label doesn’t matter, and the defenses were equated in McKennon v. Nashville Banner Publishing Co., 513 U.S. 352 , 360–61 (1995) . . . .”); Kuehnert v. Texstar Corp., 412 F.2d 700, 704 (5th Cir. 1969) (“Although [the plaintiff] is not seeking equitable relief, the doctrine [of unclean hands] remains applicable, since it expresses a general principle equally suited to damage actions.”); Kohler v. Staples the Office Superstore, LLC, 291 F.R.D. 464, 470 (S.D.

2022Ch. 1976) (describing doctrine as “a rule of public policy” rather than “a matter of defense to be applied on behalf of litigants”); Vitaphone Corp., 171 A. at 749 ( “It (the doctrine of unclean hands) is a rule that lays restrictions upon complainants, and tells them that an appeal for relief to a court of conscience will not be honored by one who has himself been guilty of unconscionable conduct.” (formatting in original)).

2022Ch. 1976) (describing doctrine as “a rule of public policy” rather than “a matter of defense to be applied on behalf of litigants”); Vitaphone Corp., 171 A. at 749 ( “It (the doctrine of unclean hands) is a rule that lays restrictions upon complainants, and tells them that an appeal for relief to a court of conscience will not be honored by one who has himself been guilty of unconscionable conduct.” (formatting in original)).

2022Ch. 1998) (“The unclean hands doctrine is aimed at providing courts of equity with a shield from the potentially entangling misdeeds of the litigants in any given case . . . [T]he Court refuses to consider requests for equitable relief in circumstances where the litigant’s own acts offend the very sense of equity to which he appeals.”). 209 Bodley v. Jones, 59 A.2d 463, 469 (Del. 1947); see Gallagher v. Holcomb & Salter, 1991 WL 158969 , at *4 (Del.

1998While I am aware of controlling authority which requires litigants to come to equity with clean hands and to maintain clean hands throughout the litigation, see, e.g., Bodley v. Jones, Del.Supr., 59 A.2d 463, 469 (1947), it would certainly be contradictory for me to create precedent undermining the unclean hands doctrine in a case where Plaintiffs’ hands were "dirty” when they came to the Court for relief, remained so throughout the length of the litigation, and only after adverse judgment did they seek to purge the taint. .

2022But the label doesn’t matter, and the defenses were equated in McKennon v. Nashville Banner Publishing Co., 513 U.S. 352 , 360–61 (1995) . . . .”); Kuehnert v. Texstar Corp., 412 F.2d 700, 704 (5th Cir. 1969) (“Although [the plaintiff] is not seeking equitable relief, the doctrine [of unclean hands] remains applicable, since it expresses a general principle equally suited to damage actions.”); Kohler v. Staples the Office Superstore, LLC, 291 F.R.D. 464, 470 (S.D.

2022But the label doesn’t matter, and the defenses were equated in McKennon v. Nashville Banner Publishing Co., 513 U.S. 352 , 360–61 (1995) . . . .”); Kuehnert v. Texstar Corp., 412 F.2d 700, 704 (5th Cir. 1969) (“Although [the plaintiff] is not seeking equitable relief, the doctrine [of unclean hands] remains applicable, since it expresses a general principle equally suited to damage actions.”); Kohler v. Staples the Office Superstore, LLC, 291 F.R.D. 464, 470 (S.D.

2022But the label doesn’t matter, and the defenses were equated in McKennon v. Nashville Banner Publishing Co., 513 U.S. 352 , 360–61 (1995) . . . .”); Kuehnert v. Texstar Corp., 412 F.2d 700, 704 (5th Cir. 1969) (“Although [the plaintiff] is not seeking equitable relief, the doctrine [of unclean hands] remains applicable, since it expresses a general principle equally suited to damage actions.”); Kohler v. Staples the Office Superstore, LLC, 291 F.R.D. 464, 470 (S.D.

2022But the label doesn’t matter, and the defenses were equated in McKennon v. Nashville Banner Publishing Co., 513 U.S. 352 , 360–61 (1995) . . . .”); Kuehnert v. Texstar Corp., 412 F.2d 700, 704 (5th Cir. 1969) (“Although [the plaintiff] is not seeking equitable relief, the doctrine [of unclean hands] remains applicable, since it expresses a general principle equally suited to damage actions.”); Kohler v. Staples the Office Superstore, LLC, 291 F.R.D. 464, 470 (S.D.

2022See generally Equity Like Law, supra, at 503 (describing the “standard-like quality” of the unclean hands doctrine and rejecting characterization of doctrine as “bundles of rules 44 relating to diverse subject”; stating that “the only way to achieve a more unified rule of unclean hands is through the experiential process of precedent”); Duncan Kennedy, Form and Substance in Private Law Adjudication, 89 Harv.

2022See generally Equity Like Law, supra, at 503 (describing the “standard-like quality” of the unclean hands doctrine and rejecting characterization of doctrine as “bundles of rules 44 relating to diverse subject”; stating that “the only way to achieve a more unified rule of unclean hands is through the experiential process of precedent”); Duncan Kennedy, Form and Substance in Private Law Adjudication, 89 Harv.

2022Ct. 1941) (“[I]n granting relief to the borrower, the courts, both of law and equity, have subordinated the equitable doctrines of in pari delicto, unclean hands and ‘he who seeks equity must do equity to the legislative fiat . . . .”). 40 means that in equity as in law the plaintiff’s fault, like the defendant’s, may be relevant to the question of what if any remedy the plaintiff is entitled to.”9 9 Shondel, 775 F.2d at 868 ; see also, e.g., Schlueter v. Latek, 683 F.3d 350, 355 (7th Cir. 2012) (“When as in such cases the plaintiff is asking for equitable relief, the in pari delicto defense i

2022Ct. 1941) (“[I]n granting relief to the borrower, the courts, both of law and equity, have subordinated the equitable doctrines of in pari delicto, unclean hands and ‘he who seeks equity must do equity to the legislative fiat . . . .”). 40 means that in equity as in law the plaintiff’s fault, like the defendant’s, may be relevant to the question of what if any remedy the plaintiff is entitled to.”9 9 Shondel, 775 F.2d at 868 ; see also, e.g., Schlueter v. Latek, 683 F.3d 350, 355 (7th Cir. 2012) (“When as in such cases the plaintiff is asking for equitable relief, the in pari delicto defense i

2022Id.; accord Bateman Eichler, 472 U.S. at 306–07 (describing the premises of the in pari delicto doctrine as “first, that courts should not lend their good offices to mediating disputes among wrongdoers; and second, that denying judicial relief to an admitted wrongdoer is an effective means of deterring illegality”). 41 Nonetheless, “[t]he most orthodox view of the unclean hands doctrine makes it an equitable defense; that is, one that can be raised to defeat an equitable remedy, but not one that defeats other remedies.” Dobbs, Law of Remedies, supra, § 2.4(2), at 68.10 A line of Court of Chanc

2022Id.; accord Bateman Eichler, 472 U.S. at 306–07 (describing the premises of the in pari delicto doctrine as “first, that courts should not lend their good offices to mediating disputes among wrongdoers; and second, that denying judicial relief to an admitted wrongdoer is an effective means of deterring illegality”). 41 Nonetheless, “[t]he most orthodox view of the unclean hands doctrine makes it an equitable defense; that is, one that can be raised to defeat an equitable remedy, but not one that defeats other remedies.” Dobbs, Law of Remedies, supra, § 2.4(2), at 68.10 A line of Court of Chanc

2022But I fail to see how this conduct has an “immediate and necessary relation” to that giving rise to the equitable relief granted: specifically, the issuance of the February 1 Press Release and February 2 Disclosures and the co-opting of corporate resources by one half of a deadlocked board.216 The only conduct complained of that could potentially present the requisite direct relation is either contrary to my findings of fact after trial or was not before 215 Nakahara, 718 A.2d at 523 (describing the application of a “countervailing public policy” as the “greatest limitation” on the doctrine of

2022Excavator Co., 290 U.S. 240, 245-46 (1933) (“[The Court applying unclean hands is] not bound by formula or restrained by any limitation that tends to trammel the free and just exercise of discretion.”). 212 Nakahara, 718 A.2d at 522 . 213 NASDI Hldgs., LLC v. N. Am.

2022The equitable doctrine of unclean hands “provides that ‘a litigant who engages in reprehensible conduct in relation to the matter in controversy . . . forfeits his right to have the court hear his claim.’”211 “[I]t is designed primarily to protect courts of equity from being misused by a party who has not acted fairly and without fraud or deceit as to the controversy in issue.”212 “The doctrine should not be seen as a means to aid a party who faces an unscrupulous opponent . . . .”213 Rather, the operative question is “whether [a party’s] conduct is so offensive to the integrity of the court t

2021Courts have refused to apply the unclean- hands doctrine where the conduct at issue involved no intent to deceive, or if the degree of inequity resulting from the conduct is de minimis.245 For an omission to be material, there must be “a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made available.”246 The purported omission within Pearl City’s Transfer Notices relates to 277 units purchased in February 2020, 241 JX 41; JX 35 at 2, ¶ 11. 242 JX 35 at 2, ¶ 11. 243 Se

2020P. Rule 1. 15 Whittington v. Dragon Grp., L.L.C., 991 A.2d 1, 7 (Del. 2009). 16 RBC Capital Markets, LLC v. Jervis, 129 A.3d 816 , 875–76 (Del. 2015). 8 discretion in determining whether to apply the doctrine of unclean hands.”17 Because “the question of unclean hands is factual, our review will be limited to an inquiry as to whether the findings below support the conclusion that [Biddle] had unclean hands.”18 (15) Biddle’s argument appears to be that the court did not base its bad faith finding on clear and convincing evidence and that, therefore, its unclean hands conclusion could not stand.

2015This 115 See Nevins, 885 A.2d at 246-50 (“By waiting a year to bring suit, [the plaintiff] jeopardized all of the actions taken by the Board during that year.”). 116 Klaassen, 2013 WL 5739680 , at *20; Stengel, 2001 WL 221512 , at *6-7. 117 IAC/InterActiveCorp v. O’Brien, 26 A.3d 174, 177 (Del. 2011) (citing Whittington, 991 A.2d at 8 ). 118 Tr. 289; Martin Dep. 34-35. 41 Court has “broad discretion when applying the unclean hands doctrine” and may “refuse[] to consider requests for equitable relief in circumstances where the litigant‟s own acts offend the very sense of equity to which he appe

2026Defenses”) 39-41. 272 See, e.g., Kuroda, 971 A.2d at 891 (dismissing an unclean hands defense where it was duplicative of failed counterclaims). 273 See supra Section II.B.2. 274 See supra Section II.B.3.a. 275 See supra Section II.B.4. 55 and never defaulted on a capital call.276 A dispute over when the funds were raised is immaterial where the consideration was actually delivered.277 The defenses of fraud and unclean hands fail because the plaintiffs made no actionable misrepresentations and owed no duty to disclose the “concealed” facts.

2026Ct. Mar. 22, 2012) (permitting the Superior Court to consider the unclean hands defense in limited circumstances). 123 Aizen, 285 A.3d 461 at 484. 124 See Milford Power Co., LLC v. PDC Milford Power, LLC, 866 A.2d 738, 746 (Del.

2026Ch. 2004). 125 Id. (cleaned up). 126 D.I. 1.

2025Ch. 1978) (“The policy behind [Section 327] and [Rule 23.1] is to prevent so-called ‘strike suits’ whereby individuals purchase shares in a corporation with litigious motives.”); Jones v. Taylor, 348 A.2d 188, 191 (Del.

2025No. 2024-0857-MTZ July 11, 2025 Page 5 of 8 A plaintiff who bought a claim with strike-suit motives also invokes the doctrine of unclean hands.17 “He who comes into equity must come with clean hands.”18 A plaintiff who buys company stock to bring a derivative suit, then purports to speak on the company’s behalf to extract benefits for herself or her counsel that exceed on a relative basis the suit’s net benefit to the company, risks converting a derivative an individual purchases stock in a corporation with purely litigious motives.”); Schreiber v. Bryan, 396 A.2d 512, 516 (Del.

2024Yet, although properly raised, it is inapplicable. 161 Sun-Times Media Gp., Inc. v. Black, 954 A.2d 380, 397 (Del.

2024Tr., 739 A.2d 770, 791-92 (Del.

2022But I fail to see how this conduct has an “immediate and necessary relation” to that giving rise to the equitable relief granted: specifically, the issuance of the February 1 Press Release and February 2 Disclosures and the co-opting of corporate resources by one half of a deadlocked board.216 The only conduct complained of that could potentially present the requisite direct relation is either contrary to my findings of fact after trial or was not before 215 Nakahara, 718 A.2d at 523 (describing the application of a “countervailing public policy” as the “greatest limitation” on the doctrine of

2021Dec. 1, 2009) (dismissing an unclean hands defense because it was alleged “in conclusory fashion without providing any supporting allegations,” and holding that “[t]he rote recitation of an unclean hands defense is not a free pass to conduct discovery”); see also Shechter v. Comptroller of City of New York, 79 F.3d 265, 268 (2d Cir. 1996) (“Affirmative defenses which amount to nothing more than mere conclusions of law and are not warranted by any asserted facts have no efficacy.”) (internal citations omitted).

2021Ch. 2008); Gallagher, 1991 WL 158969 , at *4. 246 Rosenblatt v. Getty Oil Co., 493 A.2d 929, 944 (Del. 1985). 65 roughly 4% of the 6,475 units it acquired through private sales from existing Members.247 I do not view this error as material.