Litigators often come across the “unclean hands” defense in an attempt to dismiss a case due to the plaintiff’s unethical behavior relating to the lawsuit. Forbes reports that this boilerplate defense put an end to a California lawsuit between billionaire Igor Olenicoff and UBS.
Mr. Olenicoff famously stashed a $200 million fortune in offshore accounts, including accounts at UBS, to avoid paying taxes. The IRS discovered the scheme (through a UBS whistleblower), and Olenicoff was forced to pay $52 million in back taxes and penalties. He then turned around and sued UBS for indemnification, claiming the bank misled him about tax laws and mismanaged his hidden money. The suit was dismissed in 2012. UBS, in turn, sued Mr. Olenicoff in California state court for malicious prosecution, seeking to recover approximately $4.5 million in attorneys’ fees.
But a California judge ruled last week, putting an end to the back-and-forth suits. “When does this stop between UBS...and Mr. Olenicoff? It stops right now,” said Judge Kim Dunning. She threw out UBS’s suit on the basis that the parties involved are “all bad actors.” Because UBS had helped Mr. Olenicoff evade taxes, the judge reasoned, it had unclean hands and could not maintain a suit against Mr. Olenicoff.
This case is a reminder that the “unclean hands” doctrine is alive and well. Companies must be vigilant about their own conduct, or they may lose the right to recover against unworthy clients.