Cal. Appellate Court Narrowly Construes Unclean Hands Defense Where Statute Violated Was Intended to Protect Consumers

In Mendoza v. Ruesga (2008) __ Cal.App.4th __, the Fourth District Court of Appeal declined to allow a defendant to assert an unclean hands defense to its purported violation of a consumer protection statute (in this case, California’s Immigration Consultant’s Act).  The Court of Appeal, relying on analogy under California’s UCL, used sweeping language as to why an unclean hands defense would not be allowed to a violation of the ICA: 

Application of the doctrine would allow unscrupulous immigration consultants to go unpunished and undermine the protective purposes of the legislation.  The dishonesty of undocumented immigrants can not be countenanced, of course, but the Legislature was undoubtedly aware of that potential when it enacted the ICA and subsequent amendments. . . Yet, while consistently expanding protection for immigrants, the Legislature has imposed no obligations on them or limitations on their recovery.

Decisions addressing this issue under the Rosenthal Act have held that “unclean hands” may provide an affirmative defense to the debt collector, but that such a defense will be narrowly applied. Yu v Signet Bank/Virginia (2002) 103 Cal.App.4th 298. See also Keele v Wexter (7th Cir. 1998) 149 F3d 589; Wells v GC Servs., Ltd. (N.D.Cal. 2007) 2007 WL 1068222 (defendant failed to make any showing in its papers or at the hearing that plaintiff’s credibility or motives are relevant to any claim or defense in this action); Mejia v. Marauder Corporation (N.D.Cal. 2007) 2007 WL 806486 (unclean hands not a defense to federal FDCPA claim because defense is of state law origin); See also McCabe v. Crawford & Company (N.D.Ill. 2003) 272 F.Supp.2d 736 (the doctrine of unclean hands not applicable); First North American Title v. Superior Court, (2005) 2005 WL 67123 n. 6 (unpublished) (unclean hands defense may be applied in any action at law or in equity, including the Rosenthal Act).