Unclean hands and other equitable defenses cannot be used to defeat class certification in an unfair competition lawsuit based upon violations of statute, even if the defenses might be taken into account when fashing a remedy, and even if they involve the determination of facts and legal issues that vary greatly among class members. Ticconi v. Blue Shield of California Life & Health (2007) __ Cal.App.4th __.
In Ticconi, the Court of Appeal began its analysis by noting that
Courts have long held that the equitable defense of unclean hands is not a defense to an unfair trade or business practices claim based on violation of a statute. To allow such a defense would be to judicially sanction the defendant for engaging in an act declared by statute to be void or against public policy. (Kofsky v. Smart & Final Iris Co. (1955) 131 Cal.App.2d 530, 532; Page v. Bakersfield Uniform Etc. Co. (1966) 239 Cal.App.2d 762, 770 [“The equitable doctrine of the refusal of aid to anyone with ‘unclean hands,’ does not, as such, apply to actions under [the unfair practices act].”)
At the trial court, Ticconi's class certification motion had been denied because the trial court found that "legal and factual issues concerning the defenses of fraud and unclean hands outweighed those related to liability rendering class treatment disadvantageous." However,
our Supreme Court explained that “equitable defenses may not be asserted to wholly defeat a UCL claim [under Bus. & Prof. Code, § 17200] since such claims arise out of unlawful conduct. . . .” (Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 179.) In Cortez, the plaintiff brought an action under the UCL seeking restitution of overtime wages withheld from her and other employees. The defendant argued that where the UCL sounded in equity, the trial court was obligated to consider equitable defenses. The Supreme Court held that the equities may be considered when the trial court exercises its discretion to fashion a remedy under Business and Professions Code section 17203. (Ibid.) But, equitable defenses may not be used to defeat the cause of action under the UCL. As more fully explained by Justice Werdegar in her concurrence in Cortez, “in general, as between a person who is enriched as the result of his or her violation of the law, and a person intended to be protected by the law who is harmed by its violation, for the violator to retain the benefit would be unjust.”
Therefore, the diverse facts making up Blue Shield Life’s fraud and unclean hands defenses could not be factored in when determining whether the community interest requirement for class certification had been met.
"Legal and factual issues that go to remedies simply cannot outweigh the common issues related to liability."
Because wage and hour cases are generally based upon statutory violations, and UCL claims are a part of any sound wage and hour class action complaint, Ticconi v. Blue Shield of California Life & Health should be required reading for every wage and hour class action attorney. You can read the full text here in pdf or word format.