Diamond hands: timeshare entity's alleged misconduct towards consumers didn't allow exit company to assert unclean hands

Diamond Resorts U.S. Collection Development, LLC v. Wesley Financial Group, LLC, No. 3:20-CV-251-DCLC-DCP, 2021 WL 3277260 (E.D. Tenn. Jul. 14, 2021) (R&R)

In this timeshare v. timeshare exit company case, the judge recommended tossing the exit company’s unclean hands defense.  An analogy between trademark and false advertising arguably would have supported allowing unclean hands: the exit company pointed out that, without the allegedly false solicitation of timeshares, the timeshare company would have nothing for the exit company to interfere with. This matches pretty well with the trademark standard that unclean hands requires that the plaintiff must have secured the right upon which it sues by inequitable conduct.

But the judge here quoted another case with approval: “allowing Defendants to assert the affirmative defense of unclean hands may serve to confuse the issues and prejudice Plaintiffs.” The timeshare company’s allegedly inequitable conduct was harmed a third party, not the exit company.