In Pari Delicto

The legal term in pari delicto is most commonly used in situations when both parties to a civil lawsuit are equally at fault for the wrongdoing. It basically means that, because both parties are equally to blame, the court will side with neither party. If the dispute is over possession of an item, the party in possession of the item generally retains possession unless someone not at fault can stake a claim in court. To explore this concept, consider the following in pari delicto definition.

Definition of In Pari Delicto

Adverb

1. The state of being equally at fault, or equally guilty of malfeasance or offense.

Origin

Latin   in pari delicto (in equal fault)

In Pari Delicto in U.S. Law

In the U.S., the legal doctrine of in pari delicto prevents a party who participated in illegal behavior or misconduct from recovering damages for a loss resulting from the offense. For example, in a breach of contract case, neither party would be able to successfully claim the other party breached the contract if both were equally at fault.

The doctrine may also be used when circumstances require the public be protected from further actions by the parties. For example, in a case where the Plaintiff sought to benefit from insider trading has filed a lawsuit against the person who provided false inside information, the court would not award damages, even though the provision of false information was fraudulent. In this case, both parties were engaging in illegal activity.

In criminal law, a Defendant would have a difficult time claiming he was persuaded to commit the crime by another defendant, as both took part in the crime.

Doctrine of Unclean Hands

A legal theory that is similar to, and sometimes confused with, in pari delicto is the doctrine of unclean hands. In this case, a defendant argues at trial that the plaintiff should not be awarded an “equitable remedy” because the plaintiff has acted in bad faith, or unethically, in regard to the subject of the lawsuit. In other words, the plaintiff has “unclean hands” in his dealings. In order to successfully claim the defense of unclean hands, the defendant must prove the plaintiff has not acted in good faith. If successful, the plaintiff’s claim will be dismissed.

In Pari Delicto as Affirmative Defense vs. Motion to Dismiss

The concept of in pari delicto is a relatively new defense as used in U.S. courts, and has led to some confusion as to when to use it. The rash of financial fraud schemes in recent years has ushered this doctrine to the forefront of civil cases involving ponzi schemes and other fraud cases. But should the defendant rely upon the doctrine in making a motion to dismiss the case, or should it be presented as an affirmative defense?

Courts have decided that in pari delicto is actually an affirmative defense for which a defendant is required to prove certain facts apart from the plaintiff’s complaint. The doctrine, therefore, it is not a proper basis for dismissing the case unless the relevant facts can be decisively determined from the complaint itself and other already available sources of evidence.

In Pari Delicto or Imputation

The term “imputation” refers to the act of accusing someone else of a fault or crime, as so becomes relevant in many cases involving an affirmative defense of in pari delicto. While the defendant is claiming that the plaintiff should not be able to recover damages because he was equally at fault, the court must consider whether the plaintiff should be held liable if he claims to have had no knowledge of the illegal activity that resulted in the loss.

This becomes complicated in the light of the long-held legal philosophy that ignorance of the law (or act) is not an excuse. In evaluating such claims, the court assumes people are aware of their immediate surroundings, and should be able to foresee certain results from certain acts or events. In cases of financial fraud, this prevents a party from claiming a defense based on willful or conscious blindness. For example, an accountant covering the tracks of a client selling fraudulent investment schemes could not claim a defense based on the fact that he didn’t actually see such transactions.

Related Legal Terms and Issues

• Legal Doctrine – a set of rules or procedures used to make decisions in court cases. Doctrine is often established through precedent, or prior rulings on similar cases.
• Offense – a violation of law or rule, the committing of an illegal act.
• Equitable Remedy – an action ordered by the court for a party to complete his duties under a contract. This is most often used when an award of money damages cannot sufficiently rectify the damages.
• Bad Faith – fraudulent deception; malicious or intentional failure to perform a contractual obligation or other duty.
• Ponzi Scheme – a fraudulent investment scheme in which investors are paid from the monies invested by new investors.
• Affirmative Defense – the introduction of evidence in a trial that would negate, or “cancel out,” the defendant’s civil or criminal legal responsibility for the alleged act.