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posner and the highwaymen February 11, 2013

Posted by Bradley in : law , trackback

Judge Posner likes the highwayman’s case, Everet v Williams. One highwayman sued his partner for his share of the ill-gotten gains of the enterprise. The court refused to help him out. Judge Posner cited the case in SEC v Lyttle in 2008 to reject claims by defendants in a securities case who argued that they themselves had been defrauded by another participant in the scheme (a defense Judge Posner characterized as ‘the “honor among thieves” defense’:

Their second defense is that Eldridge defrauded them, as shown by the fact that she pocketed the lion’s share of the $ 32 million stolen from the investors. The defendants, however, pocketed almost $9 million, and even if Eldridge took more than her fair share of the loot, that would not exonerate them. One is reminded of the high-wayman’s case. Everet v. Williams…One highwayman sued another, claiming that he was entitled to a larger share of the loot from a series of joint robberies. The suit was dismissed, both were hanged, and the plaintiff’s lawyers were fined for having brought a suit “both scandalous and impertinent.”

Last year he referred to the case in Schlueter v. Latek as the classic illustration for the following principle:

The common law teaches that if the opposing parties in a lawsuit are equally in the wrong and as a result neither has a colorable claim against the other—more precisely, if awarding relief to the plaintiff would reward wrongdoing—courts will not adjudicate their dispute.

And last week the case turned up again in Thomas v UBS. Clients of UBS sought to sue UBS for its failures to prevent them from breaching US tax law. Judge Posner does not like this claim:

This is like suing one’s parents to recover tax penalties one has paid, on the ground that the parents had failed to bring one up to be an honest person who would not evade taxes and so would not subject himself to penalties.

And then he gets to the highwaymen:

There is in general no common law duty to prevent another person from violating the law. At worst, UBS, as we’re about to see, violated an agreement with the IRS designed to prevent the kind of evasion that the plaintiffs engaged in. That might conceivably make UBS an aider or abettor of the plaintiffs’s tax evasion and so make this case a distant relative to Everet v. Williams … A highwayman had sued his partner in crime for an accounting of the illegal profits of their criminal activity. The court refused to adjudicate the case, and both parties were hanged. Minus the hanging and with certain exceptions (such as contribution and indemnity) irrelevant to this case, the principle enunciated in The Highwayman’s Case applies to accomplices in civil wrongdoing, as noted in our recent decision in Schlueter v. Latek… In The Highwayman’s Case one accomplice was seeking a bigger share of the profit from the crime from the other one; here one accomplice is seeking a smaller share of the costs of the crime from the other one. The principle is the same; the law leaves the quarreling accomplices where it finds them.

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