Consumer protection – Equitable defenses – Enforcement action

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Where (1) the commonwealth brought a G.L.c. 93A enforcement action alleging that the defendant’s product violates the criminal usury statute and (2) the commonwealth has moved to strike the defendant’s equitable affirmative defenses of estoppel and unclean hands, that motion should be allowed because the application of estoppel against the commonwealth would impede the public interest, while the application of the defense of unclean hands would frustrate the public policy innate in the Massachusetts attorney general’s obligation to protect the public from illegal and deceptive conduct.

“Pursuant to G.L.c. 93A, §4, the Commonwealth of Massachusetts pursues this enforcement action against Hometap Equity Partners, LLC and Hometap Management Holdings, LLC (together Hometap) alleging that Hometap’s product, the Home Equity Investment (HEI), is an illegal, deceptive, oppressive and unconscionable mortgage, that violates the criminal usury statute. Before me is the Commonwealth’s Motion to Strike Hometap’s equitable affirmative defenses of estoppel and unclean hands. …

“I agree that the application of estoppel against the Commonwealth in the present circumstances would impede the public interest. The AGO seeks to protect the public from what it alleges are illegal and misleadingly marketed mortgages. There is no doubt that an action, brought under G.L.c. 93A, §4, to protect consumers from alleged unfair and deceptive acts and practices constitutes the quintessential public interest proceeding. Indeed, under the statute, the Attorney General can bring such an enforcement proceeding only after concluding it is in the public interest. …

“Further, allowing estoppel to forestall the AGO from obtaining a chapter 93A remedy would produce unjust results and significantly erode the statutory protections afforded to consumers. Hometap seeks to avoid liability based on a meeting with the AGO in 2018 in which the office did not express any issues or concerns with Hometap’s product. To recognize an estoppel defense under such circumstances would allow businesses potentially to immunize themselves from future Chapter 93A enforcement actions if the AGO — often perhaps having only a benign, perfunctory disclosure, or preliminary information — responds with anything other than affirmative condemnation of planned practice. Such a system would require the AGO to either take an overly expansive view of potentially unfair and deceptive practices — thereby chilling legitimate business conduct — or risk being hamstrung from ever pursuing an action relating to conduct to which it may have previously acquiesced whether affirmatively or by silence. That result would neuter government enforcement of Chapter 93A and leave the public unprotected from unfair and deceptive conduct. The Legislature could not have intended, and the law cannot countenance, such a result. …

“Here, for all the reasons cited above, I agree that the application of the defense of unclean hands, should the Commonwealth prove that HEIs are illegal and deceptive, would frustrate the public policy innate in the AGO’s obligation to protect the public from such conduct. …

“For the foregoing reasons, the Commonwealth’s Motion to Strike Affirmative Defenses 3, 6, and 21 is allowed and no other defenses shall be construed to include the equitable defenses of estoppel or unclean hands.”

Commonwealth v. Hometap Equity Partners, LLC, et al. (Lawyers Weekly No. 09-170-25) (12 pages) (Squires-Lee, J.) (Suffolk Superior Court) (Civil Action No. 2584CV00469-BLS2) (Dec. 19, 2025).

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