From a letter of the Rebbe:
Whenever there are two parties in argument over a matter in this physical world, it is nearly impossible for one party to be completely correct, and the other party to be completely at fault. Every party has at least some wrongdoing that needs amending. In fact, as explained in Chassidus, it is this wrongdoing that may have triggered the wrongdoing of the other, perhaps to even a greater quantity and quality, as the verse states that just as water reflects one’s image so too the heart of man reflects another’s heart. Many good endeavors have become sabotaged due to conflict and discord that is motivated by a desire of imaginative respect, and is at times embellished within claims of fear of heaven and matters of piety [Shpitz Chabad]. Some people, after hearing the above words, rather than make an accounting of their own soul and situation, repenting for their ways and judging the other person favorably to the point he feels humbled before him, they rather demand the above from the other party. They use this to enthusiastically preach to the other party that they should do Teshuvah, and with no less enthusiasm, they judge themselves favorably, with great scrupulousness, and demand of others that they be humble before him.
 Igros Kodesh 13/19