Judicial, Equitable, and Collateral Estoppel, as Well as Waiver, Barred a Municipality’s Arguments in the Mount Laurel Context

In re Borough of Englewood Cliffs, 473 N.J. Super. 189 (App. Div. 2022). Judge Gilson’s opinion for the Appellate Division in this case today arose out of the settlement of long-running Mount Laurel litigation. In that litigation, the Borough of Englewood Cliffs lost, and a builder’s remedy to allow the construction of affordable housing was awarded to a developer.

The Borough then entered settlement negotiations with the builder and a public interest organization, agreed on a compromise, and submitted the settlement for approval at a fairness hearing. The court approved the settlement, which was embodied in two settlement agreements.

At a Borough Council meeting regarding whether to endorse the settlement, an objector contended that two Council members could not vote because they had conflicts of interest. Several months earlier, that objector had filed an action in lieu of prerogative writ seeking to restrain those Council members from voting on the settlement. The Borough filed papers in that case that asserted that the Council members had no conflict. The judge in that matter agreed with the Borough and dismissed the case. When the objector against asserted his conflict argument at the Council meeting, the Council cited the ruling in the prerogative writ case, and no Council member recused due to a conflict. The objector appeared again at the fairness hearing, the Borough again argued in opposition to his conflict contention, and the court rejected the claim of conflict and approved the settlement.

Both settlement agreements contained provisions under which the parties waived their right to challenge or appeal the settlement. As Judge Gilson noted, “[t]he waiver provision in both settlement agreements also expressly acknowledged ‘that a change in political control of the Borough Council may occur, but such a change would not constitute a change in circumstances that would warrant a retraction of’ the parties’ waiver of the right to appeal.” There was also a provision for attorneys’ fees if a party tried to sue.

Shortly after the court approved the settlement, the composition of the Borough Council changed. The Borough then moved to void the settlement based on the same conflict argument that the objector had raised and that the Borough had repeatedly and successfully rejected. The Law Division found no conflict of interest, held that the Borough was estopped from attempting to void the settlement, and awarded attorneys’ fees in favor of the developer and the public interest organization.

The Borough appealed and the Appellate Division resoundingly rejected the Borough’s arguments. Judge Gilson ruled that the Borough was judicially, equitably, and collaterally estopped from flip-flopping on its position, successfully asserted in the objector’s prerogative writ litigation and in the fairness hearing, that there was no conflict. Moreover, the Borough had waived any right to overturn the settlement. Finally, the 45-day statute of limitations contained in Rule 4:69-6 independently barred the Borough’s claim.

Despite all that, Judge Gilson went on to analyze the conflict issue on its merits. He concluded, as the Law Division had, that there was no conflict in any event.

The Appellate Division’s opinion made clear its disapproval of the conduct of the Borough. Though the panel did not, and did not need to, cite the principle that a public body must “turn square corners” in dealing with the public, the court made eminently clear that the Borough’s actions were utterly unacceptable. Everyone who represents public bodies, or who litigates against them, as well as members of public bodies themselves, should read this opinion.

Judge Farrington handled at the trial level all the litigation involved in this appeal. The Appellate Division rightly commended her repeatedly and by name for her work in these cases.