Background
Carlino East Brandywine, L.P. has been trying to develop a 10-acre commercial tract on Horseshoe Pike in Chester County into a shopping center anchored by a Giant Food store since 2010. The Township required Carlino to build a Connector Road linking two state roads across an adjacent parcel owned by L&R Partnership, LLC. In 2014, the Township and Carlino entered a Memorandum of Understanding under which the Township condemned a 1.9-acre portion of L&R’s property and paid the owners $104,000, while Carlino agreed to fund the road construction in exchange for a credit against the Township’s traffic impact fee.
In 2019, the Township conditionally approved Carlino’s development plan, with Condition No. 17 setting the traffic impact fee at $1,410,031.08 and specifying that any grant funding obtained by Carlino would reduce the fee credit dollar-for-dollar. That same year, Carlino and the Township executed a Land Development Agreement (LDA) that used a different, proportional formula for calculating the grant offset—one that Appellants (neighboring landowners Brandywine Village Associates and L&R Partnership) contend cost the Township approximately $771,000 in impact fee revenue. Appellants challenged the LDA in a 2020 declaratory judgment action, arguing it violated the Pennsylvania Prevailing Wage Act. The trial court dismissed that action for lack of standing in 2023, and the Commonwealth Court affirmed.
Meanwhile, on remand from the Commonwealth Court in a related injunction proceeding, Carlino renewed its request for a permanent injunction enjoining Appellants from interfering with development. On September 30, 2024, the trial court granted Carlino’s motion in limine, ruling that Appellants were collaterally estopped from presenting evidence about the LDA–Condition No. 17 discrepancy because that issue had been raised in the prior declaratory judgment action. Appellants were therefore barred from challenging whether Carlino had a “clear right to relief”—the first element of the permanent injunction standard. The trial court entered a permanent injunction on January 31, 2025, declaring the Settlement Agreement void and upholding the Board’s rescission resolution. Appellants appealed.
The Court’s Holding
The Commonwealth Court (Judges McCullough, Wojcik, and Wolf), in an opinion by Judge McCullough, vacated the permanent injunction and remanded for further proceedings. The court held that the trial court’s application of collateral estoppel was legal error because neither of the two dispositive elements of the doctrine was satisfied.
First, collateral estoppel requires that the issue have been “actually litigated” in the prior proceeding. Because the declaratory judgment action was dismissed for lack of standing—not on the merits—the underlying issues were never actually litigated. The court relied on its own precedent in Commonwealth ex rel. Corbett v. Desiderio, 698 A.2d 134 (Pa. Cmwlth. 1997), where it held that a dismissal for lack of standing leaves the substantive issues untouched: “[T]he issue . . . was not actually litigated.” The same principle governed here. A judgment resting entirely on a threshold procedural defect (standing) cannot foreclose later litigation of the merits.
Second, the identity-of-issues element was independently unsatisfied. In the declaratory judgment action, Appellants challenged the LDA as violative of the Prevailing Wage Act—a statutory requirement. The current injunction proceeding does not implicate the Wage Act at all. Because the legal theory and the regulatory framework differed, the issues were not identical. The court vacated the permanent injunction and remanded, directing the trial court to conduct an evidentiary hearing if necessary so Appellants could present the excluded evidence and the trial court could assess its relevance and weight in the equitable proceeding.
Key Takeaways
- A prior dismissal for lack of standing does not create collateral estoppel. The doctrine requires that issues be “actually litigated and determined” — a standing dismissal leaves the merits untouched and forecloses nothing.
- Identity of issues is a separate, independent element. Even if the same facts appear in two proceedings, collateral estoppel fails where the legal claim or statutory framework differs between the two actions.
- Wrongly excluding evidence by misapplying collateral estoppel in an equitable proceeding is reversible error. The permanent injunction test requires a “clear right to relief”; evidence bearing on that element cannot be barred without a proper legal basis.
- The unclean hands defense survives. Because Appellants were prevented from developing their argument that Carlino’s departure from Condition No. 17 constituted inequitable conduct, the remand must permit that defense to be heard.
Why It Matters
Carlino is a pointed reminder that collateral estoppel is a doctrine of finality, not of administrative convenience. A litigant who loses a case on standing cannot use that non-merits dismissal as a sword to block the opposing party from raising substantive arguments in follow-on litigation. For practitioners navigating multi-round municipal and land use disputes—common in Chester County and across the Philadelphia collar counties—the decision confirms that prior standing dismissals should not be treated as preclusive on any issue, no matter how prominently the issue was briefed in the earlier case.
The court’s footnote also signals judicial impatience: this case has appeared before the Commonwealth Court multiple times over a decade of contentious litigation, and the panel “strongly encourage[d] the parties and the trial court to expedite the proceedings on remand.” That signal carries practical weight—parties in protracted municipal litigation should be prepared for courts to scrutinize delay and push for resolution on the merits.