Can a law firm that used to defend a municipality's workers' compensation claims now represent claimants bringing comp claims against that municipality?

Plain-English summary

A law firm had defended a municipality's workers' compensation claims, first through the municipality's insurance carrier from 1970 to 1974 and again, after the municipality became self-insured, through an adjustment bureau from 1976 to 1981. When the bureau's contract expired and a successor firm was selected by competitive bidding, the firm transferred its open defense files in November 1981 and asked whether it could now represent claimants in comp claims against the same municipality.

The Committee began from the proposition that, regardless of who paid the firm, the municipality was the client, and ethical standards forbid an attorney from taking a position adverse to a client's interests. It relied on the New Jersey Supreme Court's decision in Reardon v. Marlayne, Inc., 83 N.J. 460 (1980), which set a three-part test for disqualification on a former client's motion: a prior attorney-client relationship; a substantial relationship (or a reasonable public perception of one) between the present matter and matters worked on before; and access to relevant confidences, which can support a conclusive presumption of knowledge.

Applying that standard, the Committee concluded the answer could not be a flat yes or no but depended on the facts of each comp claim. Because comp practice involves matters like aggravation of pre-existing conditions, increased disability, occupational disease, and hearing loss, the firm could not take any claim whose subject matter bore a substantial relationship to claims it had worked on for the municipality where it had access to information that might adversely affect the municipality. And even where no actual substantial relationship existed, the firm should decline a claimant's representation if the public could reasonably perceive such a relationship.

Currency note

This opinion was issued in 1982, before New Jersey's adoption of the 2004 revisions to the Rules of Professional Conduct, and predates the 1984 replacement of the Disciplinary Rules by the RPCs. The 2004 revisions abolished the freestanding "appearance of impropriety" standard the Committee applied. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Could the firm take any comp claim against its former municipal client?

A: Not categorically. The opinion concluded the firm could not take a claim substantially related to matters it had defended where it had access to harmful information, but did not bar every claim outright.

Q: What test governed the disqualification?

A: The opinion applied the Reardon v. Marlayne three-part test: a prior attorney-client relationship, a substantial relationship (or reasonable public perception of one) to prior matters, and access to relevant confidences.

Q: What if a particular claim was not actually related to the firm's prior work?

A: The opinion held the firm should still decline if the public could reasonably perceive a substantial relationship between the claimant's case and matters the firm had handled for the municipality.

Background and rules framework

The opinion was decided under the duties to a former client and the appearance-of-impropriety standard then governing New Jersey lawyers (DR 4-101 and DR 9-101), before the 1984 adoption of the Rules of Professional Conduct. In current terms the analysis maps onto RPC 1.9 (duties to former clients, including the substantial-relationship test) and RPC 1.6 (protection of client confidences).

Citations and references

Rules of Professional Conduct:

• MR 1.9 / NJ RPC 1.9 (duties to former clients; substantial-relationship test)
• MR 1.6 / NJ RPC 1.6 (confidentiality of information)

Cases:

• Reardon v. Marlayne, Inc., 83 N.J. 460 (1980) (three-part former-client disqualification test)

See also

• NJ ACPE Op. 507: Suing a Client in an Unrelated Action
• NJ ACPE Op. 531: Opposing a Departed Partner's Corporate Client in a Divorce
• NJ ACPE Op. 499: County Utilities Authority and Member Municipality

Source

• Full text (Justia mirror): https://law.justia.com/cases/new-jersey/advisory-committee-on-professional-ethics/2004/acp504-1.html
• Issuing authority: New Jersey Supreme Court Advisory Committee on Professional Ethics, via the NJ Courts Supreme Court Committees page

Original opinion text

Reproduced from a full-text mirror of the official opinion for research purposes. The linked official source controls.

110 N.J.L.J. 397, October 7, 1982

OPINION 504

Action against Municipality on behalf of Workers' Compensation Claimants by Attorneys who formerly handled Defense of such Claims for the Municipality

The basic inquiry presented was:

May a law firm represent workers' compensation claimants against a municipality on whose behalf it had formerly acted as workers' compensation defense counsel at the request of insurance companies or independent adjustment bureaus who no longer provide that coverage?

The inquiring law firm represented the municipality in the defense of workers' compensation claims through the municipality's insurance carrier from 1970 until 1974. From June 1976 until 1981 it again represented the municipality, which had become self-insured, through an adjustment bureau with which the municipality had contracted for the handling of workers' compensation claims. The contract between the municipality and the adjustment bureau expired May 15, 1981. The firm continued to represent the municipality until November 1981 with respect to claims arising prior to May 15, 1981. In November 1981 it sent all pending and open defense files to another law firm which had been selected as a result of competitive bidding to represent the municipality in the defense of workers' compensation claims. The former law firm has submitted the foregoing inquiry.

Regardless of the attorney's employment by an insurance company or an adjustment bureau, the municipality was the client. We start with the proposition that the municipality was the client and ethical standards forbid an attorney taking a position adverse to the interests of the client.

This subject was considered at length by our Supreme Court in Reardon v. Marlayne, Inc., 83 N.J. 460 (1980) which involved a motion to disqualify an attorney which was instituted by his former client. The Court's decision turned on an attorney's duty to protect the confidences of his client, DR 4-101, and to avoid even the appearance of impropriety, DR 9-101. The Court said at 474:

In summary, when a motion to disqualify an attorney is instituted by his former client to enforce the principles that an attorney must protect the confidences of a client and avoid even the appearance of impropriety, the former client must establish the following: (1) a prior attorney-client relationship between the former client and the attorney sought to be disqualified; (2) a substantial relationship or a reasonable perception, from the public's perspective, of a substantial relationship between the subject matter of the present suit and that of cases worked on during the former representation; (3) access to relevant confidences of the former client, which may be proven by other than direct evidence, leading to a conclusive presumption of the attorney's knowledge of such confidences.

The application of the foregoing standard to the present inquiry brings us to the conclusion that the answer cannot be a "yes" or "no", but must depend on the factual situation relating to each worker's compensation claim.

The reason for this result arises from the nature of the workers' compensation practice which involves, for example, such aspects as aggravation or pre-existing conditions, claims for additional compensation due to increased disability, claims for occupational diseases due to exposure to chemicals or carcinogens, or loss of hearing due to exposure to noise over an extended period of time. It is our opinion that the former attorney may not undertake a workers' compensation claim against the municipality with respect to any matter, of which the foregoing are a few examples, in which the subject matter of the claim bears a substantial relationship to claims worked on during the attorney's representation of the municipality and where the attorney had access to any information which might adversely affect it. Even if the subject matter of the claim does not, in fact, bear a substantial relationship to matters worked on during the attorney's representation of the municipality, the attorney nonetheless should decline representation of a claimant if the public could reasonably perceive such a relationship between the claimant's case and matters previously handled for the municipality.