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

ADVISORY COMMITTEE ON PROFESSIONAL ETHICS

Appointed by the New Jersey Supreme Court

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.

        See, e.g., Westinghouse Elec. Corp. v. Gulf Oil Corp., 588 F.2d 221, 225 (7th Cir. 1978).

Id. at 474.

    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.

    On the other hand, we can appreciate that there will arise workers' compensation claims, which result from accidents occurring after the attorney had terminated his representation of the municipality, which have no relationship to any prior claim, accident or conditions of health or employment and as to which confidential information previously obtained by the attorney will not be relevant. In such matters, there will be no disqualification.
    Each claim must be carefully reviewed. To paraphrase the language of the Supreme Court in the Reardon case supra, at 471. - If there is any doubt as to the propriety of an attorney representing a compensation claimant against the municipality which he formerly represented, such doubt must be resolved in favor of disqualification. See our Opinion 205, 94 N.J.L.J. 451 (1971),and Opinion 211, 94 N.J.L.J. 483 (1971) in which the question here presented has been discussed.

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