There are few unpublished or published Appellate Division cases dealing with disqualification of defense counsel in workers compensation. The unreported case of Arboleda v. Paychex, 2026 N.J. Super. Unpub. LEXIS 333, No. A-0085-25 (App. Div. February 25, 2026) is therefore worth reviewing by practitioners, employers and insurance professionals.
The case began with a claim petition filed by petitioner Arboleda naming Prop N Spoon as the employer. Because Prop N Spoon had previously entered into a professional employer organization (PEO) agreement with Paychex for purposes of obtaining HR services and workers’ compensation coverage, Prop N Spoon tendered the claim petition to Paychex as well as American Zurich Insurance Company.
The law firm of Goldberg Segalla (hereinafter “the defense firm”) file an answer on October 31, 2024. The answer listed the firm as defense counsel for Prop N Spoon and disputed claims regarding the nature, extent and causation of permanent partial disability. Four days later, the defense firm filed an amended answer clarifying that the firm did not represent Prop N Spoon and denied coverage for this claim. The coverage issue arose because the insurance carrier contended that Prop N Spoon “concealed Arboleda’s employment from Paychex.” Defense counsel made clear in the amended answer that it was only answering on behalf of Paychex as insured by Zurich.
Prop N Spoon then retained new counsel to represent its interests and moved to disqualify the defense firm based on the initial answer which listed defense counsel as representing Prop N Spoon.
The defense counsel argued that Courts Online does not allow counsel to change the identity of the respondent. “One technological issue is that when we file the answer on the court’s on-line system, there is no option to change or delete respondent, i.e. Prop N Spoon, in this claim.” Defense counsel added that the “preliminary answer was to provide notice to the court and the parties of our firm’s involvement while Paychex/Zurich/ESIS completes their investigation. This filing neither established nor intended to establish an attorney-client relationship with Prop N Spoon.” Defense counsel further argued that it promptly filed an amended answer after communicating with Paychex and Zurich about relevant facts regarding employment and coverage. Counsel stressed that it had never provided Prop N Spoon with legal advice.
The Judge of Compensation ruled on the motion finding that the defense firm was disqualified from the case based on a conflict of interest. The Judge directed Zurich and Paychex to retain separate counsel. Defense counsel objected to the disqualification order and objected that the Judge of Compensation made the ruling on the papers without oral argument. Thereafter oral argument took place. The Judge of Compensation specifically cited to N.J.A.C. 12:235-3.5(c) for the proposition that judges have authority to decide such motions on the papers. The Judge of Compensation also took issue with the limitations of Courts Online, stating that manual answers may be filed in the Division of Workers’ Compensation.
An appeal followed, and the Appellate Division held as follows:
- Certain motions such as motions to dismiss for lack of prosecution (N.J.S.A. 34:15-54) and motions to suppress defenses must be listed for hearings with oral argument permitted. All other motions can be disposed of by the Judge of Compensation on the papers.
- The Appellate Division relied on RPC 1.9(a) which provides: “A lawyer who has represented a client in a matter shall not thereafter represent another client in the same . . . matter in which that client’s interest are materially adverse to the interests of the former client unless the former client gives informed consent confirmed in writing.”
The Appellate Division rejected the argument that limitations with Courts Online sometimes result in the need for amended answers such as the one in this case. The Court said, “Moreover, the record lacks evidence that it is normal for workers’ compensation matters to be initiated in the name of one party only to be later corrected by representing an entirely separate and adverse party. Even if it were so, we would not condone it given the clear and plain wording of RPC 1.9(a).”
