Defendants May Not Enjoin a Suit Alleging They Defrauded the Plaintiffs

Plaintiffs, automobile insurers, sued medical professionals and healthcare entities, alleging a scheme to submit fraudulent personal injury protection (PIP) bills and supporting documentation for services that were not performed or were medically unnecessary. The complaint asserted common-law fraud, violations of the New Jersey Insurance Fraud Prevention Act (IFPA), aiding and abetting fraud, unjust enrichment, and declaratory relief.

While the action was pending, Plaintiffs moved to stay and enjoin related PIP arbitrations. A magistrate judge recommended denial. in State Farm Guaranty Insurance Company v. Tri-County Chiropractic And Rehabilitation Center P.C., Civil Action No. 22-4852, United States District Court, D. New Jersey (September 15, 2026)

After the New Jersey Supreme Court decided Allstate New Jersey Insurance Company v. Carteret Comprehensive Medical Care, P.C., the federal court reopened the case and considered the parties’ supplemental positions on that decision.

LAW

A motion to stay or enjoin arbitration is evaluated under the preliminary-injunction framework. The movant must show:

likelihood of success on the merits;
irreparable harm absent relief;
no substantial harm to other parties;
consistency with the public interest;
 Likelihood of success and irreparable harm are gateway factors;
failure to establish either permits the court to deny relief without reaching the remaining factors.

Because halting pending arbitrations requires affirmative action, the requested relief is mandatory and demands a heightened showing of irreparable harm. Monetary injury ordinarily is not irreparable when damages can provide adequate compensation.

DISCUSSION

Plaintiffs argued that the magistrate judge should have applied New Jersey authority such as Allstate Insurance Co. v. Lopez, mischaracterized the requested injunction as mandatory, and wrongly found no irreparable harm. They maintained that proceeding through numerous PIP arbitrations would fragment the alleged fraud scheme, restrict their ability to present comprehensive defenses or counterclaims, and expose them to allegedly fraudulent awards that could not practically be recovered.

ANALYSIS

The court held that the magistrate judge applied the correct federal preliminary-injunction standard and correctly treated an order halting ongoing arbitrations as mandatory relief. Plaintiffs did show a likelihood of success because an earlier ruling found a prima facie IFPA claim. They nevertheless failed to make the required clear showing of immediate, irreparable injury. The asserted harms—piecemeal proceedings, limited presentation of a broader fraud theory, defense costs, and payment of arbitration awards—were economic and potentially remediable through money damages. Plaintiffs cited no controlling authority showing that recovery would be legally or practically unavailable. Analogous federal precedent likewise held that insurers could contest individual treatments in arbitration and later recoup economic losses. Because irreparable harm was not shown, the court did not need to balance harms or assess the public interest.

Carteret did not alter that result. It held that IFPA claims are not subject to mandatory PIP arbitration, but it did not make all PIP-related disputes nonarbitrable, preclude voluntary arbitration agreements, address whether already-pending arbitrations should be stayed, or establish that monetary damages would be inadequate.

CONCLUSION

The court adopted the report and recommendation in full and denied Plaintiffs’ motion to stay and enjoin all arbitration proceedings. The dispositive point was not Plaintiffs’ likelihood of success, but their failure to prove irreparable harm.

First, Judge Waldor (the Magistrate) applied the correct standard when evaluating Plaintiffs' Motion. As discussed, Courts in this District and Circuit apply the injunctive relief standard when evaluating motions to stay and enjoin arbitration proceedings. A mandatory injunction alters the status quo by commanding a positive act. This USDC has concluded that a plaintiff's request to enjoin arbitration proceedings seeks to order an affirmative act rather than a stay to maintain the status quo and is thus a request for a mandatory injunction.  Where the relief ordered by the preliminary injunction is mandatory the party seeking the injunction must meet a higher standard of showing irreparable harm in the absence of an injunction

Judge Waldor appropriately concluded that Plaintiffs adequately established a likelihood of success on the merits of their claims. As Judge Salas noted in her Opinion resolving Defendants' first motion to dismiss, Plaintiffs established a prima facie case of an IFPA violation.

Judge Waldor appropriately concluded that Plaintiffs have not established irreparable harm. A movant has the burden of establishing a clear showing of immediate irreparable injury. The availability of adequate monetary damages belies a claim of irreparable injury.

Importantly, this Court recently denied an analogous motion to stay and/or enjoin arbitration proceedings on the basis that the plaintiffs failed to establish irreparable harm. The Court rejected the plaintiffs' arguments, reasoning that they could recoup any potential additional economic injury they are exposed to in the parallel arbitrations, and that while they may not be able to present evidence of an alleged fraudulent scheme involving multiple patients, they could make the case that the medical treatment given to specific individual patients was unwarranted or improper.

ORDERED that Plaintiffs' Motion to Stay and Enjoin all Arbitration Proceedings is DENIED.

ZALMA OPINION

Failure of a movant to make a clear showing of immediate irreparable injury defeats the attempt to enjoin the suit by the insurers. Insurance fraud is both a tort and a crime in New Jersey. Insurers are not required to arbitrate dozens if not hundreds of fraudulent arbitrations when, if the insurers were unable to prove the fraud, the defendants could be made whole with damages and was, therefore, not facing irreparable injury by litigating the case with the insurer.