"Large Libel Model" Lawsuit Against OpenAI Headed Back to Georgia Court

OpenAI tried to remove Mark Walters' lawsuit to federal court, but has now withdrawn that attempt.

In Walters v. OpenAI, LLC, plaintiff sued OpenAI after it hallucinated false statements about him (in response to a query by a third party). Plaintiff sued in Georgia state court, and OpenAI removed the case to federal court, on the theory that it was a lawsuit between citizens of different states and involved at least $75,000 in potential damages (so-called "diversity jurisdiction"). But OpenAI, LLC is a "limited liability company," and under federal law an LLC is the citizen of all the states where its members (i.e., co-owners) are citizens; and if the members are LLCs, then the LLC is the citizen of all the states where its members' members are citizens, and so on, indefinitely.

OpenAI therefore had to file a declaration discussing the citizenship of its members, which it did. But Judge Michael L. Brown (N.D. Ga.) concluded that wasn't enough:

Defendant still has not shown the Court has diversity jurisdiction because it has not yet established the citizenship of OpenAI Holdings, LLC and Aestas Management Company, LLC (both of which are entities in Defendant's membership structure). Defendant claims (1) OpenAI Holdings, LLC has "[m]embers who are citizens of California and Michigan, or are citizens of other countries"; and (2) "Aestas Management Company, LLC's members are citizens of Alaska, Arizona, California, Colorado, Connecticut, the District of Columbia, Delaware, Florida, Illinois, Massachusetts, Maryland, Michigan, North Dakota, New Jersey, Nevada, New York, Oregon, Pennsylvania, Texas, Virginia and Washington, or are citizens of other countries, but not Georgia." These allegations are insufficient.

Defendant must affirmatively identify by name each member of an LLC and then allege whatever specific facts are necessary to establish the citizenship of that member. The Court will give Defendant one last chance to do so. Defendant must file, no later than October 6, 2023, a single consolidated document showing the Court has subject matter jurisdiction over this action. Failure to do so will result in remand [to state court].

Friday, OpenAI responded:

OpenAI withdraws its notice of removal, as OpenAI is not in a position to provide further information beyond its prior filings.

The case will thus proceed back in Georgia state court (presumably based on the First Amended Complaint), though the federal court will presumably continue to hear Walters' motion for $8400 in attorney fees based on OpenAI's unsuccessful attempt to remove the case to federal court. (The legal standard for an award of attorney fees after a remand following an unsuccessful attempt to remove a case to federal court turns on whether "the removing party lacked an objectively reasonable basis for seeking removal.")

For more on the substantive issue—when can AI companies be sued for libel based on the output of their programs—see Large Libel Models? Liability for AI Output.