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OpenAI tried to remove Mark Walters' lawsuit to federal court, but has now withdrawn that attempt.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

Comments

[DaveM]

This sounds rather ominous from a PR standpoint. You have an LLC for a company named "OpenAI" but you don't want to risk even saying who your members are to the court? I'm trying to come up with a positive way to look at this, but so far every rationale looks evil.

[David Nieporent]

You may be overreading this. The issue might merely be that they literally don't know the answer to the question. It's not the membership of OpenAI LLC that wasn't being disclosed; it's the membership of OpenAI Holdings, LLC and Aestas Management Company, LLC, neither of which are the clients of OpenAI's lawyers.

[loki13]

It’s even more than that.

Let’s assume, for a second, that they could get the membership of those LLCs. But what if there are LLCs that are members of those LLCs?

It could be LLCs all the way down.

(I kid, kind of, but with these kinds of entities you have to keep digging, and you only need one of them to say, “Naw, we’re not talking.”)

[Andrew Dhuey]

It'd probably be wise for the defendant to send an $8,400 check to the plaintiff for attorney's fees. Fighting that bill has more downside than just incurring more of their own fees.

[David Welker]

$8400 is chump change for a company like OpenAI.

[ReaderY]

Don’t the movants have to show that the removing party lacked an objectively reasonable basis for removal? And how can they show this if they can’t prove that there was a lack of diversity of citizenship?

[ReaderY]

I am skeptical the case warrants sanctions. Other courts had accepted a declaratory affidavit regarding diversity ownership similar to the one OpenAI jnitially provided in this case, without requiring the additional evidence that the district judge subsequently demanded. For this reason, OpenAI had a good-faith reason to believe that its evidence of diversity would be accepted. I think this satisfies the reasonable basis for removal requirement.

[Roger S]

The case should be dismissed from whatever court it is in. Of course ChatGPT hallucinates. It was designed to. No one has been damaged. ChatGPT is just a computer program.

[Champion]

I will say that for me, the use of AI has always been something incredible, I could not even imagine that we would be able to create it and integrate it into society in such a short period of time, even in this form. To put it in more detail, I used it only in my studies, which was very cool, but after go to this site, I realized that I didn't need that AI at all. And looking at this whole situation, I can't even understand how I used it at all. But as for me, the average user doesn't care, because the main thing is that it gives results, and everything else is an appendage.