AI Hallucination in Filings Involving 14th-Largest U.S. Law Firm Lead to $31K in Sanctions

The judge finds "a collective debacle"—possibly caused, I think, by two firms working together and the communications problems this can cause—though "conclude[s] that additional financial or disciplinary sanctions against the individual attorneys are not warranted."

I should note up front that both of the firms involved (the massive 1700-lawyer national one and the smaller 45-lawyer predominantly California one) have, to my knowledge, excellent reputations, and the error is not at all characteristic of their work. As to the lawyer whose outline apparently started this, the court notes that he "candidly admitted … what happened, and is unreservedly remorseful about it." Likewise, the court adds, "In their declarations and during our recent hearing, [the lawyers'] admissions of responsibility have been full, fair, and sincere. I also accept their real and profuse apologies."

But that I think just shows that all firms, however large and respected, need to be extra careful about having all their submissions thoroughly checked.

From Special Master Michael Wilner's order last week in Lacey v. State Farm Gen. Ins. Co. (C.D. Cal.):

The attorneys representing Plaintiff in this civil action submitted briefs to the Special Master that contained bogus AI-generated research. After additional proceedings and considerable thought, I conclude that an award combining litigation sanctions against Plaintiff and financial payments from the lawyers and law firms is appropriate to address this misconduct.

I also conclude that additional financial or disciplinary sanctions against the individual attorneys are not warranted. This was a collective debacle, and is properly resolved without further jeopardy.

RELEVANT PROCEDURAL AND FACTUAL BACKGROUND

Discovery Proceedings Before the Special Master

In January 2025, the Court appointed me as Special Master in this insurance-related civil action. Central to the reason for my appointment was an ongoing dispute between the parties regarding the insurer's assertion of various privileges in discovery.

After handling intervening legal issues, I met with the parties in early April to discuss the insurer's privilege invocations. The parties provided me with detailed letter briefs regarding the discovery issue in advance of the meeting. When we met, the parties agreed to provide supplemental briefing on a discrete issue regarding the propriety of in camera review of some of the disputed documents.

The Briefs with AI Research

As recounted in detail in orders I issued on April 15 and 20 (attached to the Appendix to this order), Plaintiff's supplemental brief contained numerous false, inaccurate, and misleading legal citations and quotations. According to my after-the-fact review—and supported by the candid declarations of Plaintiff's lawyers—approximately nine of the 27 legal citations in the ten-page brief were incorrect in some way. At least two of the authorities cited do not exist at all. Additionally, several quotations attributed to the cited judicial opinions were phony and did not accurately represent those materials. {Some "pincites" were not correctly reported. While this could certainly impede research and review, I consider those errors to be at the mild end of the AI hallucination spectrum.} The lawyers' declarations ultimately made clear that the source of this problem was the inappropriate use of, and reliance on, AI tools.

Here's an abbreviated summary of the events. Plaintiff is represented by a large team of attorneys at two law firms (a lawyer moved from the Ellis George firm to K&L Gates during the course of the state court litigation underlying the insurance coverage action; the representation in the present case is shared between the two firms). {Although it's necessary to identify some parties involved here, I decline to name-and-shame all of the lawyers in this order. They know who they are, and don't need further notoriety here.} The lawyers admit that Mr. Copeland, an attorney at Ellis George, used various AI tools to generate an "outline" for the supplemental brief. That document contained the problematic legal research.

Mr. Copeland sent the outline to lawyers at K&L Gates. They incorporated the material into the brief. No attorney or staff member at either firm apparently cite-checked or otherwise reviewed that research before filing the brief with the Special Master. Based on the sworn statements of all involved (which I have no reason to doubt), the attorneys at K&L Gates didn't know that Mr. Copeland used AI to prepare the outline; nor did they ask him.

A further wrinkle. During my initial review of Plaintiff's brief, I was unable to confirm the accuracy of two of the authorities that the lawyers cited. I emailed the lawyers shortly after receiving the brief to have them address this anomaly. Later that day, K&L Gates re-submitted the brief without the two incorrect citations—but with the remaining AI-generated problems in the body of the text. An associate attorney sent me an innocuous e-mail thanking me for catching the two errors that were "inadvertently included" in the brief, and confirming that the citations in the Revised Brief had been "addressed and updated."

I didn't discover that Plaintiff's lawyers used AI—and re-submitted the brief with considerably more made-up citations and quotations beyond the two initial errors—until I issued a later OSC soliciting a more detailed explanation. The lawyers' sworn statements and subsequent submission of the actual AI-generated "outline" made clear the series of events that led to the false filings. The declarations also included profuse apologies and honest admissions of fault….

RELEVANT LEGAL AUTHORITY …

Rule 11(b) states, in relevant part, that when an attorney presents "a pleading, written motion, or other paper" to a court, the attorney "certifies that to the best of that person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances [that the] legal contentions are warranted by existing law." Rule 11(c)(3-4) states that a court may impose a sanction "limited to what suffices to deter repetition of the conduct or comparable conduct by others similarly situated." That may include "nonmonetary directives" or "an order directing payment [ ] of part or all of the reasonable attorney's fees and other expenses directly resulting from the violation."

Rule 37(a)(5)(B) states that a court "must, after giving an opportunity to be heard, require [ ] the attorney filing [an unsuccessful discovery] motion [ ] to pay the party or deponent who opposed the motion its reasonable expenses incurred in opposing the motion, including attorney's fees." Litigation-related sanctions (for disobeying a court's discovery order, but generally applicable to other circumstances) may include prohibiting a party from "supporting or opposing designated claims or defenses" or "striking pleadings in whole or in part." Fed. R. Civ. 37(b)(2)(A)(ii-iii).

Separate and apart from sanctions based on these rules, a court has the inherent authority to levy sanctions against a party or attorney for, inter alia, acting in "bad faith" or for otherwise "willfully abus[ing] judicial processes." Sanctions based on a federal court's inherent authority are "both broader and narrower than other means of imposing sanctions" because they encompass "a full range of litigation abuses."

The Ninth Circuit has concluded that such sanctions "are available if the court specifically finds bad faith or conduct tantamount to bad faith" by an attorney. The "tantamount to bad faith" standard includes "a variety of types of willful actions, including recklessness when combined with an additional factor such as frivolousness, harassment, or an improper purpose."

With greater frequency, courts are now regularly evaluating the conduct of lawyers and pro se litigants who improperly use AI in submissions to judges….

ANALYSIS

I conclude that the lawyers involved in filing the Original and Revised Briefs collectively acted in a manner that was tantamount to bad faith. The initial, undisclosed use of AI products to generate the first draft of the brief was flat-out wrong. Even with recent advances, no reasonably competent attorney should out-source research and writing to this technology—particularly without any attempt to verify the accuracy of that material. And sending that material to other lawyers without disclosing its sketchy AI origins realistically put those professionals in harm's way. Mr. Copeland candidly admitted that this is what happened, and is unreservedly remorseful about it.

Yet, the conduct of the lawyers at K&L Gates is also deeply troubling. They failed to check the validity of the research sent to them. As a result, the fake information found its way into the Original Brief that I read. That's bad.

But, when I contacted them and let them know about my concerns regarding a portion of their research, the lawyers' solution was to excise the phony material and submit the Revised Brief—still containing a half-dozen AI errors. Further, even though the lawyers were on notice of a significant problem with the legal research (as flagged by the brief's recipient: the Special Master), there was no disclosure to me about the use of AI. Instead, the e-mail transmitting the new brief merely suggested an inadvertent production error, not improper reliance on technology. Translation: they had the information and the chance to fix this problem, but didn't take it.

I therefore conclude that (a) the initial undisclosed use of AI, (b) the failure to cite-check the Original Brief, and (perhaps most egregiously), (c) the re-submission of the defective Revised Brief without adequate disclosure of the use of AI, taken together, demonstrate reckless conduct with the improper purpose of trying to influence my analysis of the disputed privilege issues. The Ellis George and K&L Gates firms had adequate opportunities—before and after their error had been brought to their attention—to stop this from happening. Their failure to do so justifies measured sanctions under these circumstances.

Those sanctions are as follows. I have struck, and decline to consider, any of the supplemental briefs that Plaintiff submitted on the privilege issue. From this, I decline to award any of the discovery relief (augmenting a privilege log, ordering production of materials, or requiring in camera review of items) that Plaintiff sought in the proceedings that led up to the bogus briefs. I conclude that these non-monetary sanctions will suffice to "deter repetition of the conduct or comparable conduct by others similarly situated." If the undisclosed use of AI and the submission of fake law causes a client to lose a motion or case, lawyers will undoubtedly be deterred from going down that pointless route.

{At our recent hearing, Mr. Copeland movingly asserted that neither he nor his colleagues would engage in similar conduct in the future; exposure of these events was therefore sufficient to deter them from doing this again. I completely agree. But under the Rule, I also have to consider the goal of deterring other members of the legal community. In my estimation, more is required.}

The district judge's order appointing me initially required Defendant to pay the costs of the Special Master. However, that order expressly authorized me to shift fees when I deemed appropriate. It's certainly appropriate here. I've calculated that the fees for dealing with this issue (reviewing the various iterations of the defective briefs, issuing various orders and reviewing the responses, conducting the OSC hearing, and issuing this sanctions order) were approximately $26,100 (including service fees from the provider). Because Defendant advanced those fees to JAMS, Ellis George and K&L Gates are jointly and severally directed to pay that sum to the defense in reimbursement within 30 days.

I also gave serious consideration to ordering Plaintiff's lawyers to compensate the defense for time that Defendant's lawyers spent on their supplemental brief. A shift of fees to the winning party in a discovery motion is authorized and commonplace under Federal Rule of Civil Procedure 37(a)(5), and falls well within the inherent authority of the court to deter this conduct by others in the future. I also easily conclude that Plaintiff's lawyers were not "substantially justified" in using false information in advancing their legal positions on the privilege issue.

However, the amount of fees that the defense attested to (at my request, not theirs) for preparing the brief and attending the recent hearing approached $25,000. I don't have any reason to dispute that sum, but I don't believe that full compensation for the briefing process—one that the defense somewhat eagerly agreed to—isn't necessary for deterrence purposes. In an exercise of discretion, I direct Plaintiff's lawyers to pay the defense a total of $5,000 for fees incurred here.

{I note, but don't ascribe any weight to, Plaintiff's argument that Defendant wasn't prejudiced by the AI debacle because the parties submitted their briefs at the same time. Given the deterrence-based motivation of this sanction order, the serendipity of simultaneous v. sequential briefing is of limited relevance to my consideration of this point.

I'm also not swayed by the observation (in my original OSC, and echoed in Plaintiff's response brief) that, as it turned out, the AI hallucinations weren't too far off the mark in their recitations of the substantive law. That's a pretty weak no-harm, no-foul defense of the conduct here.}

My sanction notice informed the parties that I planned to order the lawyers to inform Plaintiff personally about the substance and outcome of this issue. The lawyers told me at the hearing that they already disclosed this information to their client; that's sufficient for me. I recognize that Mrs. Lacey is clearly not at fault for the AI debacle, but will bear this outcome as a consequence of her lawyers' actions. She will not, however, be financially responsible for the monetary awards described in this order. Those will fall solely on the lawyers and their firms.

In a further exercise of discretion, I decline to order any sanction or penalty against any of the individual lawyers involved here. In their declarations and during our recent hearing, their admissions of responsibility have been full, fair, and sincere. I also accept their real and profuse apologies. Justice would not be served by piling on them for their mistakes.

CONCLUSION

A final note. Directly put, Plaintiff's use of AI affirmatively misled me. I read their brief, was persuaded (or at least intrigued) by the authorities that they cited, and looked up the decisions to learn more about them—only to find that they didn't exist. That's scary. It almost led to the scarier outcome (from my perspective) of including those bogus materials in a judicial order. Strong deterrence is needed to make sure that attorneys don't succumb to this easy shortcut.

For these reasons, Plaintiff's supplemental briefs are struck, and no further discovery relief will be granted on the disputed privilege issue. Additionally, Plaintiff's law firms are ordered (jointly and severally) to pay compensation to the defense in the aggregate amount of $31,100.