Hallucinations (and Alleged Lack of Candor About Them) in Federal Appellate Briefing

From McCarthy v. U.S. DEA, decided yesterday by Third Circuit Judge Cindy Chung, joined by Judges Peter Phipps and Jane Roth:

McCarthy is a physician assistant who held a DEA COR [Certificate Of Registration] allowing him to prescribe Schedule II through V controlled substances. McCarthy prescribed controlled substances despite the fact that he was not being supervised by a physician with whom he had a written agreement as required by Pennsylvania law. In response to his conduct, on April 21, 2023, the DEA issued McCarthy an Order to Show Cause why his continued registration was not inconsistent with the public interest. [Factual details omitted. -EV]

McCarthy … argues that the Administrator's decision to revoke his COR was arbitrary and capricious or an abuse of discretion…. To make this point, McCarthy primarily relies on "summaries" of eight DEA adjudications. McCarthy's counsel now acknowledges that seven of these summaries were inaccurate, that the eighth decision does not exist, and that the summaries and non-existent decision were all generated by Artificial Intelligence (AI). McCarthy's counsel further acknowledges that he never took care to confirm the accuracy of the summaries or even that the decisions existed. {We ordered McCarthy's counsel to provide the cases to the Court and explain if and how he verified the accuracy of his summaries. In his response, McCarthy's counsel acknowledged that he knew that he had submitted erroneous summaries and a non-existent case to this Court long before the filing of his response. We are separately ordering McCarthy's counsel to show cause why he should not be sanctioned for his conduct, particularly for his lack of candor to the Court.}

Accordingly, we will not consider this portion of his brief. {McCarthy's counsel also concedes that the Government has successfully rebutted the eight summaries. This provides us with another reason not to consider this portion of the brief.} …

Here's the order to show cause, which requires McCarthy's lawyer "to show cause why he should not be sanctioned for his conduct with respect to the briefing in this case, specifically with regard to his lack of candor to the Court":

See ECF 45-1 (explaining that Counsel "confirmed" that text had been generated by AI in February and that "it first occurred" to Counsel "[i]n mid-February 2025" that certain case descriptions had been generated by AI); id. (first informing this Court of that belief on May 19, 2025 and only after prompting from this Court). In particular, Counsel shall address whether he violated his duty of candor to the Court in filing his Reply Brief where he (1) represented that his Opening Brief was "a good faith effort to chronicle Agency disparities," while never having read said decisions; (2) minimized the inaccurate summaries as "immaterial misstatements about the cited cases' tangential details," while having never read said decisions; and (3) failed to correct his misstatements and to disclose that one case did not exist. Reply Br. 14.

Additionally, Counsel shall address his failure to self-disclose to the Court, prior to the Court's letter, the inaccuracy and non-existence of cases cited. Counsel is advised that the Court is considering imposing discipline in the form of monetary sanctions. Counsel shall file his response within 10 days of the date of this order. Within 10 days of the date of this order, Counsel may file an application requesting to appear before the panel in person. If he does so, the panel will schedule a hearing. This panel may also refer this matter to the Standing Committee on Attorney Discipline.

And from the lawyer's response, also filed yesterday, which seems to me about as effective and professional an apology and response as possible given the circumstances (recognizing of course that there would have been much less to apologize for if the lawyer had promptly acknowledged the error):

At the outset, undersigned counsel recognizes he is subject to discipline under [the] rules set forth in this Court's Order to Show Cause dated July 21, 2025 …. Counsel readily concedes that the aforementioned Rules governing conduct and enforcement are applicable under the circumstances before the Court.

As represented in the Response to the Order to Show Cause, it was in mid-February 2025, that your undersigned came to believe with reasonable certainty that the citations and case descriptions made in the Opening Brief, as supplied by the client, were likely supplied by Artificial Intelligence ("AI").

Even still, undersigned counsel did not submit a corrective filing to address the inaccurate authority.

DUTY OF CANDOR – RECOGNITION AND REMEDIATION

REPRESENTATION MADE IN OPENING BRIEF AND REPLY BRIEF.

In undersigned counsel's Reply Brief it was represented that he was making a good faith effort to chronicle Agency disparities. This Reply Brief was filed on February 06, 2025.

As stated in the Response to the Text Order, Attorney Pallen [the undersigned counsel] did receive content from his client which was generated so rapidly that it caused your undersigned to directly question the client about his use of AI. It was not until a few days later in mid-February 2025, that your undersigned conclusively deduced that the citations and case descriptions made in the Opening Brief, as supplied by the client, were likely supplied by Artificial Intelligence ("AI"). It is also true that from mid-February until this Court's prompting by way of Text Order dated May 15, 2025, that Attorney Pallen did nothing to remediate the problem or to retract the supplied citations and descriptions.

Pennsylvania Rule of Professional Conduct 3.3 provides that "[a] lawyer shall not knowingly … make a false statement of material fact or law to a tribunal or fail to correct a false statement of material fact or law previously made to the tribunal by the lawyer."

Undersigned counsel, having a career of seventeen (17) years has deep respect for the duty of candor, and even deeper regrets for falling short in this instance. The only nuance here is whether or not counsel knowingly advanced inaccurate and unverified citations. Between the time of the Opening Brief and the Reply Brief, undersigned counsel included citations that had not been properly verified and were later determined to be inaccurate. Your undersigned failed to cross-reference, research deeply, fully read, or even Shepardize™ the authority presented to the panel. After it became clear that the authority shared with him by the client and submitted in the brief was AI generated, counsel failed to retract the citations which were presented without sufficient verification. However, when prompted by this Court, your undersigned readily and immediately took ownership and responsibility of the matter. See e.g. (failing to make a reasonable inquiry under the circumstances admitted by Attorney Pallen).

 

Attorney Pallen failed to verify and independently confirm legal authorities that were later discovered to be inaccurate or fictitious due to lack of oversight, diligence, and professionalism. Once it became clear that the citations were fictitious and/or materially inaccurate, Attorney Pallen made no effort to correct the false statement(s) until prompted by this Court.

Counsel understands that attorneys practicing before this Court have a nondelegable responsibility to ensure that all representations—factual and legal— are accurate, sourced, and made with integrity. In this instance, Attorney Pallen failed to verify certain citations that were included in a draft prepared by his client.

Candor means more than just not lying. It also means not saying things "that are literally true but actually misleading." And it means steering clear of "half-truths, inconsistencies, mischaracterizations, exaggerations, omissions, evasions, and failures to correct known misimpressions created by [the lawyers'] own conduct."

While Counsel did not knowingly or intentionally present false authority, the authority was presented negligently which created the risk of misleading the Court. Counsel takes that risk seriously and deeply regrets the lapse in oversight. Counsel especially regrets his failure to file a retraction once he reasonably suspected the

 

inaccuracy. Undersigned counsel recognizes the Court's justified concerns and fully accepts the consequences that will follow from failing to meet this standard.

MINIMIZATION OF THE INNACURATE SUMMARIES.

Again, undersigned counsel does not contend otherwise - the authority supplied was not vetted, read or researched. Yet, undersigned counsel represented to the Court that the inaccurate summaries were either "immaterial misstatements" or "tangential details" in the Reply Brief.

Counsel now recognizes that his prior characterization of those summaries as immaterial or tangential was misguided. While the constitutional issues were the focus of the appeal, counsel acknowledges that any misstatement—regardless of its weight in the broader argument—warrants forthright correction.

The Appellee's Brief roundly dispensed with the Federal Register citations ad seriatim which had been supplied in the Opening Brief. The Appellee's advocacy, however, does not change that fact that the problematic authority was not properly researched and was described in language that, in retrospect, understated its deficiencies.

The only explanation that Counsel has for minimization is: the constitutional issues in the case were the prime mover on appeal for the Court's consideration. The arbitrary and capricious standard arguments made were the least persuasive aspect of the appeal. If the Court were to have granted relief on the basis of the constitutional issues, the third argument would never have been reached.

FAILURE TO CORRECT MISSTATEMENTS.

The standard set forth in Fusari v. Steinberg, requires that counsel advise the court of developments that may conceivably affect the outcome of a case. "Some Courts seem to have narrowed the duty of candor to require an element of materiality. Those courts have invoked the duty when counsel has failed to inform the court (or belatedly informed the court) of a development that could have a material effect on the outcome of the litigation.

As this Court is aware, counsel did not correct the misstatements prior to May 15, 2025, when there was an opportunity to have done so. Even if DEA Counsel dispensed fully with the mis-cites in Appellee Brief, this was not sufficient reason alone to avoid a retraction. Counsel regrets that this opportunity for retraction came and went; but points to the Court that, at no point after May 15, 2025, did Counsel ever continue to "press on" or suggest that the authority was genuine. Cf. Mata v. Avianca, Inc. (S.D.N.Y. 2023) (individual attorneys were

sanctioned $5,000 each as per Fed. R. Civ. P. 11(b)(2) where they submitted non- existent judicial opinions with fake quotes and citations created by an artificial intelligence tool, then continued to stand by the fake opinions after judicial orders called their existence into question). In contrast, undersigned counsel did not persist in reliance on the problematic authority once its accuracy was questioned by the Court, and has fully cooperated at every stage of this proceeding.

FAILURE TO SELF DISCLOSE PRIOR TO MAY 15, 2025.

Counsel did not correct the misstatements prior to May 15, 2025, when there was an opportunity to have done so. Counsel filed a Reply Brief on February 06, 2025, where he minimized the mis-cites and still had failed even then to properly vet and research the material provided to the Court.

Shortly after the Reply Brief was filed, counsel questioned the client about the content's origin and grew increasingly concerned that AI may have been involved. Although the client maintained that the citations were real, counsel's independent search—including one clearly nonexistent case—deepened his concerns. In hindsight, counsel recognizes that a prompt corrective filing should have been made regardless of that uncertainty.

Attorney Pallen had an opportunity from mid-February to mid-May, 2025 to issue a correction or retraction but did neither. Counsel acknowledges that DEA's Brief highlighted the deficiencies, but this was not a substitute for an affirmative retraction. The Appellee Brief made clear that the authority provided was inaccurate. During that span of time, counsel looked for the one case that did not exist.

 

Meanwhile his client assured him it was an existent case. After that fruitless search and before May 15, 2025, it should have been apparent to undersigned counsel that a written retraction was necessary.

REMEDIAL MEASURES AND ASSURANCE TO THE COURT.

Undersigned counsel has taken this experience as a sobering professional inflection point. This experience has been professionally humbling and has prompted immediate and lasting reforms to Counsel's practice.

Changes have been required to eliminate the possibility of a future scenario where counsel simply accepts draft material as valid. Accordingly, Counsel has now implemented strict protocols requiring full-source validation of every case citation used in any filing, regardless of origin. Every single written submission to this Court or any other will be cross-checked for citations on Lexis-Nexis (counsel's in-house research platform). Any client-prepared, draft material will now be confined to factual chronology or personal narrative only subject to a signed client verification. This means that all legal assertions will be independently sourced and confirmed. Counsel humbly assures the Court that this lapse—while serious and regrettable— will not be repeated here or in any other court or jurisdiction where undersigned practices.

Counsel respectfully requests that the Court consider his prompt response, candor in responding, and remedial actions in determining whether sanctions are necessary. If so, Counsel requests that they may be limited in scope to reaffirm the importance of diligence without impairing his ongoing ability to serve clients and the public.

Counsel is deeply grateful for the Court's attention to this matter and remains committed to honoring the ethical and professional standards required of all attorneys who appear before it. Counsel remains committed to ensuring that this Court and all others can place full confidence in the accuracy and integrity of every filing submitted under his name.

APPLICATION REQUESTING TO APPEAR IN PERSON.

The Order to Show Cause dated July 21, 2025 permits undersigned counsel to file an application requesting to appear before the panel in person. Counsel desires to appear in person and will file the appropriate application by way of separate filing and docket entry….