Law firm pays $55K after AI created fake legal citations

A large U.S. law firm has apologized to a federal bankruptcy judge after submitting court filings containing fabricated AI-generated citations and legal authorities. Gordon Rees Scully Mansukhani, an 1,800-lawyer firm, told the court it was “profoundly embarrassed” by the incident and has agreed to pay over $55,000 in legal fees to cover the fallout from the AI errors.

What happened: The firm’s lawyer, Cassie Preston, submitted filings in an Alabama hospital bankruptcy case that contained what the judge called “pervasive inaccurate, misleading, and fabricated citations, quotations, and representations of legal authority.”

• Jackson Hospital & Clinic and its bankruptcy lender first flagged the potentially AI-generated content in August, noting fabricated and mis-paraphrased material in Progressive Perfusion’s filing.
• When U.S. Bankruptcy Judge Christopher Hawkins asked Preston directly if AI was used, she initially said no but then withdrew the filing.
• Preston later admitted she “did not personally use generative AI to prepare the filing” but “was aware that generative AI was used.”

The financial impact: Gordon Rees has reached agreements to compensate affected parties for the additional legal work caused by the AI errors.

• The firm will pay more than $35,000 in attorneys’ fees to the bankruptcy lender.
• An additional $20,000 in legal fees will go to the debtors’ lawyers.
• The firm has indicated it will accept any additional sanctions the court imposes.

What they’re saying: Preston acknowledged taking on excessive work during difficult personal circumstances, while her client’s lawyer expressed concern about reputational damage.

• “She had taken on more work than she could reasonably do under the strain of difficult personal circumstances,” Preston said in her filing.
• Joel Connally, representing Progressive Perfusion, said he is concerned the firm’s actions “have damaged my client’s position with Jackson and those investing in its continued operations.”

The bigger picture: This case represents the latest example of AI-related legal ethics violations plaguing law firms nationwide, as attorneys struggle to properly vet AI-generated content.

• Lawyers across the country, at firms of all sizes, have faced sanctions and harsh warnings for not adequately reviewing AI output before submission.
• Gordon Rees joins a growing list of large law firms forced to explain AI misuse in court proceedings.

Policy changes: The firm has implemented new safeguards to prevent future AI-related errors.

• Gordon Rees has updated its AI policies and created new education and training programs on AI risks.
• The firm has established a new “cite checking policy” specifically designed to catch AI-generated inaccuracies.
• Both Preston and another Gordon Rees lawyer have withdrawn from the bankruptcy case.