JACQUELYN “JACKIE” LACEY, et al., Plaintiffs, v. STATE FARM GENERAL INSURANCE CO., Defendant Case No. CV 24-5205 FMO (MAAx) United States District Court, C.D. California Filed May 06, 2025 Wilner, Michael R., Special Master ORDER OF SPECIAL MASTER IMPOSING NON-MONETARY SANCTIONS AND AWARDING COSTS SUMMARY OF RULING 1. The attorneys representing Plaintiff in this civil action submitted briefs to the Special Master[1] that contained bogus Al-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. 2. 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 3. 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. (Docket # 70, 73.) 4. 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 5. 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.[2] The lawyers' declarations ultimately made clear that the source of this problem was the inappropriate use of, and reliance on, AI tools. 6. 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).[3] 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. 7. 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. 8. 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.[4] 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.” 9. 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. 10. I subsequently set the matter for a hearing on the OSC. My April 20 order gave the parties notice of the specific types of sanctions and fee-shifting awards that I was considering based on Federal Rule of Civil Procedure 11 and 37, along with my inherent (and Court-delegated) authority. Plaintiff's lawyers responded to the OSC and addressed me during our recent hearing. I also received a submission from the defense estimating the cost of the preparation of their brief on the privilege issue. This order follows. RELEVANT LEGAL AUTHORITY 11. The district court's order appointing me as Special Master authorized me to “take all appropriate measures to perform the assigned duties fairly and efficiently.” I possess the Court's authority to “regulate all proceedings” before me pursuant to the Federal Rules of Civil Procedure. This expressly includes the ability to impose “any noncontempt sanction provided by Rule 37” or other authority. (Docket # 70.) 12. 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.” 13. 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). 14. 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.” Roadway Express, Inc. v. Piper, 447 U.S. 752, 766 (1980). 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.” Chambers v. NASCO, Inc., 501 U.S. 32, 46-47 (1991). 15. 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. Fink v. Gomez, 239 F.3d 989, 994 (9th Cir. 2001); Rocha v. Fiedler, 2025 WL 1219007 at *1 (9th Cir. Apr. 28, 2025) (same standard under Fed. R. Bankr. P. 9011); Arrowhead Capital Finance, Ltd. v. Picturepro, LLC, 2023 WL 109722 at *2 (9th Cir. Jan. 5, 2023) (same; affirming discovery sanction award). 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.” Fink, 239 F.3d at 994. 16. With greater frequency, courts are now regularly evaluating the conduct of lawyers and pro se litigants who improperly use AI in submissions to judges. Whether that conduct supports the imposition of various types of sanctions requires a fact- and circumstance-specific analysis. See, e.g., United States v. Hayes, __ F.Supp.3d __, 2025 WL 235531 at *10-15 (E.D. Cal. Jan 17, 2025) (sanctioning criminal defense lawyer for using AI; when questioned by the court, the lawyer's response about the source of inaccurate legal citations “was not accurate and was misleading”); Saxena v. Martinez-Hernandez, 2025 WL 1194003 at *2 and n.5 (D. Nev. April 23, 2025) (“Saxena's use of AI generated cases – and his subsequent refusal to accept responsibility for doing so – is just another example of Saxena's abusive litigation tactics, and further explains why the court issued case-terminating sanctions”) (collecting cases); United States v. Cohen, 724 F.Supp.3d 251, 254, 259 (S.D.N.Y 2024) (declining to find bad faith where defense lawyer voluntarily disclosed that she “had been ‘unable to verify’ ” false citations in colleague's brief and lawyer acknowledged that he “would have withdrawn the [fake] citations immediately if given the opportunity”). ANALYSIS 17. I conclude that the lawyers involved in filing the Original and Revised Briefs collectively acted in a manner that was tantamount to bad faith. Fink, 239 F.3d at 994. 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. 18. 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. Cohen, 724 F.Supp.3d at 259. 19. 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. 20. 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.” Fed. R. Civ. P. 11(c)(4). 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.[5] 21. 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. (Docket # 70 at ¶ 7.) 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. 22. 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. (Fed. R. Civ. P. 37(a)(5)(B).) 23. 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.[6] 24. 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. 25. 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. Footnotes [1] Hon. Michael R. Wilner, former United States Magistrate Judge for the Central District of California. [2] 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. [3] 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. [4] Copies of the Original Brief and the Revised Brief (identified as Versions 1 and 3 in my initial OSC) are attached in the Appendix. I've marked the bogus citations in both briefs in red. I noted that there was an intervening iteration of the brief submitted to me that contained the bogus AI research and an odd typographical error in one of the challenged citations. I don't understand the significance of that additional submission, but I don't believe that it adds much to the sanctions analysis. [5] 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. [6] 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. APPENDIX OF MATERIALS 1. Special Master's Order to Show Cause re: Sanctions (April 15, 2025). 2. Special Master's Notice of Intended Sanctions and Fee Orders (April 20, 2025). 3. Plaintiff's Brief in Support of Obtaining Relevant, Non-Privileged Documents from Defendant (Original Brief, as marked by Special Master) (filed April 14, 2025). 4. Plaintiff's Brief in Support of Obtaining Relevant, Non-Privileged Documents from Defendant (Revised Brief, as marked by Special Master) (filed April 14, 2025). 5. E-mail transmitting Revised Brief to Special Master (April 14, 2025). 6. Declaration of Trent Copeland (filed April 18, 2025) plus a version of the AI outline sent to K&L Gates (referenced in declaration, received separately). 7. Declaration of Ryan Keech (filed April 18, 2025). 8. Declaration of Keian Vahedy (filed April 18, 2025). 9. Plaintiff's Response to Special Master's Notice of Intended Sanctions and Fee Orders.