Lawyer’s Repeated Filings with AI Hallucinations Lead to Default Judgment Against Client

From Flycatcher Corp. Ltd v. Affable Avenue LLC, decided yesterday by Judge Katherine Polk Failla (S.D.N.Y.):

Mr. Feldman was not dissuaded by Court orders or the threat of sanctions from filing unchecked, AI-generated submissions with false legal citations. And when given the opportunity to explain his conduct in person, Mr. Feldman chose to give many answers, only a few of which were true. The Court has reviewed the options available to it and, in particular, has carefully considered whether a lesser sanction would suffice.

It also wishes to be clear that its problems with Affable’s submissions are not the use of AI per se, but rather Mr. Feldman’s (i) knowing decision to use flawed methods of legal research and cite-checking; (ii) his inexplicable refusal to verify his submissions before filing them with the Court; and (iii) his unwillingness to come clean once these issues were revealed to the Court. Ultimately, the length and breadth of Mr. Feldman’s misconduct warrant terminal sanctions….

Mr. Feldman violated Rule 11 repeatedly and brazenly, despite multiple warnings from the Court and fellow counsel. In his motion to dismiss brief, Mr. Feldman submitted documents containing fake cases and misattributed quotes hallucinated by AI. Then, when the Court called him out for this behavior and ordered him to show cause why it should not sanction him for misusing AI in violation of Rule 11, he relied on AI to draft the Response.

The Court can forgive the abrupt shift in tone and the irrelevant historical references; what it cannot forgive is Mr. Feldman’s inclusion of another faulty citation and his persistent failure to verify his citations. And as further proof that he had learned nothing from his interactions with the Court, Mr. Feldman spontaneously submitted a proposed reply brief containing yet another nonexistent case while awaiting a hearing on the Order to Show Cause.

The Court put Mr. Feldman on notice that it believed his conduct violated Rule 11 and that it was considering “a range of sanctions against him,” including default judgment. But at no point did the Court’s warnings deter him; he continued to submit fake cases and erroneous citations to the Court. Even when confronted with pointed questioning from the Court during the sanctions conference, he remained unable to accept full responsibility and admit his mistakes.

The Court finds that Mr. Feldman’s AI misuse resulting in erroneous citations, exacerbated by his insouciant approach to cite-checking, was done in bad faith. He knew, or consciously avoided learning, that the cases he cited were not “warranted by existing law,” Fed. R. Civ. P. 11(b)(2), or “legally tenable.” In particular, the Court finds that Mr. Feldman either knew or was aware of the high probability that using AI as he did would generate faulty citations. The Court determines that he knew of this risk when writing his motion to dismiss brief. And the Court explicitly told him of this risk before he submitted his Response and reply brief.

The Court recognizes that the imposition of terminal sanctions is an extraordinary step. It is not one the Court takes lightly or eagerly. But Mr. Feldman’s repeated misdeeds were themselves extraordinary. The Court has weighed the five factors relevant when considering terminal sanctions. It has already explained that Mr. Feldman’s “misconduct was the product of intentional bad faith.” This misconduct “prejudiced” the Court and other parties to the case, who have all expended significant resources investigating and responding to Mr. Feldman’s faulty submissions. This “misbehavior” was a “pattern.”

Indeed, the most remarkable element of Mr. Feldman’s misconduct — and a significant reason why the Court is defaulting his client — is his continuous pattern of behavior. He kept submitting erroneous citations and kept refusing to check his citations despite ample warning from the Court to do so or face sanctions, and despite his own admission that he had a viable means to access Westlaw and Lexis to conduct a cite check.

Mr. Feldman never “corrected” his “misconduct” either. He claims he did (see Tr. 88 (“I will endeavor to continue to correct [the errors.]”)), but his repeated misbehavior and minimization of responsibility say otherwise. Finally, Mr. Feldman has given the Court every reason to believe that “further misconduct is likely to occur in the future.” He has offered no convincing plan to take ameliorative action. Rather, from the jump he has claimed that he would fix his mistakes, but he never has.

By Mr. Feldman’s own telling, he did not check his citations but instead fed them through AI programs. So even if the Court did credit every word of Mr. Feldman’s explanation of the drafting process of his submissions (and it does not), he would still have violated Rule 11 by submitting cases without reading them…. “At the very least, the duties imposed by Rule 11 require that attorneys read, and thereby confirm the existence and validity of, the legal authorities on which they rely.”

Mr. Feldman claimed to have been pressed for time, but that does not excuse an attorney from his obligations — nor a client from its attorney’s misdeeds, see Link v. Wabash R.R. Co. (1962) (“[E]ach party is deemed bound by the acts of his lawyer-agent” and cannot “avoid the consequences of [its lawyer’s] acts or omissions.”). If Mr. Feldman could not verify a citation, he should not have cited it.

Accordingly, pursuant to Rule 11 and its inherent powers, the Court enters default judgment against Mr. Feldman’s client, Affable, and finds this sanction is “limited to what suffices to deter repetition of the conduct or comparable conduct by others similarly situated.” The assessment of damages will await the disposition of the matter as to the remaining Defendants.

Finally, Mr. MacMull requested leave “to make a fee application pursuant to either a violation of Rule 11(b) and/or 28 U.S.C. [§] 1927.” The Court grants him permission to do so because it has found that Mr. Feldman acted in bad faith, and it agrees that Mr. Feldman has “multiplie[d] the proceedings in [this] case unreasonably and vexatiously,” 28 U.S.C. § 1927….

For the foregoing reasons, the Court SANCTIONS Mr. Feldman by entering default judgment as to his client, Defendant Affable Avenue LLC….