AI Hallucinated Case Citations Prompt Sanctions And Delay Class Action Settlement

Duane Morris Takeaways: On November 20, 2025, in Buchanan v. Vuori, Inc., No. 5:23-CV-01121 (N.D. Cal. Nov. 20, 2025), Magistrate Judge Nathanael M. Cousins of the U.S. District Court for the Northern District of California imposed sanctions on plaintiff's counsel for using artificial intelligence to generate case law citations in a motion for preliminary approval of a wage and hour collective action settlement. The sanctions included an order directing plaintiff's counsel to pay $250 to the clerk of court, striking the motion without leave to refile, and referring plaintiff's counsel to the Court's Standing Committee on Professional Conduct. Importantly, because of the sanctions, Magistrate Judge Cousins found plaintiff's counsel to be an inadequate representative of the class and precluded plaintiff's counsel from filing an additional motion for approval of the class settlement. This required defense counsel to file a case management statement requesting a stipulation of dismissal that was approved on January 8, 2026. Plaintiff's counsel's use of AI ultimately delayed final disposition of the action until months later and underscores the growing trend of judicial commitment to accountability with respect to attorney use of AI in drafting legal filings.

Case Background

On March 14, 2023, a former Vuori, Inc. ("Vuori") employee, Terrence Buchanan, sued Vuori, alleging that it had violated the Fair Labor Standards Act (FLSA) and various California Labor Codes by miscalculating the overtime paid to their employees by failing to include commissions or bonuses in calculating overtime. See Case No. 5:23-cv-01121, ECF No. 1. Eventually, the parties settled the litigation.

On October 3, 2025, after a first try for settlement approval failed, counsel for Plaintiff filed a second motion for preliminary approval of a collective action settlement (ECF No. 81) followed by a corrected motion on October 28, 2025 (ECF No. 89). Upon review of the corrected motion, the Court found that the memorandum in support of the motion included 8 quotations "supposedly attributable to a real case" that did not actually appear in the cited case and "one nonexistent case." See ECF No. 96, at 1. On November 5, 2025, the Court ordered plaintiff's counsel to show cause as to why he should not be sanctioned pursuant to Federal Rule of Civil Procedure 11(c) and referred to the Court's Standing Committee on Professional Conduct under Civil Local Rule 11-6 for providing fabricated case law to the Court. Plaintiff's counsel filed a response and proof of service that he provided the Court's order to show cause to his client. See ECF Nos. 92, 93. He also filed a supplemental response. See ECF No. 94. The Court held a hearing on the order to show cause on November 19, 2025, at which counsel and plaintiff Buchanan appeared. See ECF No. 96, 1-2.

Order Imposing Sanctions And Finding Class Counsel Is Therefore Inadequate

Magistrate Judge Cousins ordered sanctions by way of payment of $250 to the clerk of court pursuant to Federal Rule of Civil Procedure 11(c), referred Plaintiff's counsel to the Standing Committee on Professional Conduct pursuant to Civil Local Rule 11-6, and ordered that the motions for preliminary approval be stricken without leave to refile.

In support of this decision, Magistrate Judge Cousins explained that "the rise in non-existent cases and quotations hallucinated by artificial intelligence tools" is of "particular concern." ECF No. 96 at 3. He noted that Plaintiff's counsel "acknowledge[d] without reservation" that his motion "contained one non-existent case citation." ECF No. 92, at 3 (citing ECF No. 92 at 2). Plaintiff's counsel also admitted to using about six different AI tools to prepare his motion "[a]s a solo practitioner under time pressure" and that he used the tools to check one another. Id. at 3-4. The Court noted that the corrected memorandum of law in support of the second motion for preliminary approval, did not correct the false case law hallucinated by the AI tools. Id. at 4. The Court made clear that the intentions of Plaintiff's counsel were irrelevant and that his use of AI which "led him to submit a hallucinated case to the Court through his motion" and failure to conduct a reasonable inquiry into the law cited in his motion violated Rule 11(b) and Local Rule 11-4. Id. at 4-5. Specifically, the Court found that Plaintiff's counsel violated his duty of candor owed to the tribunal under California Rule of Professional Conduct 3.3 by citing nonexistent cases and quotations to the Court and certifying "via signature that he had conducted reasonable inquiry into these citations when he had not." Id. at 5.

Though Plaintiff's counsel offered to forfeit attorneys' fees in the matter, to file an amended motion certifying that he verified all citations, and to complete continuing legal education, the Court declined his suggested sanctions and instead ordered that: (1) plaintiffs' second motion for preliminary approval of a class action settlement and corrected motion be stricken with prejudice; (2) Plaintiff's counsel pay the clerk of court $250 by December 5, 2025; and (3) Plaintiff's counsel be referred to the Court's Standing Committee on Professional Conduct in connection with his violation of Local Rule 11-4 and unprofessional conduct. As to the third remedial measure, the Standing Committee has authority to conduct further investigation or impose additional discipline, such as continuing legal education or notification of the state bar as it deems necessary and appropriate. Magistrate Judge Cousins added that it was the Court's "hope" that "the experience with the Standing Committee also proves constructive for Plaintiff's counsel, who attests that he is a very busy sole practitioner who faces various logistical constraints." See ECF No. 96 at 6.

Finally, and notably, the Court found that striking plaintiff's motion for settlement approval "necessarily raises the questions" of whether Plaintiff's counsel could adequately represent the class through final approval of settlement. The Court found that Plaintiff's counsel could not file an amended motion for preliminary approval of the class settlement because "it does not find that he is adequate class counsel, which would prevent the Court from approving a renewed motion for settlement approval." See ECF No. 96, at 7.

Delay Of Final Disposition Due To Sanctions And Inadequate Class Representative Finding

On December 5, 2025, the Court docketed and acknowledged receipt of counsel's payment of $250 to the clerk of court. See ECF No. 98. As Magistrate Judge Cousins found Plaintiff's counsel to be an inadequate class representative and therefore prohibited him from filing further motions to approve the class action settlement, on January 7, 2026, counsel for Vuori was required to file a case management statement to get final disposition of the action and setting out Vuori's position that the parties signed a settlement agreement containing "a general release of Plaintiff's claims against Defendant" and, per the terms of that agreement, "Plaintiff was obligated to dismiss this action with prejudice no later than December 31, 2025." See ECF No. 100, at 2. To that end, counsel for Vuori requested that "Plaintiff immediately dismiss this action with prejudice." Id. On that same day, Plaintiff's counsel filed a Stipulation of Dismissal with the Court. See ECF No. 101. On January 8, 2026, the Court granted the stipulation of dismissal with prejudice by order signed by Magistrate Judge Cousins. See ECF No. 102.

Implications For Companies

This order is unprecedented. The implications of the sanctions order and the aftermath of the order is two-fold. First, employers and companies should review class counsel's filings scrupulously by noting any citations or quotations that seem incorrect and AI-generated as this may build a case for disqualifying class counsel and may prove as a barrier to getting approval of a class settlement agreement. Second, employers and companies must be diligent in ensuring that in-house and outside counsel alike use human verification in connection with the use of any AI tool when drafting court filings to ensure that all case law citations and quotations have been independently verified by an attorney prior to filing such information with a court to avoid similar deleterious consequences.

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