Wadsworth v. Walmart Inc, 2:23-cv-00118

Plaintiffs' attorneys filed motions in limine supporting arguments with nine cases, eight of which were fictitious and generated by an AI tool ('MX2.law').
The court issued an Order to Show Cause to address potential sanctions for submission of non-existent cases.
The involved attorneys included Mr. Rudwin Ayala (drafter and user of AI tool), Mr. T. Michael Morgan (supervisor), and Ms. Taly Goody (local counsel); all appeared as signatories to the defective filing.
Upon discovery, Plaintiffs withdrew the offending motions, admitted error, and implemented remedial measures, including compensating opposing counsel’s fees and instituting safeguards against future occurrences.
The defendants highlighted the use of AI and the existence of hallucinated case law, prompting the court’s intervention under Fed. R. Civ. P. 11.
The court considered both the attorneys' good faith remediation and the broader need to deter future litigation abuse arising from misuse of generative AI in legal filings.

Issue	Plaintiffs' Argument	Defendants' Argument	Held
Whether citing AI-generated fake cases in court filings violates Rule 11	Plausibly inadvertent; attorneys acted in good faith, took responsibility, and remediated	Citing fake cases is objectively unreasonable and harms the justice process	Violation of Rule 11; sanctions warranted
Whether failure of supervising/local counsel to review filings excuses liability	Relied on trusted attorney’s experience and reputation; lack of direct involvement	All signatories are responsible for ensuring filings are supported by existing law	No excuse; nondelegable duty; all signatories sanctioned
Appropriate scope of sanctions for attorneys involved	Prompt remediation should mitigate punishment; honesty and transparency noted	Stronger deterrence required due to potential for widespread abuse and public harm	Pro hac vice revoked (Ayala); monetary fines for all
Whether law firms should also be sanctioned for employees’ conduct	Implemented safeguards and policies post-incident	Institutional responsibility ordinarily attaches	No law firm sanctions due to prompt corrective measures

Bus. Guides, Inc. v. Chromatic Commc’ns Enters., Inc., 498 U.S. 533 (U.S. 1991) (signing attorney must conduct reasonable inquiry and vouch for law and facts cited)
Pavelic & LeFlore v. Marvel Ent. Grp., 493 U.S. 120 (U.S. 1989) (responsibility under Rule 11 for signatories is nondelegable)
Adamson v. Bowen, 855 F.2d 668 (10th Cir. 1988) (trial court must find a violation and then impose appropriate sanction under Rule 11)
Collins v. Daniels, 916 F.3d 1302 (10th Cir. 2019) (sanctions decisions reviewed for abuse of discretion)
White v. Gen. Motors Corp., 908 F.2d 675 (10th Cir. 1990) (identifies multiple purposes of Rule 11 sanctions and standards for their imposition)