a legacy of success

Mark D. Schorr

In a 2013 Reddit comment, a would be comedian offered a pizza recipe with a glue topping.  Google AI, which wasn’t in on the joke, scraped the comment from the internet and offered it as a serious culinary tip.  Nobody is going to actually make a glue-topped pizza (we think), but there is plenty of AI-generated content, whose absurdity is not so obvious, that is accepted at face value.  Even by lawyers, who should know better.

An AI hallucination is where a system, usually a large language model, produces information which sounds plausible, but is in actuality fabricated or impossible to verify.  It is a side effect of how the models work on a fundamental level.  That is because they don’t decide what is true, but instead predict what is statistically most likely to come next in a sequence of words.

When the underlying information is missing, weak or ambiguous, the model doesn’t disclose its limitations; it completes the pattern.  The hallucination customarily appears when the inquiry demands a  specific response or the model ventures into areas beyond what its training can reasonably support.

In law school, you learn pretty early on that when you advance a legal proposition, you need to cite an authority to back it up–usually either a judicial or administrative decision, a statute or a regulation.  Even if the authority doesn’t support the proposition for which you cited it, a court or adversary can review the authority, which is publicly available, and point out, to your embarrassment, that you missed the mark.  You’re unlikely to get sanctioned for making a frivolous argument or even a misleading description; the more likely result is that you’ll just lose.

Damian Charlotin, a French lawyer and data scientist, maintains a database that tracks court orders related to hallucinated content world-wide.  As of the date of this writing, he has identified 1393 instances in the US where lawyers and non-lawyers representing themselves have relied on such content.

So what happens when you get caught?  It depends on the jurisdiction and the patience of individuals judges.  One possible result is a sanction under rules governing practice in state and federal courts.  For example, Rule 11, a rule governing civil practice in the federal courts, whose purpose is to deter baseless filings, provides that, by submitting or advocating a position, a lawyer or unrepresented party certifies that, to the best of their knowledge, after reasonable inquiry, the legal contentions are warranted under existing law or not a frivolous plea for an extension or modification of existing law.  So you can see how unverified AI content runs afoul of the rule, which also empowers the court to sanction an offending lawyer.

Here’s how it worked in an otherwise unremarkable contract litigation in a federal court included in Charlotin’s database.  In Withers v. City of Aberdeen, all four attorneys in the case, two on either side, signed legal briefs containing authorities that the court was unable to locate.  Two of the lawyers, one on each side, the ones who actually managed the case, were admitted to practice in other states and not members of the bar of the court in which they were litigating, the United States District Court for the Northern District of Mississippi. They were admitted specially for the case.  The other two were local lawyers.  All admitted using AI in their research without checking the citations resulting from their inquiry.

The two out-of-state lawyers were fined $3500 and $2500.  The were treated differently because the court was skeptical of the explanation of one of them.  Both had their admission revoked and were barred from practice in the court for two years.  The local lawyers, who had signed but not read the pleadings which contained the hallucinated content, were fined $1000 each and disqualified from further participation in the case.  If you’re interested, you can check Charlotin’s database to learn the fate of the hundreds of other offenders.

Ask a model, say Chat GPT, why it admittedly manufactures legal citations and it offers a number of excuses, which appear both reductive and disturbing:  the hallucinated authority is something that looks real based upon a learned pattern; the model is confused by cases with similar names, facts or legal propositions; it feels “pressure” to produce a plausible authority rather than admit it cannot find one; and its training data is limited.  Chat GPT’s advice: verify each citation it generates against an authoritative source.

There is nothing inherently wrong with using AI to draft legal documents.  AI is just the latest phase of the relationship between the practice of law and technology.  It also appears pretty simple to avoid the ethical issues identified by the Mississippi court and others.  As Chat GPT itself suggests, a lawyer need only check to insure that the authorities and propositions they rely upon, whether AI generated or not, are trustworthy.

1 Hallucination Cases, Damian Charlotin, www.damiancharlotin.com/hallucinations (last visited
September 9, 2026).
2 Fed. R. Civ. P. 11(b)(2).
3 Fed. R. Civ. P. 11(c)(1).
4 Civil Action No. 1:24-CV-218-SA-RP (N.D. Miss. June 8, 2026), a case I discovered through
an AI inquiry–and then read.

Mark D. Schorr

Elon Musk likes to talk.  A lot.  Sometimes he does it without thinking through all of the ramifications.  And sometimes, when the public gets wind of what he says, he gets into trouble.  This time over his purchase of Twitter.

In April 2022, Musk signed an agreement to buy Twitter Inc. for $54.20 per share in cash, or about $44 billion in total.  He soon had second thoughts and, in May, he tweeted that the deal was “temporarily on hold.”  In July of the same year, he purported to terminate the deal, alleging that there were too many spam bots, which he claimed constituted 20% of  all Twitter accounts.  Musk accused Twitter of deceiving  him about the scale of the problem.  

There’s no such thing as unilaterally putting a corporate merger “on hold.”  Musk was well aware of the scale of the bot issue, Twitter never deceived him about it, and in any event the deal was not contingent on anything about the bots.  In a suit by Twitter in Delaware whose aim was to compel Musk to go through with the deal, Musk capitulated on the eve of trial and went ahead with the purchase. 

It’s not at all clear what went through Musk’s mind—is that ever clear?—but he later admitted at trial in a securities fraud case filed by unhappy investors:  “If this trial were about whether I wrote stupid tweets, I would plead guilty.”  No one claimed that the tweets weren’t monumentally stupid, but that wasn’t the issue  projected in the lawsuit that arose from his actions.

In October 2022, investors instituted that suit, a class action,¹ in which they alleged that Musk’s tweets had influenced their investment decisions, resulting in losses, all in violation of Rule 10b-5,² which creates a private right of action for securities fraud.  After a three-week trial, a jury agreed with them and found Musk liable for their losses.  The jury did not, however, find that Musk had hatched a scheme to defraud them, which clearly he didn’t.  His actions were the result of his belated conclusion that he was overpaying for Twitter.  So if there was a scheme, the aim was not to cheat investors, but to get a better price than the one he had negotiated, or maybe to get out of the deal altogether.

Lawyers for the plaintiffs estimated that their clients’ damages, to be established in a later proceeding in the case, will amount to about $2.1 billion in trading losses for stockholders and $500 million for option holders.  Musk’s net worth is estimated to be around $676 billion (per Bloomberg) or $852 (per Forbes).  So a verdict of that magnitude won’t put a crimp in his lifestyle.  But it’s still an awful lot of money.

Unsurprisingly, Musk’s lawyers quickly announced that they would file an appeal, which they promised would vindicate their client. But is their expressed confidence misplaced?

Promulgated pursuant to the SEC’s  authority under the Securities Exchange Act of 1934,³ Rule 10b-5 prohibits employing an act or omission that is fraudulent or deceitful in the purchase or sale of securities.  In a landmark 1968 decision, SEC v. Texas Gulf Sulphur Co.⁴, the US Court of Appeals for the Second Circuit ruled that proving a violation of Rule 10b-5 requires establishing five elements:  1) that the defendant made a material representation or omission—meaning a representation or omission the reasonable investor would rely on in making an investment decision; 2) scienter—meaning the defendant acted with the intent to deceive or manipulate; 3) that the representation or omission was in connection with the purchase or sale of a security; 4) reliance by the investor; and 5) a loss.

But can the scienter requirement be satisfied in a case like Musk’s, where the jury concluded there was no attempt to deceive investors?  Another significant decision, Sundstrand Corp. v. Sun Chemical Corp.⁵, answered that question.  The court there found that reckless conduct, which it defined as “an extreme departure from the standards of ordinary care…presenting a danger of misleading investors that is either known or so obvious the actor mush have been aware off it,” satisfies the requirement.  Most other federal courts have adopted this standard or something close to it.

So is the promise of Musk’s lawyer of a reversal of the verdict on appeal going to be fulfilled, or are they just expressing false confidence that they can demonstrate Musk’s conduct was not reckless after all?  We can’t know everything that happened during a three-week trial or what the grounds for an appeal will be.  We do know that Musk himself characterized his tweets as “stupid,” an admission that does not in and of itself create liability, but probably influenced the jury significantly.  

Even more damning, at least to us, is that Musk had to be aware, or it should have been obvious to him, that what he says has the ability to move markets.  Recall that in 2018 Musk and Tesla each paid $20 million to settle an SEC complaint after he had falsely claimed in a tweet that he had secured funding to take Tesla private at a substantial premium to the market price, which jumped by $20, or 6%, within hours of the tweet.  Which is pretty much what he did again, as the jury found. 

1 Pampena v. Musk, Docket No. 3:22-cv-05937 ( N.D. Cal. filed Oct. 10, 2022)
2 17 C.F.R. §240.10b-5
3 15 U.S.C. §78a et seq.
4 401 F.2d 833 (2d Cir. 1968).
5 553 F.2d 1033 (7 th Cir.), cert. den. 434 U.S. 875 (1977).