Can Arbitrators Sanction Attorneys for AI Hallucinations?

By Leslie King O’Neal

Three Courts Impose Different Sanctions for Fraudulent Filings

In the three cases cited below in footnote 1 (all decided in July 2025), the trial judges imposed different sanctions against counsel for court filings with false citations, factual allegations and quotations.

Monetary Fines Against Attorney & Law Firm

In Eric Coomer Ph.D. v. Michael J. Lindell, et al. (a/k/a the “My Pillow Guy” defamation suit), the judge imposed relatively modest $3,000 fines as Rule 11 sanctions against two attorneys and a law firm for filing an Opposition to a Motion in Limine with nearly thirty defective citations. The errors included: “[M]isquotes of cited cases; misrepresentations of principles of law associated with cited cases, including discussions of legal principles that simply do not appear within such decisions; misstatements regarding whether case law originated from a binding authority such as the United States Court of Appeals for the Tenth Circuit; misattributions of case law to this District; and most egregiously, citation of cases that do not exist.” Because the attorneys didn’t tell the client they were using AI tools, the court didn’t impose sanctions on the client also.

Reprimands & Fines Inadequate

The judge in Frankie Johnson v. Jefferson Dunn, et al. found reprimands and modest fines were inadequate sanctions for fabricating legal authority in court filings. The court stated, “If fines and public embarrassment were effective deterrents, there would not be so many cases to cite.” In a 51-page opinion, the judge described three attorneys’ failure to check AI-generated citations in two separate motions. The attorneys violated their law firm’s internal policies about AI use.

Harm From False Citations

The Johnson court noted the harms such false citations create: “The opposing party wastes time and money in exposing the deception,” and “[t]he client may be deprived of arguments based on authentic judicial precedents.” Further, “There is potential harm to the reputation of judges and courts whose names are falsely invoked as authors of the bogus opinions and to the reputation of a party attributed with fictional conduct. It promotes cynicism about the legal profession and the American judicial system.”

Attorneys Publicly Reprimanded, Disqualified from Case, Referred to Bar for Discipline

Using its “inherent power”[iii] the court imposed three sanctions on the attorneys: (1) a public reprimand paired with a limited publication requirement (providing a copy of the order to clients, opposing counsel and presiding judge in every state or federal case where they are counsel of record), (2) disqualification from further appearing in this case and (3) referral to applicable licensing authorities.

Law Firm Not Sanctioned

The court didn’t sanction the attorneys’ law firm, Butler Snow, stating: “Butler Snow understood the seriousness of these proceedings and responded accordingly. It called these events “unacceptable” and apologized in its initial response, then it expressed similar contrition at every subsequent step. Acting on these sentiments, Butler Snow expended significant time and resources to investigate and remediate these issues through both an internal investigation of citations and a parallel investigation by Morgan Lewis.”

False Citations in Eight Related Cases Garner Severe Sanctions

 In Byoplanet Int’l, Inc. v. Peter Johansson, et al., Plaintiffs’ counsel repeatedly regurgitated “hallucinated” authority in eight separate but related cases, four of which were before the same judge. Plaintiff’s counsel was on notice that his use of AI resulted in hallucinated cases and quotations on April 25, 2025, yet he submitted seven filings to courts after this date that contained hallucinated cases and fabricated quotations, including in a response to an order to show cause regarding his use of AI to generate hallucinated cases and quotations.

Continued Use of Hallucinated Cases & Citations is Bad Faith

The court found the attorney’s conduct constituted bad faith and fostered extensive and needless satellite litigation. This warranted the court’s use of its inherent powers not only to sanction the attorney, but also to dismiss the cases. [iv]

Severe Sanctions: Case Dismissal; Attorney’s Fees; Order Publication; Bar Discipline

Finding that plaintiff’s counsel unnecessarily delayed or increased the complexity of the litigation and engaged in unreasonable and vexatious conduct which multiplied the proceedings, the court: (1) dismissed all four cases without prejudice and without leave to amend; (2) ordered counsel to pay the defendant’s reasonable attorney’s fees for responding to filings where AI-hallucinated cases and quotations were used; (3) required counsel to attach a copy of the order to any cases filed in the Southern District of Florida within the next two years; (4) referred counsel to the Florida Bar for appropriate discipline.

Current Arbitration Rules Have No Provision Like Rule 11

Neither the AAA Construction Industry Arbitration Rules nor the JAMS Construction Arbitration Rules contain any provision like FRCP 11(b) that, by signing a filing, the attorney represents that it is not presented for an improper purpose, factual contentions have evidentiary support, and denials are warranted by evidence or lack of information. [v]

Arbitrators’ Power to Impose Sanctions

 AAA Rule 61 and JAMS Rule 29 allow arbitrators to impose sanctions for failure to comply with arbitration rules or any arbitrator order.  The AAA mentions limiting a party’s participation in arbitration or making an adverse determination, but it doesn’t mention monetary sanctions. The JAMS rule states sanctions may include but aren’t limited to: “assessment of Arbitration fees and Arbitrator compensation and expenses; any other costs occasioned by the actionable conduct, including reasonable attorneys’ fees; exclusion of certain evidence; drawing adverse inferences” and in extreme cases, determining an issue adversely to a Party for failure to comply.   Considering the observations in recent court cases, it’s questionable whether these sanctions are sufficient to deter those determined to use AI-generated citations without checking them. That topic is beyond the scope of this post.

No Order, No Power to Sanction

The problem for arbitrators wanting to sanction counsel for using AI-hallucinated false citations or quotations is that, unless the arbitrator enters an order prohibiting this conduct, it doesn’t violate any arbitration rule and there is no basis for sanctions. At present, there are no comprehensive rules governing how AI can or should be used in arbitration or litigation.[vi] State bar rules of professional conduct may or may not provide a basis for such sanctions. Unlike federal district court judges, arbitrators lack “inherent power” to sanction attorneys, parties or law firms. Arbitration is a creature of contract. One of the grounds for overturning an arbitration award is that the arbitrators exceeded their powers.

SVAMC Guidelines Offer Possible Solutions

In 2024 the Silicon Valley Arbitration & Mediation Center published its Guidelines on the Use of AI in Arbitration.[vii] These guidelines are meant for all arbitration participants (parties, counsel and arbitrators). They can be incorporated into a preliminary scheduling order with the sample clause provided.

Specific Guidelines re: AI Use

Guideline 5 states: “Parties, party representatives and experts shall not use any form of AI to falsify evidence, compromise the authenticity of evidence, or otherwise mislead the arbitral tribunal and/or opposing party(ies).”

Guideline 4 requires competence in the use of AI. Its commentary provides: this “Guideline reminds party representatives (and particularly legal professionals) of their ethical and professional duty to review any work product created by, or with the help of, AI and remain responsible for inaccurate submissions made during an arbitration.”

Incorporating Guidelines into Order Gives Arbitrators Tools

Incorporating these (or similar) guidelines into arbitration scheduling orders may provide additional tools for arbitrators to use in managing AI use in arbitration. Also, arbitrators may sanction counsel’s non-compliance with such an order if needed.

Chartered Institute of Arbitrators (CIARB) Guideline

Earlier this year CIARB issued its Guideline on the Use of AI in Arbitration[viii] which gives guidance on AI use, allowing arbitrators, parties, counsel, and other participants to take advantage of AI’s benefits while using practical efforts to mitigate risk to process integrity, any party’s procedural rights, and enforceability of any award or settlement agreement.  It provides a useful form for an Agreement on Use of AI in Arbitration and a long and short form Procedural Order.  While CIARB focuses on international arbitration, the Guideline applies to U.S. arbitrations as well.

Takeaways

• AI use is part of today’s law practice, including arbitration. It’s likely that attorneys are using AI in drafting filings in arbitration proceedings. Arbitrators should anticipate AI-hallucinated citations or facts in arbitration demands, motions, memoranda and briefs.
• Current arbitration rules don’t address the issue of AI-created fake citations, quotations or factual allegations.
• Including AI Guidelines in preliminary scheduling orders gives arbitrators tools to manage AI use in arbitration proceedings, including the basis for imposing sanctions.

---

[i] E.g. Sanctions Order, Frankie Johnson v. Jefferson Dunn, et al. (Case No: 2:21-cv-1701-AMM, D.Ct. N.D. AL July 23, 2025) https://www.linkedin.com/feed/update/urn:li:activity:7354476365242355712?updateEntityUrn=urn%3Ali%3Afs_updateV2%3A%28urn%3Ali%3Aactivity%3A7354476365242355712%2CFEED_DETAIL%2CEMPTY%2CDEFAULT%2Cfalse%29;

Order (imposing sanctions), Byoplanet Int’l, Inc. v. Peter Johansson, et al., (Case No: 0:25-cv-60630-LEIBOWITZ, D.Ct. S. D. FL July 17, 2025) https://caselaw.findlaw.com/court/us-dis-crt-sd-flo/117513089.html

Order to Show Cause (imposing sanctions), Eric Coomer Ph.D. v. Michael J. Lindell, et al. (Case No: 1:22-cv-01129 NYw SBP (D.Ct.Col. July 7, 2025) https://www.courtlistener.com/docket/63296393/309/coomer-v-lindell

[ii] E.g. Mata v. Avianca, Opinion and Order on Sanctions (Case No: 22-cv-1461 (PKC) D.Ct. S.D.N.Y. June 22, 2023) https://caselaw.findlaw.com/court/us-dis-crt-sd-new-yor/2335142.html

[iii] Because these were discovery motions, Rule 11 did not apply. The court considered Local Rule 83.1(f) and Alabama Rule of Professional Conduct 3.3, but concluded it was unclear they applied in this situation. The court noted, “[A]lthough no specific rule expressly forbids the misconduct that occurred here, on the whole the rules make clear that it is serious misconduct ever to make false statements to a court, and no one here suggests that false statements generated by AI and parroted without verification in discovery motions are allowed.”

[iv] Plaintiff’s counsel admitted he used AI in generating the Complaints and he could not assure the Court unequivocally that they did not contain fabricated factual allegations.

[v] FRCP 11(b) Representations to the Court. By presenting to the court a pleading, written motion, or other paper—whether by signing, filing, submitting, or later advocating it—an attorney or unrepresented party certifies that to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances:(1) it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation; (2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law; (3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and (4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information.

[vi] See Newman & Garrie, The Current State of US Regulation of AI Use in Dispute Resolution https://www.bakermckenzie.com/-/media/files/people/newman-bradford/the-current-state-of-us-regulation-and-the-use-of-ai.pdf?sc_lang=en&rev=d247eab55bac4d85877fc7fadc687bcc&hash=7FF222F111377356EA47F49457DA521B. 

[vii] https://svamc.org/wp-content/uploads/SVAMC-AI-Guidelines-First-Edition.pdf

[viii]  Guidance 18 https://www.ciarb.org/resources/professional-practice-guidelines/international-arbitration/