Bailey v. Sedgwick Claims Management Services, Inc.

How did the court address the AI-related conduct?

Judge Thomas L. Parker granted the corrected motion and preliminarily approved the settlement, preliminarily certifying a non-opt-out settlement class under Rule 23(b)(1) and setting a final approval hearing for October 9, 2026. On the citation problem, the footnote states: "In its discretion, the Court did not impose sanctions here. It likely could have," citing the Sixth Circuit's statement in Whiting v. City of Athens that "[c]iting even a single fake case can be sanctionable." Quoting United States v. Farris (6th Cir. 2026), the court reminded plaintiff's counsel that the duty of competence includes keeping up with "relevant technology" and that a lawyer who uses AI "must do so in a manner consistent with their ethical obligations." The footnote ends: "The hope is that Plaintiff's counsel has received the message." No fine, fee award, referral, or other sanction was imposed; the only consequence the order records is the court-ordered correction of the citations before the motion was decided.

Why does Bailey v. Sedgwick Claims Management Services, Inc. matter for law firms using AI?

Bailey v. Sedgwick shows a district court addressing fabricated authority in a footnote to an otherwise routine order. Plaintiff’s counsel in an ERISA class action filed a motion for preliminary approval of a settlement that, according to the order, “included citations to cases that did not exist or quotes that did not appear in real cases.” Judge Parker convened a video status conference, voiced concerns that counsel had used an AI tool, and, per the order, “Plaintiff’s counsel agreed that these errors were most likely the result of the AI tool.” The court’s own gloss is hedged: “Apparently that AI program hallucinated over some citations.”

The court chose correction over sanction. It required counsel to fix the citations and file a corrected motion, then granted preliminary approval on the corrected filing. The footnote is explicit that sanctions were available and withheld as a matter of discretion: “In its discretion, the Court did not impose sanctions here. It likely could have.” It grounds that statement in two 2026 Sixth Circuit decisions, quoting Whiting v. City of Athens that “[c]iting even a single fake case can be sanctionable,” and United States v. Farris on the “baseline ethical obligations as they relate to the use of artificial intelligence.”

The order’s closing line on the subject, “The hope is that Plaintiff’s counsel has received the message,” reads as a warning addressed to this counsel in this case. Firms documenting compliance may wish to consider that the same verification expectations applied here to a largely procedural motion, and that the correction and the court’s reasons now sit in a public order in the case file.