Brown v. Real Estate Capital of America, LLC
Supreme Court of the State of New York, New York County · N.Y. Sup. Ct. · New York bar guidance
Conduct
Here plaintiffs' opposition attributed a quotation to a case that does not contain it; movants (Su and RECAP) said AI fabricated it and sought fees on reply.
Consequence
Here the court declined sanctions, finding one misattributed quotation in a supplemental passage did not warrant a Part 130 award.
Lesson
Here the court noted movants had not identified the authority for the sanction, supplied the possible bases itself, and declined in its discretion.
Verified September 28, 2026
- Citation
- Brown v. Real Estate Capital of Am., LLC, 2026 NY Slip Op 51211(U), 89 Misc 3d 1240(A), Index No. 165361/2025 (N.Y. Sup. Ct., N.Y. County Aug. 7, 2026) (Lebovits, J.)
- Decided
- August 7, 2026
Summary
Raquel and Wesley Brown sued their former mortgage broker, Johnny Su, and his firm Real Estate Capital of America, LLC (RECAP), alleging that Su cancelled their commercial mortgage financing without authorization in 2019, along with contract and related claims against the lender. Su and RECAP moved to dismiss the breach-of-fiduciary-duty claim against them as time-barred. In their reply papers, they also sought dismissal and an award of attorney fees "on the additional ground that plaintiffs' opposition assertedly includes a quotation fabricated by artificial intelligence." The court recounts that movants "identified a quotation in plaintiffs' opposition papers that does not appear in the case to which the opposition attributes it." The court noted that movants raised sanctions only on reply, did not identify the basis for the court's authority to impose the requested sanction, and did not raise the issue at oral argument. The same decision addressed the timeliness of plaintiffs' opposition, which was filed five days late, a delay counsel attributed to a calendaring error.
- AI tool:
- Alleged by movants only (movants Su and RECAP asserted the quotation was fabricated by AI; the court did not decide whether it was "an AI fabrication, rather than the product of ordinary human error")
- Amount or terms:
- None; request for attorney fees as a sanction denied
How did the court address the AI-related conduct?
Justice Gerald Lebovits granted the motion to dismiss the fiduciary-duty claim against Su and RECAP as barred by the three-year limitations period, deemed plaintiffs' late opposition timely nunc pro tunc, and denied the request for sanctions. The dismissal as against RECAP and Su was with costs and disbursements as taxed by the Clerk, and the CPLR 3211(a)(7) branch was denied as academic. On dismissal as a sanction, the court held that movants had not shown, by clear and convincing evidence, a fraud on the court. On attorney fees, which it treated as a request under 22 NYCRR 130-1.1, the court exercised its discretion to decline sanctions. It reasoned that "even if this court were to conclude that the challenged quotation is an AI fabrication, rather than the product of ordinary human error," the request rested on "a single quotation erroneously attributed to a single case," in a passage that "merely provides additional, supplemental support for an argument that rests on properly cited authority." It added that because sanctions were sought only on reply, plaintiffs would ordinarily be entitled to a further opportunity to be heard, but found further briefing unnecessary. The remaining claims against the lender defendants were severed and continue.
Why does Brown v. Real Estate Capital of America, LLC matter for law firms using AI?
Justice Lebovits’s decision declines sanctions for a misattributed quotation. The court accepted that the quotation in plaintiffs’ opposition did not appear in the case cited for it, but declined to decide whether AI produced it. The analysis turned instead on the procedural posture and the significance of the error. The court’s inherent authority to dismiss as a sanction reaches a fraud on the court (Napoli v Bern, citing CDR Creances S.A.S. v Cohen), and under Southerland v Sister Jane Tavern that fraud must be shown by clear and convincing evidence, which movants did not attempt. For fees, the court presumed the request arose under 22 NYCRR 130-1.1 and exercised its discretion to decline.
Two factors drove that discretion: the error was a single quotation attributed to a single case, and the passage containing it offered supplemental support for an argument that rested on properly cited authority. The court cited, with a “cf.” signal, the Second Department’s May 2026 decision in Matter of Julien v Arthur, which in that court’s discretion sanctioned a pro se party $250 for citing one nonexistent case in an appellate brief.
The decision also flags a procedural point for movants. Sanctions raised for the first time on reply, and not at oral argument, would ordinarily require a further opportunity for the accused party to be heard under 22 NYCRR 130-1.1(d). Firms documenting compliance may wish to consider raising citation problems in a way that states the authority for relief and gives the other side notice.
Implications for your firm
Operational steps a firm reading this case may wish to consider documenting. Strategic and rule-application calls belong to your firm's attorneys.
- Document the legal basis when seeking sanctions for an opponent's fabricated authority. The court noted movants did not identify the source of its authority to impose the sanction they requested.
- Consider timing. Sanctions requested only in reply papers would ordinarily require giving the other side a further opportunity to be heard.
- Verify quotations even in supplemental passages. The court declined sanctions here, but it stated that the quotation does not appear in the cited case.
Sources
Primary sources
- AI attribution is the movants' allegation as the court recounts it; the court expressly did not decide whether the quotation was an AI fabrication or ordinary human error.