Forest Ridge Townhomes Corporation of Greensboro v. Heag Pain Management Center, P.A.
North Carolina Court of Appeals · N.C. Ct. App. · North Carolina bar guidance
Conduct
Here the appellants' brief relied on irrelevant authority, some of which the court said appears to be AI-generated; counsel had said he used Perplexity.AI in a trial-court motion.
Consequence
Rule 34 sanctions declined. The court admonished respondents and, conditionally, chastised their counsel for inadequate review of AI work product.
Lesson
Here the appellate court noted that two appellate arguments "strongly resemble" a "Perplexity.AI Answers" exhibit counsel filed with a trial-court motion.
Verified September 29, 2026
- Citation
- Forest Ridge Townhomes Corp. of Greensboro v. Heag Pain Mgmt. Ctr., P.A., No. COA 25-600 (N.C. Ct. App. Mar. 18, 2026) (unpublished) (Murry, J.)
- Decided
- March 18, 2026
Summary
Respondents Greensboro Realty & Investments, LLC and K&S Resources, LLC appealed a Guilford County order disbursing foreclosure surplus funds to the petitioner homeowners' association. Writing for the panel, Judge Murry found their legal authority irrelevant: they relied on RM Contrs., LLC v. Wiggins, a mechanics'-lien case, and incompletely cited "Porter v. Bank, 251 N.C. 573, 577, 111 S.E.2d 904." Assuming it refers to Porter v. Citizens Bank of Warrenton, the court said that case does not address an HOA lien or a surplus-funds claim. In footnote 3 the court observed that respondents' speculation about the case's "impact" on mechanics' liens and their Fair Debt Collection Practices Act claim "strongly resemble similar arguments" in a record filing titled "Perplexity.AI Answers," attached as an exhibit to their trial-court motion for a new trial, in which respondents' counsel explained that he "did traditional research but supplemented it with research through Perplexity.AI, Professional Version." The court wrote that "[t]o the extent that the irrelevance of Respondents' cited legal authorities results from the failure of Respondents' counsel to adequately review AI-generated work product, we chastise him for this regrettable oversight," citing N.C. State Bar Formal Ethics Opinion 1 (2024). Petitioner moved for sanctions under Appellate Rules 25, 28, and 34.
- AI tool:
- Perplexity.AI, Professional Version (per respondents' counsel's statement in a trial-court motion, as quoted in the opinion; the court said only that some authority "appears to be AI-generated")
- Amount or terms:
- None; Rule 34 sanctions declined
What did the court warn about?
The court affirmed the order disbursing $26,911.38 to Petitioner and declined to impose Rule 34 sanctions because respondents' "legal errors and meritless arguments--dire as they are--do not rise to the level of 'gross . . . noncompliance'" under Dogwood. It added that forgoing sanctions "does not diminish the severity of our chastisement," found that respondents "burden our review with irrelevant legal authority, some of which appears to be AI-generated work product that they failed to adequately examine," and stated: "We admonish Respondents for these obstacles to our review." No monetary sanction, suspension, or bar referral was imposed. The opinion is unpublished and, under Appellate Rule 30(e)(3), not controlling authority.
Why does Forest Ridge Townhomes Corporation of Greensboro v. Heag Pain Management Center, P.A. matter for law firms using AI?
Forest Ridge is an admonishment without a sanction. The North Carolina Court of Appeals affirmed a surplus-funds disbursement to a homeowners’ association and rejected a series of respondents’ arguments as meritless, several because the authority behind them had nothing to do with a surplus-funds proceeding under N.C.G.S. Section 45-21.32. RM Contrs., LLC v. Wiggins concerns mechanics’ liens; Porter v. Citizens Bank of Warrenton, assuming that is the “Porter v. Bank” respondents cited, concerns whether an alimony order gave a wife a superior lien on surplus funds. The court wrote that respondents’ counsel’s citation to RM Contrs. as controlling precedent “belies his own lack of understanding in this matter.”
The AI link came from counsel’s own filing below. In a trial-court motion for a new trial, he explained that he “did traditional research but supplemented it with research through Perplexity.AI, Professional Version,” and attached an exhibit titled “Perplexity.AI Answers.” The court observed that respondents’ speculation about the case’s “impact” on mechanics’ liens and their FDCPA claim “strongly resemble similar arguments” in that exhibit, and chastised counsel “[t]o the extent” the irrelevance of the cited authorities resulted from failing to review AI-generated work product, citing N.C. State Bar Formal Ethics Opinion 1 (2024) and Benjamin v. Costco Wholesale Corp.
On the sanctions motion, the court applied Dogwood and held that respondents’ legal errors and meritless arguments, “dire as they are,” did not reach “gross … noncompliance.” It declined Rule 34 sanctions, but stated that this “does not diminish the severity of our chastisement” and admonished respondents. Firms documenting compliance may wish to consider that here counsel’s disclosure of AI use in a trial-court motion was cited by the appellate court when it discussed two of the brief’s arguments.
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.
- Verify that cited authority addresses the proceeding at hand. Here the court found a mechanics'-lien case and an alimony-lien case irrelevant to a surplus-funds proceeding.
- Review AI-generated research exhibits before they are filed. The court compared two appellate arguments to a "Perplexity.AI Answers" exhibit counsel had attached to a trial-court motion.
- Document attorney review of AI output. The court cited N.C. State Bar Formal Ethics Opinion 1 (2024), which it described as holding the attorney individually responsible for reviewing AI-generated work product.
Sources
Primary sources
- The opinion does not find that any specific citation in the appellate brief was generated by Perplexity; it says some authority "appears to be AI-generated," and its chastisement of counsel is conditioned on "[t]o the extent" the irrelevance resulted from inadequate review of AI output.