Greenberg v. First Bank, Inc.

What did the court warn about?

Judge Mark C. Kim denied the bank's motion for sanctions, filed February 27, 2026. The bank had moved under Code of Civil Procedure section 128.7, which gives the opposing party a safe-harbor period to withdraw the challenged paper. The court wrote that "there is nothing in the Code that permits the motion to be made with NO time period at all," and, citing Goodstone v. Southwest Airlines Co., that sanctions cannot be imposed if a motion is filed before the safe-harbor period expires (or, as here, without one), "no matter how egregious the conduct potentially subject to sanctions." It noted that sanctions "may be appropriate under some other section or authority," but that the bank chose section 128.7 and "the Court cannot impose sanctions under the cited section." The court then "harshly admonishes Plaintiffs' attorney that citations to nonexistent and/or inapplicable cases are absolutely not permissible." It wrote that it "understands Counsel was ill around the time of the filing of the brief, but the conduct is unacceptable," that counsel "must ensure full compliance with all ethical rules in the future in connection with this and other actions to avoid potentially serious sanctions and/or other consequences," and that it "is not inclined to refer the matter to the State Bar in light of Counsel's illness." No monetary sanction was imposed.

Why does Greenberg v. First Bank, Inc. matter for law firms using AI?

Greenberg is a Los Angeles contract case over five certificates of deposit, in which the citation problem was raised by the defendant bank in its summary judgment reply and then litigated on a specially set sanctions motion. The court denied summary judgment on the merits, finding that the bank’s search of its own records did not show that the plaintiffs could not prove nonpayment. At the sanctions stage, it agreed with the bank that “Mitchell v. Bank of America (1928) 89 Cal.App. 467” does not appear to exist, and it found that People v. Wharton, a criminal case, and AARTS Productions, a case about wrongfully dishonored checks, did not support the propositions for which the opposition cited them.

The court’s treatment of AI is limited. The bank called Mitchell “AI-generated,” and the court’s April 28 ruling referred to Schlichter v. Kennedy as a Court of Appeal decision sanctioning an attorney for “AI-hallucinated cases.” The court itself did not find that AI was used; it grounded its analysis in rule 8.4(c) and rule 3.3 of the California Rules of Professional Conduct, stating that counsel “presented legal authority to the Court that did not appear to exist or did not stand for the propositions Plaintiffs’ counsel cited them for.”

The ruling’s discussion of the governing rules also states that “the Court sets an OSC re: Why Counsel for Plaintiffs Jack and Barbara Greenberg Should Not be Sanctioned and Referred to the State Bar for Disciplinary Action,” but the minute order sets no hearing, and its conclusion denies the motion. The consequence turned on procedure. Section 128.7 gives the opposing party a period to withdraw the challenged paper, and the bank’s motion gave none; relying on Goodstone v. Southwest Airlines Co., the court held it could not impose sanctions under that section however egregious the conduct. It harshly admonished counsel, warned of potentially serious sanctions for future violations, and said it was not inclined to refer the matter to the State Bar in light of counsel’s illness. Firms documenting compliance may wish to consider that, here, the outcome depended on the authority the moving party chose, and that the court noted sanctions “may be appropriate under some other section or authority.”