In re Nupeutics Natural, Inc.; Gladstone v. Peatross
United States Bankruptcy Court, Southern District of California · Bankr. S.D. Cal. · California bar guidance
Verified April 26, 2026
- Citation
- In re Nupeutics Natural, Inc. (Gladstone v. Peatross), No. 24-90036-JBM, 2025 WL 3546838 (Bankr. S.D. Cal. Dec. 5, 2025)
- Decided
- December 5, 2025
Summary
Defense counsel Deepalie Milie Joshi used generative AI to draft a Motion to Enlarge Time and failed to verify any of the legal citations before filing. The motion contained an AI-hallucinated case, In re Verdi, 2019 WL 6712136, that does not exist, miscited In re Caneva for a proposition it did not address, and inaccurately paraphrased Federal Rule of Bankruptcy Procedure 9006(b)(1) and Local Bankruptcy Rule 1001-2. Judge J. Barrett Marum found that Counsel compounded the Rule 9011 violation by making untrue representations to the Court about her client's declaration and signature, conduct the Court found tantamount to bad faith.
- AI tool:
- Unspecified generative AI
- Sanction amount:
- $950
What sanction did the court impose?
$950 monetary penalty payable to the Court within 30 days; eight hours of CLE (four on AI in legal practice, four on practice management, at least four hours in person) within 12 months; revocation of CM/ECF authority to file documents bearing another person's electronic signature through December 31, 2027; mandatory compliance with the court's General Order No. 210 on AI use; and referral to the Standing Committee on Discipline for the U.S. District Court for the Southern District of California.
Why does In re Nupeutics Natural, Inc.; Gladstone v. Peatross matter for law firms using AI?
Nupeutics is notable less for the single hallucinated citation than for the cascade of conduct that followed. The court treats failure to verify AI output as Rule 9011 bad faith on its own, and then escalates sharply when counsel obscures the underlying facts in subsequent filings and an in camera submission. For managing partners, the case is a reminder that the sanctions exposure from AI misuse is rarely just the fabricated cite: it is the discovery, candor, and supervision posture that follows, and that exposure now includes ECF privilege restrictions and bar referral, not only fee awards.
Sources
Further reading
Source PDF is a Westlaw printout mirrored from the Damien Charlotin hallucination database. We are working to add the underlying court docket (PACER, CourtListener, or court website) as a second source.