Lacey v. State Farm General Insurance Co.
U.S. District Court, Central District of California · C.D. Cal. · California bar guidance
Verified May 1, 2026
- Citation
- Lacey v. State Farm Gen. Ins. Co., No. 2:24-cv-05205-FMO-MAA (C.D. Cal. May 6, 2025)
- Decided
- May 6, 2025
Summary
Plaintiff's counsel from Ellis George LLP and K&L Gates LLP submitted a supplemental brief in an insurance coverage dispute that contained approximately nine defective citations out of 27, including at least two to authorities that did not exist at all. Special Master Michael R. Wilner (a retired U.S. Magistrate Judge) found that an Ellis George associate drafted an outline using a generative AI tool, sent it to attorneys at K&L Gates who incorporated it into the brief without independently verifying the citations, and that a revised brief filed after opposing counsel raised concerns introduced still more inaccuracies. Wilner characterized the conduct as "tantamount to bad faith" and noted the fabricated authorities had affirmatively misled the court.
- AI tool:
- CoCounsel, Westlaw Precision, and Google Gemini (multi-tool workflow)
- Sanction amount:
- $31,100
What sanction did the court impose?
Plaintiff's supplemental briefs were struck and all requested discovery relief on the disputed privilege issue was denied. Ellis George and K&L Gates were held jointly and severally liable for $31,100, comprising $26,100 in Special Master fees and $5,000 in attorneys' fees awarded to State Farm. The order specified that the client would not bear the monetary award. Wilner declined to name most of the individual attorneys involved.
Why does Lacey v. State Farm General Insurance Co. matter for law firms using AI?
Lacey is the multi-firm, multi-tool case that managing partners should read before assuming AI hallucination risk lives only with solos and small shops. K&L Gates is among the largest U.S. law firms by headcount, and the defective brief still cleared internal review on its way to a federal Special Master. The order’s reasoning, that filing unverified AI-assisted citations is sanctionable regardless of which tool produced them or how senior the supervising attorney was, applies cleanly to any firm relying on a research-to-draft handoff between attorneys without an explicit citation-verification step in between.
Sources
Primary sources
- The specific generative AI tools used (CoCounsel, Westlaw Precision, Google Gemini) are widely reported in secondary coverage but the order itself, per contemporaneous reporting, did not enumerate the tools by name.
- The fabricated citation 'Booth v. Allstate Ins. Co.' is referenced in some secondary summaries; the order describes 'at least two' nonexistent authorities among nine defective citations but the specific captions were not extracted from the order text.