Nellum v. Credit Acceptance Corporation

What sanction did the court impose?

Motion to compel arbitration granted. Action stayed pending arbitration with status reports due. Pro se plaintiff cautioned that hallucinated citations are unacceptable and can result in sanctions. No monetary sanction imposed in this order.

Why does Nellum v. Credit Acceptance Corporation matter for law firms using AI?

Nellum v. Credit Acceptance Corporation is the first published S.D. Ind. order in which a magistrate judge expressly characterized a pro se litigant’s defective citations as “hallucinated” and cautioned that “such conduct can result in sanctions.” The order’s substantive holding (granting Credit Acceptance’s motion to compel arbitration) is unremarkable; the Indiana arbitration analysis tracks established Seventh Circuit precedent. What distinguishes Nellum is the court’s willingness to memorialize the AI-citation finding in a footnote even though Nellum had affirmatively represented in her sur-reply that she had not fabricated cites and had attributed the errors to “limited access and the complexity of legal databases.”

Magistrate Judge Wildeman’s footnote diagnostic is methodologically careful. For the Messina cite, she ran the Westlaw search that produces the real (Eighth Circuit) case at the cited reporter location and noted that no Indiana Court of Appeals decision of that name exists. For the fabricated Miller v. Credit Acceptance Corp. citation, she ran the Westlaw number and found it pointed to a District of Utah habeas decision, then ran the case name and found two unrelated Northern District of Ohio remand decisions. This is the same diagnostic method Judge Pratt used in Parrish v. Miller four months earlier and the Indiana Court of Appeals used in Cingel v. Ferreri.

For an Indiana federal practice, Nellum signals two things. First, the magistrate-judge bench in S.D. Ind. is now systematically documenting AI hallucinations in footnotes alongside the merits ruling. Second, a pro se litigant’s affirmative denial of fabrication will not insulate against the citation finding; the court traces the defective cite to its real-but-unrelated source and treats that trace as proof of the failure mode. A firm’s brief-finalization workflow should treat every cite as defectively jurisdictional until verified against the official reporter, not just confirmed to exist somewhere.