OTG New York, Inc. v. Ottogi America, Inc.
U.S. District Court, District of New Jersey · D.N.J. · New Jersey bar guidance
Conduct
Counsel filed a Motion to Consolidate reply citing nonexistent cases, propositions unsupported by their cited cases, and quotations not in the supposed source, all from unverified generative AI use.
Consequence
$3,000 Rule 11 fine; reply brief withdrawn and stricken; counsel ordered to self-report to all licensing state bars and to serve his own client with the sanctions order, all within 14 days.
Lesson
The $3K-plus-four-part-remedy package is the emerging median outcome for AI-hallucination Rule 11 violations where the attorney shows prompt remorse and remedial commitments.
Verified May 10, 2026
- Citation
- OTG N.Y., Inc. v. Ottogi Am., Inc., No. 24-cv-07209 (BRM) (JRA), 2025 U.S. Dist. LEXIS 183358 (D.N.J. Sept. 18, 2025) (Almonte, M.J.)
- Decided
- September 18, 2025
Summary
Plaintiff's counsel Sukjin Henry Cho, Esq., representing OTG New York, Inc. in a breach-of-contract and unjust-enrichment dispute against Ottogi America, Inc. (with $20 million in damages alleged), filed a Reply brief in support of a Motion to Consolidate (ECF No. 42) that contained citations to cases that did not exist, did not support the propositions for which they were cited, or did not contain the supposed quoted authority. The Court denied the Motion to Consolidate (ECF No. 43) and simultaneously issued an Order to Show Cause why Rule 11 sanctions should not be imposed. In his response (ECF No. 44), Cho admitted that 'time constraints and scheduling conflicts prevented a diligent review of the legal authority' and that '[l]egal research was conducted with the support of generative AI tools and draft summaries, supplemented by targeted LexisNexis database searches.' Cho characterized the issue as 'overreliance on generative [AI] prompts during early-stage research' and described remedial measures including 'stricter verification protocols and internal safeguards' for his firm.
- AI tool:
- Unspecified generative AI
- Sanction amount:
- $3,000
What sanction did the court impose?
Magistrate Judge José R. Almonte found Cho violated Rule 11(b)(2) under the Third Circuit's Wharton v. Superintendent Graterford SCI, 95 F.4th 140 (3d Cir. 2024) negligence standard ('a court can sanction lawyers for what they should have known, not just what they knew') and imposed a four-part sanction: (1) $3,000 fine payable to the Clerk of Court within 14 days, on the lower end of the $1,000 to $6,000 range observed in comparable AI-hallucination Rule 11 cases, in light of Cho's prompt admission and remedial commitments; (2) the offending Reply at ECF No. 42 was marked WITHDRAWN and STRICKEN from the record; (3) Cho was ordered to self-report the sanctions order to the disciplinary authority of every state bar of which he is a member, with proof of service filed on the docket; and (4) Cho was ordered to serve his own client, OTG New York, with a copy of the order within 14 days and file proof of service. The order surveyed the emerging national pattern, citing Mid Central Operating Engineers Health & Welfare Fund v. HoosierVac LLC (S.D. Ind. May 28, 2025) ($15K initial reduced to $6K), Ramirez v. Humala (E.D.N.Y. May 13, 2025) ($1K), Dehghani v. Castro, 782 F. Supp. 3d 1051 (D.N.M. 2025) ($1.5K plus CLE plus three-state bar reports), Benjamin v. Costco Wholesale Corp., 779 F. Supp. 3d 341 (E.D.N.Y. 2025) ($1K), and Bunce v. Visual Tech. Innovations, Inc. (E.D. Pa. Feb. 27, 2025) ($2.5K plus CLE).
Why does OTG New York, Inc. v. Ottogi America, Inc. matter for law firms using AI?
The doctrinal anchor in Almonte’s order is the Third Circuit’s Wharton standard. Wharton v. Superintendent Graterford SCI, 95 F.4th 140 (3d Cir. 2024) holds that Rule 11 sanctions require only negligence, not bad faith, and ‘courts can sanction lawyers for what they should have known, not just what they knew.’ That framing matters for AI-hallucination defendants in the Third Circuit because it forecloses the ‘I sincerely thought the citations were real’ defense as a complete bar to sanctions. Intent still matters, but only to the form and severity of the remedy, not to whether sanctions issue at all. Cho’s prompt admission and remedial commitments worked as mitigation under Rule 11(c)(4)‘s deterrence-not-penalty principle, but they did not negate the Rule 11 violation itself.
The four-part remedy package is more interesting than the dollar amount. The $3,000 fine sits in the middle of the surveyed national range ($1,000 to $6,000), but the bar-self-report and client-notice components are the genuinely durable consequences for the attorney’s professional record. State bar authorities increasingly track AI-hallucination Rule 11 sanctions as a discipline-relevant data point, and the order’s requirement that Cho serve his own client (citing Park v. Kim, 91 F.4th 610 (2d Cir. 2024) and the Ramirez and Benjamin lineage) means the client will know that the firm relied on unverified AI for the brief. For partners thinking about firm-side malpractice exposure, the client-notice piece is the operationally important detail: the client now has the predicate for a malpractice or fee-dispute claim, even though the order does not itself find malpractice.
The case is also the most useful national-pattern survey published in 2025. Almonte’s collection of comparable cases (HoosierVac, Ramirez, Dehghani, Benjamin, Bunce) maps the working sanctions distribution and the standard remedy components: monetary fine to court, CLE in some cases, bar self-report, brief-strike, and client-notice. For firms thinking about how to present AI-governance to a malpractice carrier or to a managing-partner committee, this case’s national-pattern citation list is the canonical citation set as of late 2025.
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.
- Recognize the four-part sanction structure that Almonte applied (fine to court, brief stricken, self-report to bar, serve client) as the emerging template for the middle of the AI-Rule 11 sanctions distribution; partners reading peer-firm risk should expect the bar-self-report and client-notice components, not just the fine.
- Document in writing the firm's AI verification protocol and the supervisor's review step; Cho's mitigation rested on 'stricter verification protocols and internal safeguards' he committed to going forward, and the Court treated those commitments as a sanctions-reduction factor.
- Train associates on the Third Circuit's Wharton standard: Rule 11 negligence is sufficient for sanctions, intent is not required, and 'lawyers cannot avoid sanctions by unreasonably failing to investigate whether their factual or legal contentions have support.'
- Track the citation pattern as the most useful comparable: $1,000 to $6,000 range across cases (HoosierVac, Ramirez, Dehghani, Benjamin, Bunce) is the working national distribution as of mid-2025, with $3,000 plus the four-part remedy package as the median outcome where the attorney shows prompt remorse.