Song Dow Lee v. HSBC Bank USA, National Association
U.S. District Court, Central District of California · C.D. Cal. · California bar guidance
Conduct
Here plaintiffs' opposition misstated several cases' holdings and included a quotation the court said does not exist; several of the misrepresentations were not corrected after defendant flagged them.
Consequence
Order to show cause why counsel should not be sanctioned $2,500 and/or the action dismissed, with declarations on any AI use; no ruling on it appears before the case was dismissed.
Lesson
Here the court's order followed the plaintiffs' failure to correct misstatements that the defendant had already pointed out.
Verified September 30, 2026
- Citation
- Song Dow Lee v. HSBC Bank USA, N.A., No. 2:26-cv-01198-JFW-E, Order to Show Cause re: Sanctions (C.D. Cal. May 7, 2026) (Walter, J.), ECF No. 41
- Decided
- May 7, 2026
Summary
In a civil action by Song Dow Lee and other plaintiffs against HSBC Bank USA, National Association and other defendants, Judge John F. Walter issued an in-chambers order to show cause regarding sanctions after reviewing plaintiffs' opposition to a defense motion to dismiss. The court stated that in the opposition "Plaintiffs misrepresent the holdings of several cases, and even include a non-existent quotation." As an example, it pointed to page 12 of the opposition, which stated that "[i]n BPi Bright Power, Inc. v. Umpqua Holding Corp., 669 F.Supp.3d 904, 906 (N.D. Cal. 2023), the court recognized that Article 4A 'addresses the mechanics of executing wire transfers and payment orders,' not a bank's pre-contractual representations or its general duty to provide advertised services." The court added that "[e]ven after Defendant pointed out several of Plaintiffs' misrepresentations in its Reply" (Docket No. 36), plaintiffs did not correct them in their Proposed Statement of Decision filed April 15, 2026 (Docket No. 39). The order does not name plaintiffs' counsel.
- AI tool:
- Not determined (the order to show cause directs counsel's declarations to address "whether artificial intelligence was used"; the order makes no finding of AI use and names no tool)
- Amount or terms:
- None imposed in the May 7, 2026 order; counsel ordered to show cause why the court should not impose sanctions of $2,500.00 on counsel and/or dismiss the action
How did the court address the AI-related conduct?
The court ordered plaintiffs' counsel to show cause, in writing, on or before May 11, 2026, "why this Court should not impose sanctions on counsel in the amount of $2,500.00 and/or dismiss this action." Counsel were directed to file declarations addressing, among other things, "whether artificial intelligence was used to draft Plaintiffs' Opposition and Proposed Statement of Decision, and what actions counsel took to determine that any of the propositions of law relied on by Plaintiffs were accurate." No oral argument would be heard unless the court ordered otherwise; the order to show cause would stand submitted on the filing of the response, and failure to respond "will result in the imposition of sanctions and/or dismissal of this action." Counsel filed a declaration in opposition on May 11, 2026. The docket read through September 8, 2026 shows no ruling on the order to show cause; the court dismissed the second amended complaint without leave to amend on August 5, 2026, and plaintiffs appealed to the Ninth Circuit.
Why does Song Dow Lee v. HSBC Bank USA, National Association matter for law firms using AI?
The Song Dow Lee order is short, and its reasoning rests on two points: the content of the opposition brief and what happened after the defendant objected. Judge Walter stated that plaintiffs misrepresented “the holdings of several cases” and included “a non-existent quotation,” giving the BPi Bright Power passage as an example. The order does not describe any cited case as nonexistent, and it does not find that artificial intelligence was used.
The order’s “Accordingly” comes directly after the second point: defendant identified several of the misrepresentations in its reply, yet plaintiffs “failed to correct those misrepresentations” in the proposed statement of decision they filed afterward. The court then set a short deadline for a written response and proposed two consequences, a $2,500 sanction on counsel and dismissal of the action, in the alternative or together.
The order also sets out what counsel’s declarations had to cover: whether AI was used to draft the opposition and proposed statement of decision, and what counsel did to confirm that the propositions of law were accurate. Firms documenting compliance may wish to consider that here the court asked about verification steps and AI use together, and that the ruling on the order to show cause has not been located, so the entry records the posture rather than a result.
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.
- Verify quotations attributed to a case against the opinion itself. Here the court gave a passage attributed to BPi Bright Power as an example of misstated holdings and a non-existent quotation, without saying which.
- Review opposing counsel's reply for flagged misstatements before the next filing. The court noted that plaintiffs did not correct the misrepresentations in their Proposed Statement of Decision after defendant's reply identified them.
- Document how each proposition of law was checked. The order required declarations on what actions counsel took to confirm the propositions relied on were accurate, as well as on any AI use.
Sources
Primary sources
- AI use is not established. The order asks counsel to address whether artificial intelligence was used; it makes no finding and records no admission. The AI attribution in the Charlotin tracker is an inference.
- Outcome of the order to show cause: not found. Plaintiffs' counsel filed a declaration in opposition to the order to show cause on May 11, 2026 (ECF No. 42, not read). The May 20, 2026 order (ECF No. 43, read from a RECAP copy bought on PACER) dismisses the first amended complaint, allowing a second amended complaint only for two new statutory claims, and does not mention the order to show cause, sanctions or the misstatements. CourtListener docket entries 40 to 62, read through the shared limiter, show no ruling on the order to show cause; the court granted HSBC's motion to dismiss the second amended complaint without leave to amend on August 5, 2026 (ECF No. 60, docket text only), and plaintiffs appealed on September 2, 2026 (ECF No. 61; Ninth Circuit No. 26-5831). Coded other, not pending: no ruling on the show-cause appears, and the district court proceeding has ended.
- The order identifies a 'non-existent quotation' and misrepresented holdings; it does not state that any cited case is nonexistent.