Lawyer Who Cited Fake AI-Generated Cases Faces Harsh Penalties in Federal Court

A federal judge in Manhattan has delivered a stinging rebuke to a New York attorney who submitted fabricated legal citations in a high-stakes case, ordering sweeping sanctions that could cost his client millions in lost profits and refunds. The decision marks one of the most severe penalties yet for misuse of artificial intelligence in legal practice, underscoring the judiciary’s growing intolerance for AI-generated falsehoods masquerading as legitimate case law.

Judge P. Kevin Castel, presiding over the Southern District of New York, ruled that attorney Steven A. Schwartz of Levidow, Levidow & Oberman committed “conscious avoidance” by relying on ChatGPT to generate non-existent legal precedents. The case, which centered on a personal injury lawsuit against Avianca Airlines, spiraled into a cautionary tale about the perils of unchecked AI adoption in professional settings.

The Fabricated Citations That Fooled No One

The controversy erupted when opposing counsel discovered that several cases cited in Schwartz’s brief—including “Varghese v. China Southern Airlines” and “Miller v. United Airlines”—simply did not exist in any legal database. When confronted, Schwartz admitted he had used OpenAI’s ChatGPT to conduct legal research, believing the AI’s outputs were accurate.

“Technological advances are commonplace and there is nothing inherently improper about using a reliable artificial intelligence tool for assistance,” Schwartz’s affidavit stated. “But existing rules impose a gatekeeping role on attorneys to ensure the accuracy of their filings.”

Judge Castel was unmoved. In his February 2023 ruling, he wrote: “The act of knowingly incorporating fake opinions and citations into legal filings is sanctionable conduct.” The court ordered Schwartz and his firm to pay $5,000 in monetary sanctions and referred the matter to the grievance committee for potential disciplinary action.

A Cascade of Consequences

The sanctions triggered a chain reaction of remedies that extend far beyond the immediate financial penalty. According to court documents, Schwartz’s client must now:

• Cease all sales of products associated with the fraudulent filings
• Issue full refunds to every customer who purchased said products
• Surrender remaining inventory of the disputed goods
• Disgorge all profits derived from the illegal activity
• Potentially face additional damages and interest calculations

Legal analysts note that these remedies could total millions of dollars, effectively bankrupting the client and ending their business operations permanently. “This isn’t just about a $5,000 fine,” said Sarah Thompson, a legal technology consultant. “The cascading effects of these sanctions demonstrate how one attorney’s mistake can destroy an entire enterprise.”

The Judge’s Scathing Rebuke

What makes this case particularly noteworthy is Judge Castel’s withering assessment of Schwartz’s conduct. The judge emphasized that the attorney appeared to not appreciate “the gravity of the situation,” repeatedly submitting filings with fake citations even after being warned that sanctions could be ordered.

“This was a choice,” Castel wrote, noting that Schwartz’s errors were caught early by another defendant’s lawyer, Joel MacMull, who urged immediate notification to the court. The entire debacle could have been resolved in June 2025, MacMull suggested during the sanctions hearing.

Instead of following this advice, Schwartz delayed notifying the court, claiming he was working to correct the filing. He testified that he planned to submit corrections when alerting the court to the errors. However, Judge Castel noted that no corrections were ever submitted, and Schwartz kept the court “in the dark.”

“There’s no real reason why you should have kept this from me,” the judge said during the heated sanctions hearing.

The Whistleblower’s Role

The court learned of the fake citations only after MacMull notified the judge by sharing emails documenting his attempts to get Schwartz to act urgently. Those emails revealed Schwartz scolding MacMull for “unprofessional conduct” after MacMull refused to check the citations for him—a responsibility the judge noted was absolutely not MacMull’s.

Schwartz told Judge Castel that he also thought it was unprofessional for MacMull to share their correspondence. However, the judge said the emails were “illuminative,” providing crucial context for understanding the timeline and Schwartz’s state of mind.

At the hearing, MacMull asked if the court would allow him to seek payment of his fees, arguing that “there has been a multiplication of proceedings here that would have been entirely unnecessary if Mr. Feldman had done what I asked him to do that Sunday night in June.”

The Broader Implications

This case has sent shockwaves through the legal profession, prompting law firms nationwide to reassess their AI policies and training protocols. The incident highlights several critical issues:

Verification Protocols: The fundamental failure here was not using AI, but failing to verify its outputs. Legal professionals are now implementing multi-layer review processes specifically designed to catch AI-generated errors.

Professional Responsibility: The case raises questions about an attorney’s duty to supervise technology use by themselves and their staff. Many firms are now requiring certification that all AI-generated content has been independently verified.

Client Risk Management: The severe financial consequences demonstrate how individual attorney misconduct can create enterprise-level liability for clients, potentially affecting insurance coverage and business relationships.

The AI Revolution in Legal Practice

The Schwartz case comes amid rapid adoption of AI tools in legal practice. According to a 2024 survey by the American Bar Association, 35% of law firms now use AI for legal research, document review, and drafting. However, only 12% have formal policies governing AI use.

“The technology is moving faster than the ethics guidelines,” said Dr. Elena Rodriguez, a legal technology ethicist at Stanford Law School. “We’re seeing a fundamental shift in how legal work gets done, but the professional responsibility rules haven’t caught up.”

Law firms are responding by:

• Implementing AI detection software that flags potentially fabricated citations
• Requiring multiple attorney reviews of AI-generated content
• Developing internal databases of verified AI tools and their limitations
• Creating continuing education programs focused on AI literacy

The Human Cost

Beyond the legal and financial implications, the case has taken a personal toll on those involved. Schwartz, who had a previously unblemished record spanning three decades, now faces potential disbarment and the end of his legal career.

“I made a mistake that I deeply regret,” Schwartz said in his affidavit. “I will never use artificial intelligence for legal research without absolute verification of its authenticity.”

His client, whose identity remains protected due to ongoing proceedings, faces potential bankruptcy and the collapse of their business. Employees may lose their jobs, and customers who relied on the company’s products are left seeking refunds.

Looking Forward

The Schwartz case serves as a watershed moment for AI adoption in professional services. It demonstrates that while AI tools offer tremendous potential for efficiency and innovation, they also carry significant risks when used without proper oversight and verification.

Legal experts predict that this case will lead to:

• Stricter bar association guidelines on AI use in legal practice
• Enhanced court monitoring of AI-generated content
• Development of specialized AI tools designed specifically for legal research with built-in verification features
• Greater emphasis on traditional legal research skills alongside technological proficiency

As Judge Castel’s ruling makes clear, the legal profession is entering a new era where technological competence is no longer optional but essential. Attorneys who fail to adapt to this reality risk not only their careers but also the interests of their clients and the integrity of the legal system itself.

The Schwartz case may well be remembered as the moment when the legal profession collectively recognized that with great technological power comes even greater responsibility.

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