Elite law firm apologises for AI ‘hallucinations’ in bankruptcy case
An elite US law firm has had to apologise to a judge after its restructuring team made a filing in a high-profile case that contained multiple AI generated ‘hallucinations’.
The head of Sullivan & Cromwell’s restructuring practice, Andrew Dietderich, apologised in a letter to the New York federal judge for mistakes that included misquoting the US bankruptcy code and citing cases incorrectly in a court filing.
The case in question involved Sullivan & Cromwell representing the liquidators, appointed by the British Virgin Islands’ legal authorities, who are pursuing actions against Prince Group and its owner, Chen Zhi.
“We deeply regret that this has occurred”, Dietderich stated, but it was not confirmed which member of the team oversaw the documents that ended with ‘hallucinations’.
The error was flagged by Price Group’s lawyers at Boies Schiller Flexner (BSF), who said words that Sullivan & Cromwell had quoted in its motion “do not appear in chapter 15 of the US Bankruptcy Code” and pointed to “multiple cited decisions” that were “misquoted or misidentified” – according to the FT.
The elite law firm, which typically charges $3,000 per hour, told the New York court that the firm maintained “rigorous” standards when using AI tools and that it “instructs lawyers to ‘trust nothing and verify everything’”.
AI cracks are starting to appear
The professional services industry is facing a suite of challenges as pressure to invest in AI is starting to reveal weak spots.
In the UK, courts have had to review cases after lawyers relied on citations and quotations generated by AI tools that turned out to be entirely fictitious.
A senior High Court judge last year warned lawyers that the court has a range of powers, including referring matters to regulators, imposing wasted-cost orders, and imposing contempt or even criminal proceedings.
This is not unique to law firms. Big Four firm Deloitte issued a partial refund to the Australian federal government after a report it released contained several errors caused by AI.