Labor & Employment Law Daily Wrap Up, AI NEWS—Two cases demonstrate potential perils of AI use in the practice of law, (Mar 11, 2026)

By Brandi O. Brown, J.D.

In one case, an assistant U.S. Attorney resigned ahead of an anticipated court shellacking; in another, a company on the receiving end of a revived lawsuit sued OPENAI based on its role as “legal assistant and advisor” to the litigant.

Two recent litigation developments highlight potential perils of using AI in the legal field. In one case, an assistant U.S. Attorney recently stepped away from a case (and from the U.S. Attorney’s office) after a court issued an order for him to show cause why he should not be sanctioned for the inclusion of fabricated quotations and misstatements of case holdings in various court filings. In another, an insurance company has filed suit against OPENAI because a litigant, with whom it had previously settled a lawsuit, filed a motion to reopen that suit based on the legal assistance and advice of OPENAI.

Fabrications and misstatements. In Fivehouse v. U.S. Department of Defense, the court issued an order requiring an assistant U.S. Attorney to show cause after a plaintiff—a retired Air Force colonel who is challenging a policy limiting the availability of GLP-1 weight loss meds for TRICARE for Life beneficiaries—raised concerns that a brief filed by the U.S. Attorney’s office included fabricated quotations and misstated the holdings of several cases.

The assistant U.S. Attorney initially responded that he had “inadvertently included incorrect citations to case law from this Circuit,” and he attributed the errors to the “inadvertent filing of an unfinalized draft document.” The court, however, was not satisfied with that response and continued to have “serious concerns about the accuracy of certain quotations and representations” in the attorney’s filings, as well as the explanation offered for their inclusion.

The show cause order identified issues not only with the brief identified by the plaintiff but also issues in multiple other responsive motions and documents. The court threatened that if a violation were established, it could impose a wide variety of sanctions. The show cause hearing was scheduled to occur March 10. “Because of the seriousness of these issues,” the court added, “the court requests that one or more members of the leadership of the United States Attorney’s Office attend and participate.”

However, in the meantime, a notice of substitution of counsel was filed by the U.S. Department of Defense. The case is No. 2:25-cv-00041-M-RN.

Unauthorized practice of law. In another case, Nippon Life Insurance Co. of America v. OPENAI Foundation, an insurance company has filed suit against OPENAI directly, alleging that it has engaged in the unlicensed practice of law, tortiously interfered with a contract, and abused the process because, through its AI chatbot program ChatGPT, it has allegedly provided legal assistance to a user without a law license. Previously, the company explained, it had reached a settlement with the user that resulted in dismissal of her lawsuit with prejudice.

However, it alleges that as the user’s legal assistant and advisor, OPENAI “intentionally induced and facilitated” the user’s breach of that agreement and aided and abetted the user’s alleged abuse of the judicial process. It alleges that, as a result of the AI company’s wrongful conduct, it has been required “to spend significant time and resources relitigating settled claims, incurring substantial legal fees, costs, and other damages.”

The lawsuit, filed in federal district court in Illinois, is No. 1:26-cv-02448.

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