Labor & Employment Law Daily Wrap Up, REMEDIES, DAMAGES—D. Ariz.: Rule 11 sanctions imposed on employee’s counsel for use of fabricated citations, quotations, (Apr 3, 2026)

By Kathleen Kapusta, J.D.

“Federal courts across the country have increasingly grappled with the issue of ‘hallucinated content’ appearing in court filings.”

Declining to dismiss the Section 1981 constructive discharge claim of a Suns Legacy Partners employee, who alleged she was the highest ranking Hispanic member of the company’s corporate staff yet received no recognition for her contributions to a high-profile project, a federal court in Arizona found it did not need to address at this stage whether her claim could exist as a standalone claim. The court, however, tossed her IIED claim finding she failed to allege any sufficiently outrageous acts by the company. Finally, the court imposed Rule 11 sanctions against the employee’s counsel for their use of fabricated citations and quotations in several of their pleadings (Montes v. Suns Legacy Partners LLC, No. CV-25-01295-PHX-GMS (D. Ariz. Mar. 31, 2026)).

According to the employee, despite her high level of responsibility, she did not receive compensation or a title that reflected “the scope or impact of her work.” Nor, she alleged, did she receive the same attention other male employees who worked on comparable projects received. She also claimed her supervisor told her that a senior VP had declared that when a “high-profile media opportunity” came down to a selection between a qualified Hispanic female candidate and a Caucasian female candidate, the VP would not choose the Hispanic candidate because “she wasn’t polished enough.”

Alleged harassment. The employee also alleged that a different VP made inappropriate advances toward her, frequently mentioned he was getting a divorce, and suggested “that a romantic or sexual relationship with him could result in career advancement.” When she rebuffed his advances, she purportedly experienced a decline in professional support. In addition, she alleged she was forced by two male “agents” of the company to view and discuss a sexually inappropriate image and, in another incident, was asked if she was a lesbian when she voiced disagreement with a senior director who made blatantly homophobic comments.

Resignation. In response to the workplace stress, she recorded voice messages on her phone to document her frustrations, which she inadvertently sent to her supervisor. In one of the messages, she “expressed her belief that [he] was an ineffective leader, citing his repeated failures to address misconduct directed at her.” She was disciplined for the incident as well as for a social media post highlighting her involvement in the high-profile project. Not long after that, she resigned.

Constructive discharge. She sued, asserting various claims of discrimination and retaliation and the company moved to dismiss her constructive discharge and intentional inflection of emotional distress (IIED) claims. As to her constructive discharge claim, the company argued that she could not bring an individual claim for constructive discharge under Section 1981. The cases it cited in support, however, had no bearing on whether she could bring a claim for constructive discharge in the federal context, said the court, noting further that she also brought Section 1981 claims for race discrimination and retaliation. Pointing out that the company did not move to dismiss those claims, the court found that whether her constructive discharge claim could exist as a standalone claim was a question it did not need to address at this stage.

IIED claim. In support of her IIED claim, the employee pointed to the VP’s inappropriate advances and the decline in professional support when she declined those advances; the agents forcing her to view and discuss the sexually inappropriate photo; the two disciplines imposed against her; and the company’s failure to give her any public recognition for her work. But even taken together, said the court, these incidents were not indicative of the type of conduct that a reasonable person would find to be sufficiently outrageous to state an IIED claim.

Nor did the employee plausibly allege the company either intended to cause emotional distress or recklessly disregarded the near certainty that such distress would result from its conduct. She argued that intent could be alleged generally and inferred from conduct but neither of her cited authorities supported that position, observed the court, also rejecting her claim that “[c]ourts routinely uphold IIED claims at the pleading stage where plaintiffs allege a consistent pattern of conduct from which intent or recklessness may reasonably be inferred.”

Motion for sanctions. Finally, the court addressed the company’s motion for sanctions against the employee’s counsel, which was based on fabricated citations it had identified in several pleadings. According to the company, sanctions were appropriate because counsel’s explanations for the fictious citations and quotations were “implausible,” and the Notices of Errata counsel filed, along with a Motion for Leave to Substitute a Reply Brief, after the citations were brought to counsel’s attention, did not “withdraw or appropriately correct the full set of issues identified.” The only plausible explanation for these recurring issues, it argued, was “that Plaintiff’s counsel used artificial intelligence tools without verifying their outputs.”

Complaint. Noting that it identified at least 18 instances where plaintiff’s counsel included either a fictitious citation or a fictitious quotation, the court found counsel violated their obligation to present “claims, defenses, and other legal contentions” that are “warranted to existing law.” In response to the fictitious case included in the initial complaint, plaintiff’s counsel claimed a non-attorney law clerk prepared the initial draft and conducted legal research under the supervision of senior counsel attorneys.

Although counsel purportedly “used LexisNexis’s Document Analysis Tool to verify the accuracy of all case law citations,” the fictitious citation was not flagged. Counsel contended that that the fictitious case was a formatting error and it was intended to reference a Ninth Circuit case with the same name.

Calling this explanation problematic, the court noted that “counsel seek to pass the buck to their law clerk. But an attorney’s Rule 11 duties cannot be delegated.” Further, counsel admitted they did not read the cases cited in the initial complaint. Nor did the explanation attributing the fictious citation to a formatting error withstand even basic scrutiny, said the court, finding it apparent that AI “was used to conduct legal research, or even generate the initial complaint, thus leading to the inclusion of a fictitious case with a hallucinated parenthetical.”

Even if they were not generated by AI, said the court, counsel still “‘failed to take even th[e] most basic of actions’—actually reviewing the complaint, reading the cases cited, and not simply running it through a legal cite checking tool and calling it a day—'and therefore did not catch the fact that the [complaint] contained [a] citation[] that did not exist.’”

Motion to dismiss. As to the employee’s response to the motion to dismiss, the court pointed out that plaintiff’s counsel again blamed the inclusion of two fictitious cases on the law clerk, who prepared a draft of the brief. “While counsel aver that they ‘did not invent those authorities, nor did they rely on generative AI for case generation,’ they again fail to give any plausible explanation as to how such realistic looking cases ended up in their submitted filing,” said the court, finding again that counsel did not make a “reasonable and competent inquiry” into the existence of fictitious citations in this pleading.

Convoluted tale. Regarding the employee’s reply in support of her motion to proceed anonymously, the court noted that “Plaintiff’s counsel present a convoluted tale about the inclusion of multiple fictitious citations,” which the court found to be “an invention.” The court also refused to give any credence “to counsel’s regurgitated defense of ‘formatting’ or ‘clerical’ errors.”

Fictitious quotations. Nor, said the court, did plaintiff’s counsel make a “reasonable and competent inquiry” into the existence of fictitious quotations in a pleading. “Plaintiff’s counsel give the same song and dance here: the law clerk ‘handled’ the drafting process of the brief, counsel ran the brief through the LexisNexis cite checking tool, and no fake quotes were flagged. Counsel could have caught the fabrications by reading the cases cited in their brief. They failed to do that.”

Sanctions. Finding counsel’s conduct was not objectively reasonable under Rule 11, the court ordered counsel and their respective law firms to pay the company’s reasonable attorneys’ fees incurred in discovering the nonexistent citations and quotations and briefing the Rule 11 motion for sanctions. “This endeavor, said the court, “has ultimately resulted in a great deal of wasted time and judicial resources. By being more forthcoming with the Court, Plaintiff’s counsel could have avoided sanctions altogether.”

The court also required counsel to serve a copy of this order on their client and to participate in a Continuing Legal Education course of at least one hour regarding the ethical use of AI in the practice of law. It further ordered the Clerk of the Court to serve a copy of this order on the various state bars for which counsel are members and serve a copy on all the district judges and magistrate judges in this district.

The case is No. CV-25-01295-PHX-GMS.

Judge: Snow, G.M.

Attorneys: Chloe Woods (IBF Law Group) and Cortney Walters (Law Office of Cortney E. Walters) for Chelsea Montes aka Jane Doe. Craig Jennings Lavoie (Munger Tolles & Olson) for Suns Legacy Partners LLC.

Companies: Suns Legacy Partners LLC

Cases: Discrimination SexDiscrimination RaceDiscrimination Discharge RemediesDamages Procedure ArizonaNews