AI in the Practice of Law Creates Risks for Clients
AI is revolutionizing virtually every industry sector, and the legal industry is no exception. It can automate routine tasks and provide deeper insights through data analysis, freeing up attorneys for high-value work. However, the use of AI in the practice of law is fraught with pitfalls.
AI models can hallucinate — generate incorrect or made-up information — putting attorneys at risk of court sanctions. The use of AI can also expose confidential information. Ultimately, clients bear the most significant financial, strategic, and emotional consequences of lawyers’ improper reliance on AI.
Recent cases serve as a testament to the impacts on clients. To address the problem, the State Bar of California has introduced new ethical rules regulating the use of AI by lawyers licensed in the state. Many other jurisdictions are issuing rules and guidance as well. These rules are designed to protect clients from the impact of irresponsible AI use and ensure that their cases are judged on their merits.
Real-World Cases Show AI’s Impact on Clients
The client impact of AI has moved from a theoretical risk to a high-stakes battleground in federal and state courts. Recent court rulings highlight how a lawyer’s unverified use of AI can sabotage a case:
Withers v. City of Aberdeen. This breach of contract case escalated when attorneys on both sides admitted to submitting court documents that contained false, AI-generated citations. A Mississippi federal judge disqualified all four attorneys from the case and revoked the pro hac vice admission of the two out-of-state lawyers. The judge also canceled the trial, throwing the case into limbo as the clients seek new legal representation.
The Oregon Vineyard Dispute. In a high-stakes family battle over the control of Valley View Winery, the plaintiff’s legal team submitted documents that relied on AI-hallucinated case citations. When caught, one lawyer attempted a cover-up. In a sweeping ruling, U.S. Magistrate Judge Mark D. Clarke dismissed the plaintiff’s claims with prejudice and sanctioned her two attorneys for a total of $110,000 in fines and attorneys’ fees.
The Doc App v. Leafwell. The plaintiff’s attorney submitted a motion with numerous fake, AI-generated case citations. The judge issued an Order to Show Cause regarding sanctions. Attempting to dodge the fallout, the plaintiff voluntarily dismissed the federal lawsuit, planning to file in state court. However, the judge still referred the lawyer to the Florida Bar for formal discipline. The defendant countersued, alleging abuse of process, negligent supervision, and tortious interference.
How AI Errors in Legal Practice Affect Clients
As the above cases show, AI failures in legal practice directly affect clients. These AI impacts can manifest themselves in the following ways:
Financial loss. Clients may pay thousands of dollars for court filings that are ultimately thrown out due to AI hallucinations. They must then pay new or existing counsel to undo the damage, rewrite briefs, and file emergency corrections. Courts can order the losing party to pay the opposing side’s legal fees if a case is deemed frivolous due to fake AI citations.
Case dismissal. Judges frequently dismiss cases with prejudice as a sanction for submitting fraudulent AI data. If a defense attorney uses faulty AI, the court may strike their response entirely, resulting in an automatic win for the opposing party. When a judge orders a rewrite of an AI-corrupted brief, strict statute of limitations or appeal deadlines may expire.
Loss of settlement leverage. A client’s bargaining power relies on the strength of their case and the credibility of their counsel. The moment their lawyer is caught using fake AI data, leverage craters. Embarrassed clients are often forced to settle out of court for pennies on the dollar to avoid further public shaming.
Loss of confidentiality. When lawyers plug sensitive client information, trade secrets, or medical records into public AI platforms, that data is absorbed into the AI model’s training loop. Uploading confidential case strategies to third-party servers can legally destroy attorney-client privilege, making that data discoverable by opponents.
Reputational damage. Court sanctions are public. Corporate clients can suffer massive brand damage, dropping stock prices, and lost business when news breaks that their legal case relied on fake AI data. Individual clients may face public embarrassment, as their names remain permanently tied to high-profile legal scandals in searchable internet databases.
Emotional distress. Clients hire lawyers under the assumption of human expertise. Litigation is often a stressful experience for clients under the best of circumstances. Discovering a lawyer outsourced their fate to an unverified algorithm can cause psychological stress. Instead of resolving their underlying issue, clients are dragged into months of secondary litigation over sanctions and malpractice.
How the Proposed California State Bar Rules Protect Clients
The State Bar of California has shifted from issuing mere advisory warnings to developing formal rules that target AI-related misconduct. From the client’s perspective, the State Bar of California’s new framework is designed to shield them from the unique financial, strategic, and privacy threats posed by AI.
Stopping overbilling and “phantom” hours. Lawyers might be tempted to use AI to complete tasks in seconds but bill clients for hours of human work. Under the state’s updated rule on ethical billing (Rule 1.5), lawyers must pass the cost-efficiency of AI directly to the client. Clients are protected from predatory billing practices, ensuring they only pay for active, human analytical work.
Ensuring transparency, control, and accountability. A client can be blindsided if their lawyer is caught using fake, AI-generated information. Under California’s new rules, lawyers must disclose the use of AI if it materially affects the scope, cost, or strategy of the representation (Rule 1.4). Clients are empowered to provide explicit instructions or guidelines that restrict, limit, or dictate whether a lawyer is allowed to use AI in their specific case.
Preventing AI-related data breaches. If lawyers enter a client’s sensitive information into a public AI tool, the information could leak into the model’s training data. California mandates strict data security and information-governance protocols before any client data touches an AI server (Rule 1.6). Attorneys must ensure that the use of AI is consistent with their duty of confidentiality and preserves the attorney-client privilege.
Preventing case sabotage. If tech-illiterate lawyers file briefs filled with hallucinated legal cases, the client’s lawsuit could be thrown out of court. The State Bar codifies a strict, nondelegable duty to verify the accuracy of AI outputs (Rules 1.1 and 3.3). A lawyer must personally check every AI-generated citation to preserve the integrity of the client’s lawsuit.
Holding law firm leadership accountable. An unmonitored junior associate or paralegal might use a risky, unvetted AI app that damages a high-stakes case. Managing partners and firm executives are held strictly liable for establishing firm-wide AI safety policies and monitoring (Rules 5.1 and 5.3). These rules ensure that a client’s legal team operates under unified, safe, and audited technology protocols.
The State Bar’s ethics committee has approved these rules, and they are now awaiting approval from the Supreme Court of California. Once approved, they will carry the full force of law for legal practitioners.
Failing to follow them will constitute professional misconduct and trigger a formal process. The State Bar’s Office of Chief Trial Counsel investigates and prosecutes the case before the specialized State Bar Court. The California Supreme Court acts as the final arbiter and officially hands down the punishments, which can include disbarment.
Lawyers Should Prepare for Increased Scrutiny of AI Use
More than 35 state bar associations have issued formal rules or ethical guidelines regarding the use of AI. The legal landscape has rapidly shifted from voluntary best practices to binding rules enacted by state Supreme Courts and localized court mandates.
The rules of professional responsibility are a critical part of Purdue Global Law School’s online Juris Doctor (JD) program. Graduates of our JD program are academically eligible upon graduation to sit for the California or Connecticut bar or, with an approved petition, the Indiana bar.
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