Fake AI Citations: California Court Sanctions Attorney

One ruling, two distinct holdings

The California Court of Appeal decided Del Biaggio v. Bansen, 121 Cal. App. 5th 831 (2026). The first public analysis of the ruling is dated 22 September 2026. The decision has two holdings, but for anyone managing legal risk there is only one lesson.

The case arose from a personal services contract. Daniel Del Biaggio worked four years at Bancrest Dairy and sued Pete and Mary Bansen for breach. The jury awarded $52,850.

As the prevailing party, counsel then sought $115,533 across attorney fees and paralegal hours^[1]. The trial judge cut the attorney hours and excluded the paralegal hours entirely.

On appeal the decision splits cleanly in two: the fee calculation on one side, counsel's litigation conduct on the other.

The hours stay cut, the paralegal gets in

The Court affirmed the substantial reduction in attorney hours.

There are three reasons and all of them are technical: block billing, duplication of work, time spent on claims that were rejected or unsupported. The affirmance entrenches how California judges scrutinise fee applications. Whoever seeks recovery bears the burden of a line-by-line, readable accounting.

On paralegal time the Court reversed the trial court. A contractual clause referring to «attorneys' fees» also covers reasonable paralegal hours, because excluding them would discourage efficient delegation and drive up the cost of litigation.

The case therefore returns to the trial judge to fix the amount of those hours. The Court also vacated the sanction imposed on the party for a motion for reconsideration filed outside the permitted grounds. Two corrections in the prevailing party's favour, and a third running the other way.

The fabricated citation becomes its own offence

This is the heart of the ruling for anyone working in governance.

The Court sanctions the party's attorney for filing a brief containing case citations fabricated by a generative AI system. The legal construction deserves technical attention.

Cutting compensable hours targets inefficiency and superfluous work, and operates on the amount of the fee. The sanction for fabricated citations, by contrast, has a life of its own, on a different plane, with a different consequence. Reducing the bill absorbs the first issue and leaves the second untouched.

That separation is the real delta in the decision. Anyone who read the use of fabricated AI citations as a diligence problem already offset by the fee cut now has an answer from the California courts.

The governance signal: a model's output, once filed in court, becomes the attorney's professional conduct and is judged as such.

The State Bar reporting duty

The Court orders notification to the State Bar of California under Cal. Bus. & Prof. Code § 6086.7(a)(3). It also orders that the client be informed.

The statute is in force and requires the court to notify the professional body whenever it imposes judicial sanctions on an attorney. The report opens an independent disciplinary track. The civil case closes; the ethics proceeding begins.

The double notification changes the risk calculus for the firm. The client learns what happened from the Court itself, with direct effects on the relationship of trust and on professional liability coverage.

Governing jurisdiction: California, United States. The ruling is published and binds lower state courts.

What changes for buyers of legal services

This touches law firms and, with equal force, their clients.

A brief filed with non-existent precedents exposes the company to sanctions, to a continued hearing and to a loss of credibility before the bench. The reputational damage lands on whoever signed the engagement.

The contractual lever already exists today. The engagement letter can require human verification of every citation, traceability of the tools used and a certificate of compliance attached to every filing. Firms that adopt these controls now reduce their exposure when enforcement spreads to other courts.

The flip side deserves to be stated plainly. The Court recognises paralegal hours precisely in order to reward efficient delegation: the technology remains legitimate and verification remains mandatory.

A compliance posture calibrated on cost control is now badly calibrated against source control.

Three decisions for the board

The picture produces three operational questions, in descending order of urgency.

1. Scope: who authorises the use of generative AI in briefs filed on the company's behalf.
2. Proof: what documentary trail demonstrates that every citation was verified before filing.
3. Disclosure: what information reaches the audit committee when outside counsel receives a judicial sanction.

On the first question the answer must have a name, in writing, before the filing. The General Counsel signs it and communicates it to the firms retained.

The second falls to the Chief Risk Officer, who adds to the legal risk matrix a dedicated line for the outputs of models used by external providers. The third belongs to the audit committee, which sets the internal reporting threshold and the reporting cadence.

The CEO finds here a measurable strategic constraint. Choosing a legal provider belongs squarely among the decisions subject to technology due diligence.

Regulatory horizon

Current status: the decision is published and operates as precedent in California. Cal. Bus. & Prof. Code § 6086.7 is in force and notification to the State Bar has already been ordered by the Court.

The sanctions holding takes effect immediately. The fee holding returns to the trial court, which must fix the reasonable paralegal hours. The two timelines run separately.

Other American states are watching. The analysis published by Proskauer^[2] reads the ruling as a double message: recoverable fees widen and professional discipline tightens.

The question of whether AI tools are admissible in legal practice has been answered: they are. A second question has opened, that of proof of verification, and California has just shown where the judge will look for it.