Appellate Division, Third Department, Issues Monetary Sanctions against Attorney for Misuse of GenAI in the “First Appellate Level Case In New York” To Do So

• Posted on: Jan 16 2026

By: Jonathan H. Freiberger

Artificial Intelligence (“AI”) and Generative Artificial Intelligence (“GenAI”) are all the rage these days. While AI and GenAI can be useful tools, caution is necessary when using such tools. Today we will discuss Deutsche Bank National Trust Co. v. Letennier, a case decided by the Appellate Division, Third Department, on January 8, 2026. The Court described the decision as the “first appellate-level case in New York addressing sanctions for the misuse of GenAI.”[1]

Deutsche Bank is a mortgage foreclosure action[2] commenced in 2018. The borrower, in his answer, asserted numerous affirmative defenses, including lack of standing. The lender and borrower moved for summary judgment and the motion court granted the lender’s motion and denied the borrower’s cross motion. The order was affirmed on the borrower’s appeal. Thereafter, the borrower filed numerous motions, both before and after a judgment of foreclosure and sale was issued. One of the motions was deemed to be frivolous and the motion court warned the borrower about the issuance of monetary sanctions if frivolous conduct continued. Subsequent motion practice by the borrower resulted in a finding by the motion court that the borrower was “a vexatious litigant that must bring future motions by order to show cause, and awarding costs and legal fees to [the lender] for [the borrower]’s frivolous conduct.” Additional motions for previously sought relief were filed by the borrower and appeals from the denial of those motions are the subject of Deutsche Bank.

While the Court noted that “[i]nitially, the merits of this appeal are unremarkable in nature” it went on to state that the appeal becomes “unconventional” because the borrower’s “opening brief cites six cases which do not exist” and which the lender’s counsel identified as “possibly being the product of artificial intelligence.” The lender moved for sanctions against the borrower and its counsel. In response, [the borrower] claimed the nonexistent cases were citation or formatting errors that he would correct in his reply brief and then opposed the motion for sanctions with more fake cases and interpretations for existing cases that are at best strenuously attenuated, and at worst entirely inapposite.” The borrower subsequently included more fake cases and “false legal propositions” in letters to the Court. The Court added:

In examining the propriety of defendant’s previously filed papers, more nonexistent cases were discovered in a motion that granted affirmative relief to defendant. Defense counsel reluctantly conceded during oral argument that he used AI in the preparation of his papers and, although he told the Court that he checked his papers, the filings themselves demonstrate otherwise. In total, defendant’s five filings during this appeal include no less than 23 fabricated cases, as well as many other blatant misrepresentations of fact or law from actual cases.

The Court explained that “generative artificial intelligence … represents a new paradigm for the legal profession, one which is not inherently improper, but rather has the potential to offer benefits to attorneys and the public – particularly in promoting access to justice, saving costs for clients and assisting courts with efficient and accurate administration of justice.” (Citations and footnote omitted.) The Court then cautioned that “attorneys and litigants must be aware of the dangers that GenAI presents to the legal profession [including] AI “hallucinations,” which occur when an AI database generates incorrect or misleading sources of information due to a “variety of factors, including insufficient training data, incorrect assumptions made by the model, or biases in the data used to train the model.” (Citations and internal quotation marks omitted.) The Court then noted that other courts “throughout the country which have been confronted with AI-generated authorities have concluded that filing papers containing hallucinated cases and fabricated legal authorities may be sanctionable….” (Citations omitted.)

The Court recognized that sanctions can be awarded against a party or attorney for engaging in frivolous conduct under 22 NYCRR 130-1.1 and “that rule 3.3 of the Rules of Professional Conduct provides that ‘[a] lawyer shall not knowingly … make a false statement of fact or law to a tribunal or fail to correct a false statement of material fact or law previously made to the tribunal by the lawyer’”. (Hyperlinks added.) In determining that sanctions were appropriate against counsel for GenAI related conduct, the Court found, inter alia:

Here, defendant submitted at least 23 fabricated legal authorities across five filings during the pendency of this appeal. He has also misrepresented the holdings of several real cases as being dispositive in his favor – when they were not. It is axiomatic that submission of fabricated legal authorities is completely without merit in law and therefore constitutes frivolous conduct. It cannot be said that fabricated legal authorities constitute “existing law” so as to provide a nonfrivolous ground for extending, modifying or reversing existing law….

Where we are most troubled is that more than half of the fake cases offered by defendant came after he was on notice of such issue, whereby his reliance on fabricated legal authorities grew more prolific as this appeal proceeded – despite it being apparent to him that such conduct lacked a legal basis. Rather than taking remedial measures or expressing remorse, defense counsel essentially doubled down during oral argument on his reliance of fake legal authorities as not germane to the appeal. [Citations, internal quotation marks and footnotes omitted.]

After analyzing other AI sanction cases the Court assessed a sanction in the amount of $5,000.00 against the borrower’s counsel for the “misuse of GenAI”. The Court added that “attorneys and litigants are not prohibited from using GenAI to assist with the preparation of court submissions. The issue arises when attorneys and staff are not sufficiently trained on the dangers of such technology, and instead erroneously rely on it without human oversight.”

The Court also found that the appeal was frivolous and assessed a $2,500.00 sanction against the borrower and an additional $2,500.00 sanction against the borrower’s attorney.

Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes and is not intended to be and should not be taken as legal advice.

[1] The Court, relying on United States v. Google LLC, 2025 WL 2523010, at *9, 2025 U.S. Dist LEXIS 170459 at *52-53, explained that “‘GenAI is a subfield of AI “that uses machine-learning techniques to generate new data, including text, images, sound, code, and other media.’” Deutsche Bank at n. 5.

[2] This BLOG has written dozens of articles addressing numerous aspects of residential mortgage foreclosure. To find such articles, please see the BLOG tile on our website and search for any foreclosure, or other commercial litigation, topics that may be of interest you.

Tagged with: Commercial Litigation, GenAI, Mortgage Foreclosure, Real Estate Litigation, Sanctions