Gordon Rees and senior counsel Cassie Preston both apologized to the court Thursday in responses to U.S. Bankruptcy Judge Christopher L. Hawkins' order to show cause as to why they shouldn't be sanctioned for the motion submitted by Preston in Chapter 11 proceedings for an Alabama hospital back in August. Neither the firm nor Preston contested the issuance of sanctions.
"Gordon Rees recognizes that it is responsible for the actions of its attorneys and will accept whatever sanction the court finds appropriate under these circumstances," the firm said.
According to Judge Hawkins, the motion contained "pervasive inaccurate, misleading and fabricated citations, quotations, and representations of legal authority."
Preston, who works in the firm's Atlanta office, said in her response that she agreed to represent a creditor in the case at the request of a close friend. She said she "allowed her loyalty and desire to help her friend override the fact that she does not have a great deal of experience in the type of matters which were at issue before this court."
Notably, Preston admitted that she "was not candid" about the use of generative text in preparing the motion at a hearing on the matter later in August. While she maintains she did not personally use generative text to prepare the filing, she now said she was "aware that generative AI was used."
"When the court asked Ms. Preston about the use of generative AI, Ms. Preston improperly became defensive and was not fully truthful out of fear," the filing said.
She said she "fully understands that there is no excuse for the submission of the motion or for her responses to the court in the Aug. 26 hearing."
"She understands and believes that her handling of the matter was improper," her response said. "Ms. Preston can only ask that the court show mercy."
In Gordon Rees' response, it said that "when lawyers are not candid with the court in their filings and in their responses to questions from the court, their duties are violated."
"That is unfortunately what happened here," the firm said. "Gordon Rees is profoundly embarrassed by the events leading to the show cause order, understands that such violations have caused parties and the court to waste time and resources in addressing these violations, and sincerely apologizes to everyone affected."
Jackson Hospital & Clinic, based in Montgomery, Alabama, filed for Chapter 11 protection in February. According to the firm's filing, Gordon Rees and Preston represented creditor Progressive Perfusion Inc. in the Chapter 11 case.
Progressive Perfusion dropped Preston as its attorney on Oct. 17, according to the case docket.
The show cause order centers on a motion for reconsideration Preston filed in August concerning a dispute over payment of outstanding debt. Jackson Investment Group, the debtor-in-possession lender, responded with an objection and request for sanctions, arguing that Preston's motion "fabricates quotes from case law and statutes, mis-cites case law and wildly misstate[s] issues and holdings of existing cases." Jackson Investment Group said it believed Preston had used AI to draft the filing and hadn't checked it for mistakes.
Initially, Preston pushed back against the sanctions request, arguing that she didn't submit the motion in bad faith and that the "speculation of 'AI use' is unsupported."
"Citation errors do not justify punishment," she wrote at the time.
At an Aug. 26 hearing, Preston was asked directly if AI was used in drafting the reconsideration motion.
"No, sir," Preston said, according to Gordon Rees' filing. "I had a younger attorney start the motion. I finished it. I did not check the citations, to be frank with you, not to the degree that I should have."
Following the hearing, the court issued its show cause order for the firm and Preston for making "false statements of fact or law to the court." Gordon Rees said it didn't know about the proceedings until after the show cause order was issued.
Preston said Thursday that she was aware generative text was used but it "was not provided to her by a legal associate."
"Ms. Preston is prepared and willing to communicate the source of this information to the court either under seal or in a closed hearing," her response said. The explanation "will not, however, abdicate her knowledge and responsibility."
After it got up to speed, Gordon Rees said Thursday, it investigated Preston's other filings. There was one other filing in a Georgia state court case that management already knew about from September, but that was it, the firm said.
Gordon Rees added that it's "in the process of taking steps designed to ensure that such conduct does not happen again."
The firm said it adopted a new cite checking policy requiring all briefs to be checked in their entirety to ensure they are accurate and cited cases "are still good law." It said it also implemented additional education and training on the risks of using artificial intelligence and its policies.
"Gordon Rees again apologizes to the court and all affected parties and counsel for the events which required the DIP lender and the debtors to file motions for sanctions and the court to enter a show cause order," it said. "Gordon Rees recognizes that it is ultimately responsible for the acts of Ms. Preston and for that reason accepted responsibility for paying all requested attorneys' fees of the debtors and DIP lender."
As for sanctions, Gordon Rees said it "stands ready to take such other steps as the court might instruct to avoid such conduct in the future."
"If this court determines that Gordon Rees nonetheless should be sanctioned, given the seriousness of the matter involved here, the law firm will understand the basis of the court's decision," the firm said.
Preston has worked for Gordon Rees for a little less than two years. Before that, she was managing attorney at Callahan & Fusco LLC, a New Jersey-based firm, according to her LinkedIn profile. She worked at several other firms before that, including her own Preston Firm LLC.
Preston earned her law degree from John Marshall Law School in Atlanta and a bachelor's degree from Clayton State University, her LinkedIn profile says.
In Thursday's filing, Preston said she typically handles insurance, product and construction defects and contractual disputes. She added that she is "a single mother with a child in college who has recently undergone a series of traumatic ordeals in her personal and financial life which led to her inability to keep up with her case load while attempting to help one of the few friends who had stood by her during her ordeal."
"This information, too, Ms. Preston is willing to share with the court either under seal or in a closed hearing," the filing said.
She joins a growing list of lawyers facing sanctions over similar incidents. Earlier this month, a New York state court said a New Jersey attorney must face sanctions for both submitting filings with inaccurate and outright made-up case details — and for subsequently doubling down by submitting more "AI-hallucinated" material to defend his conduct.
That attorney, Michael William Charles Fourte, has been ordered to pay attorney fees and costs as well as out-of-pocket expenses incurred by the opposing party as a sanction for frivolous conduct.
Preston, Gordon Rees and their lawyers didn't immediately respond to requests for comment late Friday.
Preston is represented by Wallace D. Mills.
Gordon Rees is represented by Robert D. Segall and J. David Martin of Copeland Franco Screws & Gill PA.
Progressive Perfusion is represented by Joel D. Connally of Strength & Connally LLC.
The case is In the Matter of: Jackson Hospital & Clinic Inc. et al., case number 25-30256, in the U.S. Bankruptcy Court for the Middle District of Alabama.
--Additional reporting by Matt Perez. Editing by Brian Baresch.
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