Case D-50 · AI Sanctions Case Tracker

Versant Funding LLC v. Teras Breakbulk Ocean Navigation Enters., LLC

U.S. District Court for the Southern District of Florida, No. 17-CV-81140, 2025 WL 1440351 (Magistrate Judge William Matthewman, May 20, 2025)

The case

Versant Funding LLC v. Teras Breakbulk Ocean Navigation Enters., LLC, No. 17-CV-81140, 2025 WL 1440351 (S.D. Fla. May 20, 2025) (Magistrate Judge William Matthewman). Discussed in ABA Probate & Property (Sept.–Oct. 2026): https://www.americanbar.org/groups/real_property_trust_estate/resources/probate-property/2026-september-october/artificial-ethics-aba-formal-opinion-512-role-ethics-artificial-intelligence/ ; cited in a Nov. 21, 2025 S.D. Fla. order: https://cases.justia.com/federal/district-courts/florida/flsdce/1:2025cv23877/696136/14/0.pdf?ts=1763805742

What happened

A hallucinated citation remained in a filing even after opposing counsel flagged it, and counsel withdrew it about two weeks later without explanation, explaining fully only the same day the court ordered an explanation. The court called that "an unnecessarily slow response to a serious misrepresentation," but gave him "some credit" for eventually acknowledging his error, apologizing to the Court and opposing counsel, and filing the notice withdrawing the citation, and found that they "did not attempt to minimize their behavior. They did not attempt to cover up their error or obfuscate the issue. They accepted responsibility and apologized." Both the pro hac vice attorney who drafted the filing and the local counsel who sponsored the admission were sanctioned.

The rule and the sanction

Sanctions under Rule 11 and the court's inherent authority on both attorneys, a shared supervisory failure: plaintiff's reasonable fees and costs for researching and replying to the Response (Lord and Bello jointly and individually liable; the amount was left to be determined); an approved CLE on artificial intelligence with an ethics component for each lawyer, to be completed within 30 days; and fines of $1,000 (Lord) and $500 (Bello) payable to the Registry of the Clerk. The court declined to revoke Lord's pro hac vice status "at this time." The key holding for practitioners: local/sponsoring counsel cannot just lend a name; sponsoring a pro hac vice admission carries real Rule 11 verification exposure.

How it could have been avoided

When opposing counsel flags a bogus citation, correct it immediately, delay reads as lack of candor and becomes its own sanctionable offense. Local counsel: verify what you sponsor; a signature on someone else's AI-drafted filing is your Rule 11 certification too. Pro hac vice lawyers: your admission sponsor will not save you, and may go down with you.

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