Lacey v. State Farm General Ins. (2025)

Case details

Full caption

Lacey v. State Farm General Insurance

Country

United States

Jurisdiction

Federal

Decided

2025

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2. I also conclude that additional financial or disciplinary sanctions

2 against the individual attorneys are not warranted. This was a collective 3 debacle, and is properly resolved without further jeopardy. 4

RELEVANT PROCEDURAL AND FACTUAL BACKGROUND

5 Discovery Proceedings Before the Special Master 6

3. In January 2025, the Court appointed me as Special Master in

7 this insurance-related civil action. Central to the reason for my appointment 8 was an ongoing dispute between the parties regarding the insurer’s assertion 9 of various privileges in discovery. (Docket # 70, 73.) 10 4. After handling intervening legal issues, I met with the parties in 11 early April to discuss the insurer’s privilege invocations. The parties provided 12 me with detailed letter briefs regarding the discovery issue in advance of the 13 meeting. When we met, the parties agreed to provide supplemental briefing 14 on a discrete issue regarding the propriety of in camera review of some of the 15 disputed documents. 16

The Briefs with AI Research 17

5. As recounted in detail in orders I issued on April 15 and 20 18 (attached to the Appendix to this order), Plaintiff’s supplemental brief 19 contained numerous false, inaccurate, and misleading legal citations and 20 quotations. According to my after-the-fact review – and supported by the 21 candid declarations of Plaintiff’s lawyers – approximately nine of the 27 legal 22 citations in the ten-page brief were incorrect in some way. At least two of the 23 authorities cited do not exist at all. Additionally, several quotations 24 attributed to the cited judicial opinions were phony and did not accurately 25 represent those materials.2The lawyers’ declarations ultimately made clear

2 Some “pincites” were not correctly reported. While this could certainly

impede research and review, I consider those errors to be at the mild end of the 28 AI hallucination spectrum.

I used a Boolean search (ti(booth and allstate))in the California and 9th Circuit jurisdictional databases on Westlaw. No result found.

Rule 37 a 5 B states that a court “must, after giving an opportunity to be heard, require [ ] the attorney filing [an unsuccessful discovery] motion [ ] to pay the party or deponent who opposed the motion its reasonable expenses incurred in opposing the motion, including attorney s fees.μ Litigation-related sanctions for disobeying a court’s discovery order, but generally applicable to other circumstances may include prohibiting a party from “supporting or opposing designated claims or defensesμ or “striking pleadings in whole or in part.μ Fed. R. Civ. 37 b 2 A ii-iii .

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that the source of this problem was the inappropriate use of, and reliance on,

2 AI tools. 3 6. Here’s an abbreviated summary of the events. Plaintiff is 4 represented by a large team of attorneys at two law firms (a lawyer moved 5 from the Ellis George firm to K&L Gates during the course of the state court 6 litigation underlying the insurance coverage action; the representation in the 7 present case is shared between the two firms).3The lawyers admit that 8 Mr. Copeland, an attorney at Ellis George, used various AI tools to generate 9 an “outline” for the supplemental brief. That document contained the 10 problematic legal research. 11 7. Mr. Copeland sent the outline to lawyers at K&L Gates. They 12 incorporated the material into the brief. No attorney or staff member at 13 either firm apparently cite-checked or otherwise reviewed that research before 14 filing the brief with the Special Master. Based on the sworn statements of all 15 involved (which I have no reason to doubt), the attorneys at K&L Gates didn’t 16 know that Mr. Copeland used AI to prepare the outline; nor did they ask him. 17 8. A further wrinkle. During my initial review of Plaintiff’s brief, I 18 was unable to confirm the accuracy of two of the authorities that the lawyers 19 cited. I emailed the lawyers shortly after receiving the brief to have them 20 address this anomaly. Later that day, K&L Gates re-submitted the brief 21 without the two incorrect citations – but with the remaining AI-generated 22 problems in the body of the text.4An associate attorney sent me an innocuous 23

3 Although it’s necessary to identify some parties involved here, I decline 24 to name-and-shame all of the lawyers in this order. They know who they are, and

don’t need further notoriety here. 25

4 Copies of the Original Brief and the Revised Brief (identified as 26 Versions 1 and 3 in my initial OSC) are attached in the Appendix. I’ve marked the

bogus citations in both briefs in red. I noted that there was an intervening iteration of the brief submitted to me that contained the bogus AI research and an odd 28 (continued. . .)

That decision – State Farm Mutual Auto Ins. Co. v. Lee, 13 P.3d 1169, 1183 (Ariz. 2000) – is a ruling of the Arizona Supreme Court that may (in part) have relied on California law.

I note that I have long been of the opinion that a fee award under Rule 37 should not be considered a personal sanction on an attorney that is potentially reportable to the State Bar of California pursuant to Business and Professions Code section 6068 o 3 . C.f. Medina v. United Parcel Service, No. C-06-791 JW PVT, 2007 WL 2123699 N.D. Cal. 2007 state statute “exemptsμ discovery-related proceedings from self-reporting obligation . 16 JACQUELYN “JACKIE” LACEY, in her individual capacity; and 17 JACQUELYN “JACKIE” LACEY as trustee of the D and J Lacey Family 18 Trust dated November 23, 2016, 19 Plaintiff, 20 v. 21 STATE FARM GENERAL INSURANCE COMPANY, an Illinois 22 corporation, and DOES 1-50, inclusive, 23 Defendant. 24 25 508432015.1 CASE NO. 2:24-CV-05205-FMO-MAA PLAINTIFF’S BRIEF IN SUPPORT OF OBTAINING RELEVANT, NON-PRIVILEGED DOCUMENTS FROM DEFENDANT STATE FARM GENERAL INSURANCE COMPANY 16 At the center of this case is a fundamental question: Did State Farm act in bad 17 faith when it denied or delayed coverage for the Laceys’ claim? That inquiry 18 necessarily turns on the conduct and state of mind of the decision-makers— 19 specifically, State Farm’s claims adjusters—whose internal communications and 20 reasoning during the claims process are directly at issue. Yet State Farm now seeks 21 to withhold precisely those communications through boilerplate assertions of 22 privilege, despite failing to demonstrate that any recognized legal privilege in fact 23 applies. 24 Plaintiff challenges only a narrow subset of the documents identified in State 25 Farm’s privilege log—specifically, those highlighted in red and green in Exhibit B 26 to Plaintiff’s April 4, 2025 Letter Brief to the Special Master. The red entries concern 27 communications between claims representatives made during the ordinary course of 28 claims handling, while the green entries reflect internal discussions about purported 508432015.1 *1 CASE NO. 2:24-CV-05205-FMO-MAA PLAINTIFF’S BRIEF IN SUPPORT OF OBTAINING RELEVANT, NON-PRIVILEGED DOCUMENTS FROM DEFENDANT STATE FARM GENERAL INSURANCE COMPANY 19 Plaintiff’s request is modest, narrowly tailored, and consistent with both 20 statutory authority and principles of fairness. A limited in camera review of these 21 selected documents (or a subset of these challenged documents) will allow the Court 22 to determine whether State Farm’s privilege claims are valid or merely an attempt to 23 shield relevant, discoverable evidence. Because these documents bear directly on the 24 conduct and state of mind of the claims personnel whose decisions are central to the 25 bad faith claim, Plaintiff respectfully requests that the Court grant the request for in 26 camera review pursuant to Evidence Code § 915(a) and (b). 508432015.1 *2 CASE NO. 2:24-CV-05205-FMO-MAA PLAINTIFF’S BRIEF IN SUPPORT OF OBTAINING RELEVANT, NON-PRIVILEGED DOCUMENTS FROM DEFENDANT STATE FARM GENERAL INSURANCE COMPANY 16 Upjohn Co. v. U.S., 449 U.S. 383, 395-96 (1981) (ACP only protects 17 communications from client to attorney, and not disclosure of underlying facts). 18 Based on the foregoing, Plaintiff has made a factual showing that State Farm’s claims 19 file notes may not be privileged. 20 B. In Camera Review Is Warranted Because the Claims Adjusters’ 21 Conduct Is the Core of the Bad Faith Claim and Cannot Be Shielded. 22 This case turns on what State Farm’s claims personnel did, when they did it, 23 and why. The internal communications reflect the evaluative process that led to State 24 Farm’s decisions regarding its initial denial of coverage to David Lacey. Indeed, 25 State Farm seeks to withhold from disclosure even the very first entry into its claims 26 file titled “New Suit Notification.” This communication has been entirely redacted 27 and reflects the entry as having been made into the file by a claims representative – 28 without reference to an attorney (or even a communication with an attorney) 508432015.1 *8 CASE NO. 2:24-CV-05205-FMO-MAA PLAINTIFF’S BRIEF IN SUPPORT OF OBTAINING RELEVANT, NON-PRIVILEGED DOCUMENTS FROM DEFENDANT STATE FARM GENERAL INSURANCE COMPANY 508432015.1 PLAINTIFF’S BRIEF IN SUPPORT OF OBTAINING RELEVANT, NON-PRIVILEGED DOCUMENTS FROM DEFENDANT STATE FARM GENERAL INSURANCE COMPANY 16 JACQUELYN “JACKIE” LACEY, in her individual capacity; and 17 JACQUELYN “JACKIE” LACEY as trustee of the D and J Lacey Family 18 Trust dated November 23, 2016, 19 Plaintiff, 20 v. 21 STATE FARM GENERAL INSURANCE COMPANY, an Illinois 22 corporation, and DOES 1-50, inclusive, 23 Defendant. 24 25 508432015.1 CASE NO. 2:24-CV-05205-FMO-MAA PLAINTIFF’S SECOND AMENDEDBRIEF IN SUPPORT OF OBTAINING RELEVANT, NON- PRIVILEGED DOCUMENTS FROM DEFENDANT STATE FARM GENERAL INSURANCE COMPANY 16 At the center of this case is a fundamental question: Did State Farm act in bad 17 faith when it denied or delayed coverage for the Laceys’ claim? That inquiry 18 necessarily turns on the conduct and state of mind of the decision-makers— 19 specifically, State Farm’s claims adjusters—whose internal communications and 20 reasoning during the claims process are directly at issue. Yet State Farm now seeks 21 to withhold precisely those communications through boilerplate assertions of 22 privilege, despite failing to demonstrate that any recognized legal privilege in fact 23 applies. 24 Plaintiff challenges only a narrow subset of the documents identified in State 25 Farm’s privilege log—specifically, those highlighted in red and green in Exhibit B 26 to Plaintiff’s April 4, 2025 Letter Brief to the Special Master. The red entries concern 27 communications between claims representatives made during the ordinary course of 28 claims handling, while the green entries reflect internal discussions about purported 508432015.1 *1 CASE NO. 2:24-CV-05205-FMO-MAA PLAINTIFF’S SECOND AMENDED BRIEF IN SUPPORT OF OBTAINING RELEVANT, NON- PRIVILEGED DOCUMENTS FROM DEFENDANT STATE FARM GENERAL INSURANCE COMPANY 19 Plaintiff’s request is modest, narrowly tailored, and consistent with both 20 statutory authority and principles of fairness. A limited in camera review of these 21 selected documents (or a subset of these challenged documents) will allow the Court 22 to determine whether State Farm’s privilege claims are valid or merely an attempt to 23 shield relevant, discoverable evidence. Because these documents bear directly on the 24 conduct and state of mind of the claims personnel whose decisions are central to the 25 bad faith claim, Plaintiff respectfully requests that the Court grant the request for in 26 camera review pursuant to Evidence Code § 915(a) and (b). 508432015.1 *2 CASE NO. 2:24-CV-05205-FMO-MAA PLAINTIFF’S SECOND AMENDED BRIEF IN SUPPORT OF OBTAINING RELEVANT, NON- PRIVILEGED DOCUMENTS FROM DEFENDANT STATE FARM GENERAL INSURANCE COMPANY 17 Each of the above examples, albeit limited given the page limits, are claims 18 file notes entered by claims adjusters assigned to handle the Lacey’s claim file in the 19 regular course of their business, none of which are addressed to counsel for legal 20 opinions, nor are they attorney-work product. Rather, these internal notes reference 21 the adjusters’ recommendations, pending activities, and discussion with other State 22 Farm claims representatives regarding the Lacey’s insurance claim. National Steel 23 Products Co. v. Superior Court, 164 Cal.App.3d 476, 489 (1985) (Privilege is strictly 24 construed because it suppresses relevant facts which may be necessary for a just 25 decision.) 26 What Costco also reaffirmed is the long-standing principle that “a client cannot 27 protect unprivileged information from discovery by transmitting it to an attorney.” 28 Costco, supra, 47 Cal.4th at 735. Indeed, “[b]ecause an in-house lawyer often has 508432015.1 *7 CASE NO. 2:24-CV-05205-FMO-MAA PLAINTIFF’S SECOND AMENDED BRIEF IN SUPPORT OF OBTAINING RELEVANT, NON- PRIVILEGED DOCUMENTS FROM DEFENDANT STATE FARM GENERAL INSURANCE COMPANY 16 communications from client to attorney, and not disclosure of underlying facts). 17 Based on the foregoing, Plaintiff has made a factual showing that State Farm’s claims 18 file notes may not be privileged. 19 B. In Camera Review Is Warranted Because the Claims Adjusters’ 20 Conduct Is the Core of the Bad Faith Claim and Cannot Be Shielded. 21 This case turns on what State Farm’s claims personnel did, when they did it, 22 and why. The internal communications reflect the evaluative process that led to State 23 Farm’s decisions regarding its initial denial of coverage to David Lacey. Indeed, 24 State Farm seeks to withhold from disclosure even the very first entry into its claims 25 file titled “New Suit Notification.” This communication has been entirely redacted 26 and reflects the entry as having been made into the file by a claims representative – 27 without reference to an attorney (or even a communication with an attorney) 28 whatsoever. The wholesale redaction reflected in SF-CF (HO) 000110 is a further 508432015.1 *8 CASE NO. 2:24-CV-05205-FMO-MAA PLAINTIFF’S SECOND AMENDED BRIEF IN SUPPORT OF OBTAINING RELEVANT, NON- PRIVILEGED DOCUMENTS FROM DEFENDANT STATE FARM GENERAL INSURANCE COMPANY 508432015.1 PLAINTIFF’S SECOND AMENDED BRIEF IN SUPPORT OF OBTAINING RELEVANT, NON- PRIVILEGED DOCUMENTS FROM DEFENDANT STATE FARM GENERAL INSURANCE COMPANY 20 Trust dated November 23, 2016, 21 Plaintiffs, 22 vs. 23 STATE FARM GENERAL INSURANCE COMPANY, an Illinois 24 corporation, and DOES 1-50, inclusive, 25 Defendants. Complaint filed: July 4, 2020 *2550949.1 DECLARATION OF TRENT COPELAND IN RESPONSE TO SPECIAL MASTER’S ORDER TO SHOW CAUSE RE SANCTIONS 26 Gemini, Google’s AI product, for information and cases related to insurance 27 companies defending against bad faith claims. I compiled a significant number of 28 notes which I believed (1) accurately reflected current law, and (2) had been *2550949.1 -2- DECLARATION OF TRENT COPELAND IN RESPONSE TO SPECIAL MASTER’S ORDER TO SHOW CAUSE RE SANCTIONS 18 Compounding matters, prior to the filing of version 2, my legal assistant noticed that 19 we were working off of multiple drafts—none of which, we later realized, had been 20 thoroughly checked. Further, I cannot say with certainty how the parenthetical for 21 National Steel changed between versions 1 and 2, but I suspect the switch resulted 22 from uploading a different version that included the correct citation. In our haste to 23 meet the filing deadline, we failed to (1) ensure that the correct and final document 24 had been uploaded, and (2) conduct a thorough citation check of the cases submitted 25 to the Court—both of which should have occurred and which I assumed had been 26 completed. 27 7. In short, our process broke down at several levels across both firms. 28 And as the most senior lawyer on our collective team — whether cite-checking was *2550949.1 -3- DECLARATION OF TRENT COPELAND IN RESPONSE TO SPECIAL MASTER’S ORDER TO SHOW CAUSE RE SANCTIONS 16 Practical Guidance, the State Bar’s interim AI Guidelines, and other work we are 17 doing to responsibly support the exploration of AI internally and within the legal 18 profession balance opportunity against the risks of bias, inaccuracy, incompleteness, 19 and falsehood that could undermine the benefits that generative AI will create.” 20 Additionally, I also understood that while the use of AI does not violate Business 21 and Professions Code 6068(e)(2), my ethical duties included double-checking the 22 source accuracy. Because I was aware of this guidance, I should have been more 23 mindful and cautious about the risks, and I should have informed my team of my use 24 of AI so that we could collectively mitigate any errors that might result, even from 25 its good-faith use. I fell short in that regard and that will never happen again. 26 9. Following the Special Master’s instructions, I have personally reviewed 27 each and every citation and quotation - and compared these findings with my 28 colleagues - to be certain that we have found any possible issues with the citations, *2550949.1 -4- DECLARATION OF TRENT COPELAND IN RESPONSE TO SPECIAL MASTER’S ORDER TO SHOW CAUSE RE SANCTIONS 19 Cal.App.4th 1485, 1503 (2007) (“Communications by corporate 20 employees that are not made at the direction of counsel or for the 21 purpose of legal advice are not privileged.”) – the pincite should be 22 1504 and state: “otherwise routine, non-privileged communications 23 between corporate officers or employees transacting the general 24 business of the company do not attain privileged status solely because 25 in-house or outside counsel is ‘copied in’ on correspondence or 26 memoranda”. 27 c. Page 5 of Dkt. 98: 28 i. Costco, supra, 47 Cal.4th at 739 – should not have quotes *2550949.1 -5- DECLARATION OF TRENT COPELAND IN RESPONSE TO SPECIAL MASTER’S ORDER TO SHOW CAUSE RE SANCTIONS 28 Auto. Ins. Co., 137 A.2d 401, 402 (1st Dep’t 1988) (“Where it is alleged *2550949.1 -6- DECLARATION OF TRENT COPELAND IN RESPONSE TO SPECIAL MASTER’S ORDER TO SHOW CAUSE RE SANCTIONS DECLARATION OF TRENT COPELAND IN RESPONSE TO SPECIAL MASTER’S ORDER TO SHOW CAUSE RE SANCTIONS 26 Defendants. DECLARATION OF RYAN Q. KEECH IN RESPONSE TO THE SPECIAL MASTER’S ORDER TO SHOW CAUSE RE: SANCTIONS DECLARATION OF RYAN Q. KEECH IN RESPONSE TO THE SPECIAL MASTER’S ORDER TO SHOW CAUSE RE: SANCTIONS 24 Mr. Vahedy and Ms. Carpenter to provide a revised draft. I understand that Mr. 25 Vahedy worked with Mr. Copeland and Ms. Carpenter to address these comments 26 throughout the day on April 12, 2025 and circulated a revised version of the brief late 27 in the morning of April 13, 2025. DECLARATION OF RYAN Q. KEECH IN RESPONSE TO THE SPECIAL MASTER’S ORDER TO SHOW CAUSE RE: SANCTIONS DECLARATION OF RYAN Q. KEECH IN RESPONSE TO THE SPECIAL MASTER’S ORDER TO SHOW CAUSE RE: SANCTIONS DECLARATION OF RYAN Q. KEECH IN RESPONSE TO THE SPECIAL MASTER’S ORDER TO SHOW CAUSE RE: SANCTIONS DECLARATION OF RYAN Q. KEECH IN RESPONSE TO THE SPECIAL MASTER’S ORDER TO SHOW CAUSE RE: SANCTIONS DECLARATION OF RYAN Q. KEECH IN RESPONSE TO THE SPECIAL MASTER’S ORDER TO SHOW CAUSE RE: SANCTIONS 26 Defendants. DECLARATION OF KEIAN VAHEDY IN RESPONSE TO THE SPECIAL MASTER’S ORDER TO SHOW CAUSE RE: SANCTIONS 18 Brief. I take seriously the critical importance of accuracy in case citations in order 19 for the Special Master and the Court to meaningfully do their jobs, and I know that 20 my colleagues share the same view. I believed that the research submitted to me 21 when I worked on drafting the brief was accurate and that the cases were properly 22 cited. I had no information suggesting that any of the citations may have come from 23 artificial intelligence and had no involvement in finalizing or submitting the document 24 for filing. But it is still no excuse. As the associate tasked with drafting Plaintiff’s 25 Brief, I should have made sure to cite-check not only the cases I provided, but also 26 the cases that originated from Mr. Copeland’s outline. 27 4. To begin: I and Mr. Copeland have been primarily responsible for the 28 briefing associated with the privilege issue addressed by the Court on April 7, 2025.-2- DECLARATION OF KEIAN VAHEDY IN RESPONSE TO THE SPECIAL MASTER’S ORDER TO SHOW CAUSE RE: SANCTIONS 20 April 12, 2025 I worked with Mr. Copeland and Ms. Carpenter to address these 21 comments. I circulated a revised version of the brief on the morning of April 13, 22 2025. 23 7. On April 13, 2025, Mr. Copeland informed me that the revisions were 24 appropriate and that he and his firm would take responsibility for finalizing, filing and 25 submission to the Court. I offered to provide assistance in this regard, though did not 26 hear anything relating to the brief until approximately noon on April 14, 2025, when 27 I learned that Mr. Copeland’s firm was experiencing formatting and submission issues 28 with the JAMS system that were creating difficulty with meeting the Court’s deadline.-3- DECLARATION OF KEIAN VAHEDY IN RESPONSE TO THE SPECIAL MASTER’S ORDER TO SHOW CAUSE RE: SANCTIONS 20 Master’s review. I confirm that most citations in the brief stand for the propositions 21 for which they are cited. However, I also confirm finding that the following citations 22 should be noted as follows and apologize again for not catching these issues sooner: 23 a. Page 3 of Dkt. 98: 24 i. People v. Superior Court, 25 Cal.4th 703, 725 (2001) 25 (“A trial court has broad discretion to review materials 26 in camera to determine whether a claimed privilege 27 applies.”) – there should be no quotes in the 28 parenthetical, which should refer to n. 7.-4- DECLARATION OF KEIAN VAHEDY IN RESPONSE TO THE SPECIAL MASTER’S ORDER TO SHOW CAUSE RE: SANCTIONS DECLARATION OF KEIAN VAHEDY IN RESPONSE TO THE SPECIAL MASTER’S ORDER TO SHOW CAUSE RE: SANCTIONS DECLARATION OF KEIAN VAHEDY IN RESPONSE TO THE SPECIAL MASTER’S ORDER TO SHOW CAUSE RE: SANCTIONS DECLARATION OF KEIAN VAHEDY IN RESPONSE TO THE SPECIAL MASTER’S ORDER TO SHOW CAUSE RE: SANCTIONS 22 Proceeding before Special Master Hon. Plaintiffs, 23 vs. 24 25 STATE FARM GENERAL INTENDED SANCTIONS AND FEE INSURANCE COMPANY, an Illinois ORDERS 26 corporation, and DOES 1-50, inclusive, Date: April 29, 2025 27 Defendants. Time: 10:00 a.m. Place: Remote via Zoom PLAINTIFF’S RESPONSE TO SPECIAL MASTER’S NOTICE 17 Promptly Disclosed, and Cured Without Causing Any Prejudice 18 Given limited space, and the Special Master’s familiarity with the facts from 19 the submitted declarations, Plaintiff will not provide a comprehensive discussion of 20 the facts here, but summarizes the following points germane to the arguments: 21 • Following the OSC, Plaintiff’s counsel candidly disclosed that limited portions of the Supplemental Brief were initially drafted with the aid of 22 generative artificial intelligence (“AI”), in an effort to explore time-saving 23 methods during a period of constrained resources. Upon internal review, counsel acknowledged all of the case authority that had been AI-generated, 24 and additionally identified and disclosed other inconsistencies, including 25 pin cite errors and misplacement of parentheticals. Plaintiff’s counsel specifically requested the Court not to rely upon the two nonexistent cases. 271 See Declarations of Trent Copeland (“Copeland Decl.”), Ryan Keech (“Keech Decl.”) and Keian 28 Vahedy (“Vahedy Decl.”), all submitted April 18, 2025. PLAINTIFF’S RESPONSE TO SPECIAL MASTER’S NOTICE 20 To impose sanctions under the Court’s inherent authority, the target “must 21 have ‘engaged in bad faith or willful disobedience of a court’s order.’” Fink v. 22 Gomez, 239 F.3d 989, 992 (9th Cir. 2001); see also U.S. v. Stoneberger, 805 F.2d 23 1391, 1393 (9th Cir. 1986) (“A specific finding of bad faith...must ‘precede any 24 sanction under the court’s inherent powers.’”) (citations omitted). As detailed 25 above, there is no bad faith here, and thus sanctions under the Court’s inherent 26 powers are not appropriate. See, e.g., United States v. Cohen*, 724 F. Supp. 3d 251, 27 258 (S.D.N.Y. 2024) (declining to impose sanctions upon attorney for mistaken 28 inclusion of erroneous AI material in brief, holding that “the Court cannot find that PLAINTIFF’S RESPONSE TO SPECIAL MASTER’S NOTICE 25

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e-mail thanking me for catching the two errors that were “inadvertently

2 included” in the brief, and confirming that the citations in the Revised Brief 3 had been “addressed and updated.” 4 9. I didn’t discover that Plaintiff’s lawyers used AI – and 5 re-submitted the brief with considerably more made-up citations and 6 quotations beyond the two initial errors – until I issued a later OSC soliciting 7 a more detailed explanation. The lawyers’ sworn statements and subsequent 8 submission of the actual AI-generated “outline” made clear the series of events 9 that led to the false filings. The declarations also included profuse apologies 10 and honest admissions of fault. 11 10. I subsequently set the matter for a hearing on the OSC. My 12 April 20 order gave the parties notice of the specific types of sanctions and fee-13 shifting awards that I was considering based on Federal Rule of Civil 14 Procedure 11 and 37, along with my inherent (and Court-delegated) authority. 15 Plaintiff’s lawyers responded to the OSC and addressed me during our recent 16 hearing. I also received a submission from the defense estimating the cost of 17 the preparation of their brief on the privilege issue. This order follows. 18

RELEVANT LEGAL AUTHORITY 19

11. The district court’s order appointing me as Special Master 20 authorized me to “take all appropriate measures to perform the assigned 21 duties fairly and efficiently.” I possess the Court’s authority to “regulate all 22 proceedings” before me pursuant to the Federal Rules of Civil Procedure. This 23 expressly includes the ability to impose “any noncontempt sanction provided 24 by Rule 37” or other authority. (Docket # 70.) 25

typographical error in one of the challenged citations. I don’t understand the significance of that additional submission, but I don’t believe that it adds much to 28 the sanctions analysis.

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12. Rule 11(b) states, in relevant part, that when an attorney presents

2 “a pleading, written motion, or other paper” to a court, the attorney “certifies 3 that to the best of that person’s knowledge, information, and belief, formed 4 after an inquiry reasonable under the circumstances [that the] legal 5 contentions are warranted by existing law.” Rule 11(c)(3-4) states that a court 6 may impose a sanction “limited to what suffices to deter repetition of the 7 conduct or comparable conduct by others similarly situated.” That may 8 include “nonmonetary directives” or “an order directing payment [ ] of part or 9 all of the reasonable attorney’s fees and other expenses directly resulting from 10 the violation.” 11 13. Rule 37(a)(5)(B) states that a court “must, after giving an 12 opportunity to be heard, require [ ] the attorney filing [an unsuccessful 13 discovery] motion [ ] to pay the party or deponent who opposed the motion its 14 reasonable expenses incurred in opposing the motion, including attorney's 15 fees.” Litigation-related sanctions (for disobeying a court’s discovery order, 16 but generally applicable to other circumstances) may include prohibiting a 17 party from “supporting or opposing designated claims or defenses” or “striking 18 pleadings in whole or in part.” Fed. R. Civ. 37(b)(2)(A)(ii-iii). 19 14. Separate and apart from sanctions based on these rules, a court 20 has the inherent authority to levy sanctions against a party or attorney for, 21 inter alia, acting in “bad faith” or for otherwise “willfully abus[ing] judicial 22 processes.” Roadway Express, Inc. v. Piper, 447 U.S. 752, 766 (1980). 23 Sanctions based on a federal court’s inherent authority are “both broader and 24 narrower than other means of imposing sanctions” because they encompass 25 “a full range of litigation abuses.” Chambers v. NASCO , Inc., 501 U.S. 32, 46-26 47 (1991).

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15. The Ninth Circuit has concluded that such sanctions “are

2 available if the court specifically finds bad faith or conduct tantamount to 3 bad faith” by an attorney. Fink v. Gomez, 239 F.3d 989, 994 (9th Cir. 2001); 4 Rocha v. Fiedler, 2025 WL 1219007 at *1 (9th Cir. Apr. 28, 2025) (same 5 standard under Fed. R. Bankr. P. 9011); Arrowhead Capital Finance, Ltd. v. 6 Picturepro, LLC, 2023 WL 109722 at *2 (9th Cir. Jan. 5, 2023) (same; 7 affirming discovery sanction award). The “tantamount to bad faith” standard 8 includes “a variety of types of willful actions, including recklessness when 9 combined with an additional factor such as frivolousness, harassment, or an 10 improper purpose.” Fink, 239 F.3d at 994. 11 16. With greater frequency, courts are now regularly evaluating the 12 conduct of lawyers and pro se litigants who improperly use AI in submissions 13 to judges. Whether that conduct supports the imposition of various types of 14 sanctions requires a fact- and circumstance-specific analysis. See, e.g., United 15 States v. Hayes, ___ F.Supp.3d ___, 2025 WL 235531 at *10-15 (E.D. Cal. 16 Jan 17, 2025) (sanctioning criminal defense lawyer for using AI; when 17 questioned by the court, the lawyer’s response about the source of inaccurate 18 legal citations “was not accurate and was misleading”); Saxena v. Martinez-19 Hernandez, 2025 WL 1194003 at *2 and n.5 (D. Nev. April 23, 2025) 20 (“Saxena’s use of AI generated cases – and his subsequent refusal to accept 21 responsibility for doing so – is just another example of Saxena’s abusive 22 litigation tactics, and further explains why the court issued case-terminating 23 sanctions”) (collecting cases); United States v. Cohen, 724 F.Supp.3d 251, 254, 24 259 (S.D.N.Y 2024) (declining to find bad faith where defense lawyer 25 voluntarily disclosed that she “had been ‘unable to verify’” false citations in 26 colleague’s brief and lawyer acknowledged that he “would have withdrawn the 27 [fake] citations immediately if given the opportunity”).

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ANALYSIS

17. I conclude that the lawyers involved in filing the Original and

3 Revised Briefs collectively acted in a manner that was tantamount to bad 4 faith. Fink, 239 F.3d at 994. The initial, undisclosed use of AI products to 5 generate the first draft of the brief was flat-out wrong. Even with recent 6 advances, no reasonably competent attorney should out-source research and 7 writing to this technology – particularly without any attempt to verify the 8 accuracy of that material. And sending that material to other lawyers without 9 disclosing its sketchy AI origins realistically put those professionals in harm’s 10 way. Mr. Copeland candidly admitted that this is what happened, and is 11 unreservedly remorseful about it. 12 18. Yet, the conduct of the lawyers at K&L Gates is also deeply 13 troubling. They failed to check the validity of the research sent to them. As a 14 result, the fake information found its way into the Original Brief that I read. 15 That’s bad. But, when I contacted them and let them know about my concerns 16 regarding a portion of their research, the lawyers’ solution was to excise the 17 phony material and submit the Revised Brief – still containing a half-dozen AI 18 errors. Further, even though the lawyers were on notice of a significant 19 problem with the legal research (as flagged by the brief’s recipient: the Special 20 Master), there was no disclosure to me about the use of AI. Instead, the 21 e-mail transmitting the new brief merely suggested an inadvertent production 22 error, not improper reliance on technology. Translation: they had the 23 information and the chance to fix this problem, but didn’t take it. Cohen, 24 724 F.Supp.3d at 259. 25 19. I therefore conclude that (a) the initial undisclosed use of AI, 26 (b) the failure to cite-check the Original Brief, and (perhaps most egregiously), 27 (c) the re-submission of the defective Revised Brief without adequate

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disclosure of the use of AI, taken together, demonstrate reckless conduct with

2 the improper purpose of trying to influence my analysis of the disputed 3 privilege issues. The Ellis George and K&L Gates firms had adequate 4 opportunities – before and after their error had been brought to their 5 attention – to stop this from happening. Their failure to do so justifies 6 measured sanctions under these circumstances. 7 20. Those sanctions are as follows. I have struck, and decline to 8 consider, any of the supplemental briefs that Plaintiff submitted on the 9 privilege issue. From this, I decline to award any of the discovery relief 10 (augmenting a privilege log, ordering production of materials, or requiring 11 in camera review of items) that Plaintiff sought in the proceedings that led up 12 to the bogus briefs. I conclude that these non-monetary sanctions will suffice 13 to “deter repetition of the conduct or comparable conduct by others similarly 14 situated.” Fed. R. Civ. P. 11(c)(4). If the undisclosed use of AI and the 15 submission of fake law causes a client to lose a motion or case, lawyers will 16 undoubtedly be deterred from going down that pointless route.5 17 21. The district judge’s order appointing me initially required 18 Defendant to pay the costs of the Special Master. However, that order 19 expressly authorized me to shift fees when I deemed appropriate. 20 (Docket # 70 at ¶ 7.) It’s certainly appropriate here. I’ve calculated that the 21 fees for dealing with this issue (reviewing the various iterations of the 22 defective briefs, issuing various orders and reviewing the responses, 23 conducting the OSC hearing, and issuing this sanctions order) were 24 approximately $26,100 (including service fees from the provider). Because 25

5 At our recent hearing, Mr. Copeland movingly asserted that neither he 26 nor his colleagues would engage in similar conduct in the future; exposure of these

events was therefore sufficient to deter them from doing this again. I completely agree. But under the Rule, I also have to consider the goal of deterring other 28 members of the legal community. In my estimation, more is required.

p. 9

#:4272

Defendant advanced those fees to JAMS, Ellis George and K&L Gates are

2 jointly and severally directed to pay that sum to the defense in reimbursement 3 within 30 days. 4 22. I also gave serious consideration to ordering Plaintiff’s lawyers to 5 compensate the defense for time that Defendant’s lawyers spent on their 6 supplemental brief. A shift of fees to the winning party in a discovery motion 7 is authorized and commonplace under Federal Rule of Civil 8 Procedure 37(a)(5), and falls well within the inherent authority of the court to 9 deter this conduct by others in the future. I also easily conclude that 10 Plaintiff’s lawyers were not “substantially justified” in using false information 11 in advancing their legal positions on the privilege issue. (Fed. R. Civ. P. 12 37(a)(5)(B).) 13 23. However, the amount of fees that the defense attested to (at my 14 request, not theirs) for preparing the brief and attending the recent hearing 15 approached $25,000. I don’t have any reason to dispute that sum, but I don’t 16 believe that full compensation for the briefing process – one that the defense 17 somewhat eagerly agreed to – isn’t necessary for deterrence purposes. In an 18 exercise of discretion, I direct Plaintiff’s lawyers to pay the defense a total of 19 $5,000 for fees incurred here.6 20 24. My sanction notice informed the parties that I planned to order 21 the lawyers to inform Plaintiff personally about the substance and outcome of 22 236 I note, but don’t ascribe any weight to, Plaintiff’s argument that

Defendant wasn’t prejudiced by the AI debacle because the parties submitted their 24 briefs at the same time. Given the deterrence-based motivation of this sanction

order, the serendipity of simultaneous v. sequential briefing is of limited relevance to 25

my consideration of this point. 26 I’m also not swayed by the observation (in my original OSC, and echoed

in Plaintiff’s response brief) that, as it turned out, the AI hallucinations weren’t too far off the mark in their recitations of the substantive law. That’s a pretty weak 28 no-harm, no-foul defense of the conduct here.

p. 10

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this issue. The lawyers told me at the hearing that they already disclosed this

2 information to their client; that’s sufficient for me. I recognize that 3 Mrs. Lacey is clearly not at fault for the AI debacle, but will bear this outcome 4 as a consequence of her lawyers’ actions. She will not, however, be financially 5 responsible for the monetary awards described in this order. Those will fall 6 solely on the lawyers and their firms. 7 25. In a further exercise of discretion, I decline to order any sanction 8 or penalty against any of the individual lawyers involved here. In their 9 declarations and during our recent hearing, their admissions of responsibility 10 have been full, fair, and sincere. I also accept their real and profuse apologies. 11 Justice would not be served by piling on them for their mistakes. 12

CONCLUSION 13

A final note. Directly put, Plaintiff’s use of AI affirmatively misled me. 14 I read their brief, was persuaded (or at least intrigued) by the authorities that 15 they cited, and looked up the decisions to learn more about them – only to find 16 that they didn’t exist. That’s scary. It almost led to the scarier outcome (from 17 my perspective) of including those bogus materials in a judicial order. Strong 18 deterrence is needed to make sure that attorneys don’t succumb to this easy 19 shortcut. 20 For these reasons, Plaintiff’s supplemental briefs are struck, and no 21 further discovery relief will be granted on the disputed privilege issue. 22 Additionally, Plaintiff’s law firms are ordered (jointly and severally) to pay 23 compensation to the defense in the aggregate amount of $31,100. 24 25 Dated: May 5, 2025 /s/ Judge Wilner

HON. MICHAEL R. WILNER

27 U.S. MAGISTRATE JUDGE (RET.)

SPECIAL MASTER

p. 11

ID #:4274

1 APPENDIX OF MATERIALS 2

1. Special Master’s Order to Show Cause re: Sanctions (April 15,

2025).

2. Special Master’s Notice of Intended Sanctions and Fee Orders

(April 20, 2025).

3. Plaintiff’s Brief in Support of Obtaining Relevant, Non-Privileged

7 Documents from Defendant (Original Brief, as marked by Special Master) (filed 8 April 14, 2025). 9 4. Plaintiff’s Brief in Support of Obtaining Relevant, Non-Privileged

Documents from Defendant (Revised Brief, as marked by Special Master) (filed 10

April 14, 2025). 11

5. E-mail transmitting Revised Brief to Special Master (April 14, 12 2025). 13

6. Declaration of Trent Copeland (filed April 18, 2025) plus a version 14 of the AI outline sent to K&L Gates (referenced in declaration, received

separately). 15

7. Declaration of Ryan Keech (filed April 18, 2025). 16 17 8. Declaration of Keian Vahedy (filed April 18, 2025). 18 9. Plaintiff’s Response to Special Master’s Notice of Intended 19 Sanctions and Fee Orders. 20 21 22 23 24 25

p. 12

ID #:4275

JJAMS CASE REFERENCE NO. 1210040394

USDC CASE NO. CV 24-5205 FMO (MAAx) (C.D. Cal.)

Jacqueline “Jackie” Lacey, et al.,

Plaintiff,

State Farm General Insurance Co.,

Defendant.

ORDER TO SHOW CAUSE RE: SANCTIONS

1. The district court appointed me as Special Master in this action in January 2025. (Docket # 70, 71.) The Court’s appointment order specifically authorized me to “impose on a party any noncontempt sanction provided by Rule 37 or 45, and may recommend [to the district court] a contempt sanction against a party and sanctions against a nonparty.” (Docket # 70 at ¶ 3 (quoting Fed. R. Civ. P. 53(c)(2)).)

2. Plaintiff’s lawyers are ordered to show cause why the Special Master should not impose sanctions based on the following:

3. Version 1 of Plaintiff’s supplemental brief. I conducted a hearing on aV discovery issue on April 7, 2025. During that hearing, I directed the parties to submit supplemental briefing on a disputed privilege issue.

4. I received Plaintiff’s supplemental brief (Version 1) at approximately noon on Monday, April 14.1During my review of Version 1 of Plaintiff’s brief, I went onto Westlaw to read several of the judicial decisions cited or quoted in the pleading.

5. The problem: I couldn’t verify aspects of what Plaintiff’s lawyers put into the brief. Specifically, Plaintiff’s lawyers included what they presented as a lengthy quotation from a decision (National Steel Products) that appeared to

I also received a supplemental brief from Defendant. That submission is not relevant to this OSC.

p. 13

ID #:4276

strongly support their position on the privilege issue. The passage from Version 1 is reproduced in full:

Rather, these internal notes reference the adjusters’ recommendations, pending activities, and discussion with other State Farm claims representatives regarding the Lacey’s insurance claim. National Steel Products Co. v. Superior Court, 164 Cal.App.3d 476, 489 (1985) (“Internal memoranda or claims file materials, although they may discuss legal theories, litigation tactics or potential liability, are not privileged unless they are written by or at the direction of counsel and prepared for the purpose of transmitting information to counsel for legal advice.”)

Version 1 at 7.

6. I reviewed the online version of the appellate decision in National Steel Products. The text quoted in Plaintiff’s brief does not exist in that opinion.

7. Additionally, Plaintiff’s lawyers cited to another judicial decision that, again, appeared to strongly support their litigation position:

California courts are especially skeptical of overbroad privilege assertions in bad faith insurance litigation, where the insurer’s claims conduct is directly at issue. See, Booth v. Allstate Ins. Co., 198 Cal.App.3d 1357, 1366 (1989) (“An insurer cannot assert privilege to shield evidence of bad faith.”)

Version 1 at 10.

8. I was unable to locate this judicial decision online. I tried inputting the citation that Plaintiff provided. I also searched for it using the case caption in the brief.2 The decision does not appear to exist.

9. I sent an e-mail to the lawyers via JAMS Access later that day. My e-mail (sent at around 4 pm PT on April 14) was primarily intended to set up another hearing on the discovery issue. Additionally, I asked Plaintiff’s lawyers to check the accuracy of the National Steel Products and Booth citations. I expressly told the lawyers that I was unable to locate the items as stated in their brief.

p. 14

ID #:4277

10. Version 2. At roughly the same time, Plaintiff’s lawyers filed anV amended version of their supplemental brief (Version 2). An e-mail from an administrative assistant at the Ellis George firm informed me that the only change to Version 2 of the brief was “cosmetic to correct the placement of the screenshots” of certain disputed documents that were copied in the filing.

11. Despite that statement, there was a curious change to the National Steel Products parenthetical quotation. The purported text from the decision was fundamentally the same. However, the end of the quotation had garbled typing added to it: “[ ] prepared for the purpose of transmitting information PPage dfsadffor legal advice.” Version 2 at 7 (emphasis added). The Booth citation was unmodified.

12. Version 3. Plaintiff’s lawyers filed a third version of the supplemental brief with JAMS at approximately 6 pm PT that same day (Version 3). Version 3 did not contain the quoted language from the National Steel Products decision as quoted above. Instead, it contained a parenthetical summation with the same internal pin cite. The parenthetical read: “(Privilege is strictly construed because it suppresses relevant facts which may be necessary for a just decision.)” Version 3 at 7.

13. My review of the National Steel Products opinion showed that this language actually was a direct quotation from the text of the appellate decision. However, it appears in a different portion of the decision (Cal. App. edition page 483, not page 489) than as cited in the brief.

14. The reference to the Booth decision was omitted from Version 3 of the brief. Instead, the same sentence of the brief (“California courts are especially skeptical. . .”) is supported by a different citation.3Version 3 at 10.

15. I also received an e-mail from Mr. Vahedy, an associate at the K&L Gates firm. That e-mail stated that the Version 3 brief:

addresses the issues raised in [my] 4:06 pm e-mail. Specifically, references to National and Booth were inadvertently included prior to filing. These cites have since been addressed and updated within our respective papers.

16. OSC. I’m not satisfied by that explanation. Based on the materials I reviewed on Monday, Plaintiff’s lawyers may have presented falsified research on an issue of such significance (the dispute over privilege assertions) that it led to my

p. 15

ID #:4278

appointment as Special Master. I’m also concerned that a brief (Version 2) that allegedly was amended for “cosmetic” reasons contained a bizarre modification in one of the problematic sections.

17. Therefore, Plaintiff’s lawyers are ordered to show cause why I should not impose sanctions (or recommend that the district judge impose sanctions) on them for this conduct. Plaintiff’s lawyers may discharge this OSC by filing a sworn declaration attesting in adequate detail about the circumstances by which the erroneous National Steel Products and Booth materials made their way into Versions 1 and 2 of the brief. I specifically want to know which lawyers / staff members at the firms representing Plaintiff were responsible for this conduct. I also want a statement from a competent lawyer explaining whether or not any AI product was utilized in the preparation of the brief.

18. I also will require Mr. Copeland or Mr. Keech to personally review every citation and quotation in Version 1 of the brief. One of these lawyers will attest to the accuracy of those materials or inform me of any other problems in the supplemental brief that I didn’t catch.

19. Plaintiff’s lawyers will file these declarations with me via JAMS Access by or before noon on Friday, April 18. Note that, until I resolve this issue, neither this order nor the declarations of counsel should be filed on the federal court docket. Consistent with paragraph 7 of the appointment order, the parties are informed that I may consider cost-shifting of my fees regarding this situation.

Dated: April 15, 2025 /s/ Judge Wilner

Hon. Michael R. Wilner (Ret.) Special Master

p. 16

ID #:4279

Appendix 2

JAMS CASE REFERENCE NO. 1210040394

USDC CASE NO. CV 24-5205 FMO MAAx C.D. Cal.

Jacquelyn “Jackieμ Lacey and Jacquelyn Lacey, Trustee for D and J Lacey Trust,

Plaintiff,

State Farm General Insurance Co.,

Defendant.

NOTICE OF INTENDED SANCTIONS AND FEE ORDERS

FRCP 11, 37

1. The district court’s order appointing me as Special Master authorizes me to “take all appropriate measures to perform the assigned duties fairly and efficiently.μ I possess the Court’s authority to “regulate all proceedingsμ before me pursuant to the Federal Rules of Civil Procedure. This includes the ability to impose “any noncontempt sanction provided by Rule 37μ or other authority. Docket # 70.

2. The candid declarations received from Plaintiff’s lawyers in recent days reveal three uncontestable conclusions about their recent legal submissions:

a. Mr. Copeland used several AI tools to outline Plaintiff’s

supplemental brief on the disputed privilege issues. Those tools resulted in the use of fake or inaccurate legal authorities in that brief.

b. Neither the Ellis George nor the K L Gates law firms properly

checked the legitimacy of those authorities before filing the brief on the Court’s docket or with me.

c. The scope of the inaccurate authorities was considerably higher

than that described in my April 15 OSC order. The declarations

p. 17

ID #:4280

of Plaintiff’s lawyers identified nine problematic citations out of approximately 27 cited authorities in the brief , including a reference to a second non-existent judicial decision Davis .

3. I accept the sincerity of the apologies in the lawyer’s declarations regarding this conduct. I also accept Mr. Copeland’s admission of responsibility for initiating this affair. Further, I note the contentions in the lawyers’ submissions that, although they presented false legal authorities to me, the basic principles advanced in the brief a privilege assertion cannot be used as a sword and a shield, etc. are likely legitimate.

4. Nevertheless, justice requires a swift, certain, and measured response. It’s simply unfathomable for me to consider that attorneys of this caliber would blithely outsource their legal research in such a haphazard and amateurish manner. The bogus filing caused me to have considerable doubts about the accuracy of all of factual and legal contentions that Plaintiff’s lawyers advanced in this action – whether attributable to an AI foul-up or not.

5. Further, the lawyers’ actions resulted in real expenses to Defendant. The reason for the supplemental briefing was because of Plaintiff’s request that I order production of additional materials from the defense, a revised privilege log, and potentially in camera review of those documents. That request, in turn, caused Defendant: a to incur attorney’s fees in preparing the defense supplemental brief; and b to bear the special master’s fees for those proceedings pursuant to the original appointment order.

6. Therefore, consistent with the provisions of Federal Rules of Civil Procedure 111 and 372 and the Court’s appointment order, I provide notice that I am likely to impose the following non-monetary sanctions and fee shifting awards:

p. 18

ID #:4281

a. Striking all three versions of Plaintiff’s supplemental brief filed

on April 14, 2025.

b. Denying – on the merits, and for lack of support – Plaintiff’s

request for additional discovery relief as set forth in the Plaintiff’s letter of April 4, 2025.

c. Ordering the Ellis George and K L Gates firms jointly and

severally to pay reasonable attorney’s fees that Defendant incurred in the preparation and filing of its supplemental brief filed April 14 .

d. Ordering the Ellis George and K L Gates firms jointly and

severally to pay the special master fees incurred that relate to the receipt of the bogus briefs and the OSC proceedings.

e. Requiring Mr. Copeland to communicate in writing to Ms. Lacey

about the substance and outcome of these proceedings.

7. Defense counsel are directed to file a short declaration with JAMS listing the fees charged to their client as discussed in ¶ 5.c above. Please submit that by noon on April 23. I’ll separately get a rough calculation of the special master fees per ¶ 5.d.

8. Pursuant to Federal Rules of Civil Procedure 11 c 1 and 37 a 5 B , Plaintiff and her lawyers will have the opportunity to respond to this notice. That response NTE five pages – no AI to be used , if any, will be due by 4 p.m. on Friday, April 25. I’ll set the matter for a video hearing on Tuesday, April 29, 2025 at 10:30 a.m PT .

9. If Plaintiff’s lawyers do not intend to challenge this tentative outcome, they may promptly inform my case manager. I’ll relieve them of the filing obligation and will vacate the video hearing.3

p. 19

ID #:4282

10. The parties are informed that I personally advised District Judge Olguin on April 18 about the nature of these proceedings and the substance of the lawyers’ declarations. Docket # 70 at ¶ 3.

Dated: April 20, 2025 /s/ Judge Wilner

Hon. Michael R. Wilner Ret. Special Master

p. 20

ID #:4283

1 ELLIS GEORGE LLP

Eric M. George (SBN 166403) 2 egeorge@ellisgeorge.com

Trent Copeland (SBN 136890) 3 tcopeland@ellisgeorge.com

2121 Avenue of the Stars, 30th Floor 4 Los Angeles, California 90067

Telephone: (310) 274-7100 5 Facsimile: (310) 275-5697

6 K&L GATES LLP

Ryan Q. Keech (SBN 280306) 7 Ryan.Keech@klgates.com

Kevin S. Asfour (SBN 228993) 8 Kevin.Asfour@klgates.com

Keian Vahedy (SBN 316708) 9 Keian.Vahedy@klgates.com

10100 Santa Monica Blvd., 8th Floor 10 Los Angeles, California 90067

Telephone: (310) 552-5000 11 Facsimile: (310) 552-5001

12 Attorneys for Plaintiff Jacquelyn “Jackie”

Lacey (in her individual capacity and as trustee 13 of the D and J Lacey Family Trust)

14 UNITED STATES DISTRICT COURT

15 CENTRAL DISTRICT OF CALIFORNIA

"QQFOEJY

Case No. 2:24-cv-05205-FMO-MAA

Judge: Hon. Fernando M. Olguin

PLAINTIFF JACQUELYN “JACKIE” LACEY’S BRIEF IN SUPPORT OF OBTAINING RELEVANT, NON-PRIVILEGED DOCUMENTS FROM DEFENDANT STATE FARM GENERAL INSURANCE COMPANY

p. 21

ID #:4284

1 Pursuant to the Special Master’s instructions on April 7, 2025, Plaintiff 2 Jacquelyn Lacey, individually, and as trustee of the D and J. Lacey Family Trust 3 Dated November 23, 2016 (“Plaintiff”) submits this brief to further address defendant 4 State Farm General Insurance Company’s (“State Farm”) unjustified withholding of 5 relevant, non-privileged documents and communications in its privilege log. 6 I. PRELIMINARY STATEMENT 7 This motion presents a focused and practical request: that the Court exercise 8 its authority under California Evidence Code § 915(a) and (b) to conduct an in camera 9 review of a discrete set of documents for which Defendant State Farm asserts 10 attorney-client privilege or work product protection, despite lacking a sufficient 11 factual or legal basis for doing so. The essential issue before the Court is whether 12 State Farm may shield from discovery internal claims handling communications – 13 many involving no attorneys, and created in the ordinary course of business – based 14 solely on generalized and repetitive assertions of privilege that fail to meet the 15 threshold burden required by law.

p. 22

ID #:4285

1 "opinions" of outside counsel, though it is unclear whether those opinions were ever 2 formally requested or provided as legal advice. Crucially, many of these documents 3 were created at or near key decision points—when the claim was first tendered, when 4 coverage was denied, and when it was later accepted under a reservation of rights— 5 making them highly relevant to the bad faith analysis. 6 State Farm’s privilege log does not provide individualized or substantive 7 justifications for withholding these documents. Instead, it relies on uniform, cut-and-8 paste assertions that offer no meaningful detail on the nature or context of the 9 communications. This lack of specificity precludes both Plaintiff and the Court from 10 evaluating the legitimacy of the privilege claims. Moreover, State Farm has already 11 selectively disclosed portions of the same communications, raising serious concerns 12 about waiver and fairness. 13 Evidence Code § 915(b) is tailored for precisely this type of discovery dispute. 14 Where, as here, a prima facie showing has been made that the claimed privilege may 15 not apply, and the proponent has failed to substantiate its claim, the Court is expressly 16 authorized to conduct an in camera review to resolve the issue. This mechanism is 17 not only appropriate but necessary to safeguard the integrity of the discovery process, 18 particularly where withheld documents go to the heart of the case.

ID #:4286

ID #:4287

ID #:4288

ID #:4289

ID #:4290

ID #:4291

1 Costco, supra, 47 Cal.4th at 735. Indeed, “[b]ecause an in-house lawyer often has 2 other functions in addition to providing legal advice, the lawyer’s role on a particular 3 occasion will not be self-evident as it usually is in the case of outside counsel.” 4 Minebea Co., Ltd. v. Papst, 228 F.R.D. 13, 21 (D.D.C. 2005). Accordingly, “courts 5 impose a higher burden on in-house counsel to ‘clearly demonstrate’ that advice was 6 given in a legal capacity.” Neuberger Berman Real Estate Income Fund, Inc. v. Lola 7 Brown Trust No. 1B , 230 F.R.D. 398, 411 n.20 (D. Md. 2005) (citation omitted). 8 And the principle applies equally here with regard to State farm’s coverage 9 counsel. To justify withholding communications with coverage counsel, the 10 “lawyer’s role as a lawyer must be primary to her participation” in the 11 communication. In re Vioxx Prods. Liability Litig., 501 F. Supp. 2d 789, 798 (E.D. 12 La. 2007). Communications with in-house counsel are not privileged to the extent 13 they “would have been made because of a business purpose,” regardless of whether 14 there may have been a “perceived additional interest in securing legal advice.” 15 McCaugherty v. Siffermann, 132 F.R.D. 234, 238 (N.D. Cal. 1990). See also, e.g.,

p. 29

ID #:4292

p. 30

ID #:4293

p. 31

ID #:4294

1 Dated: April 14, 2025 Respectfully Submitted, 2 3 ELLIS GEORGE LLP 4 5 By: /s/ Trent Copeland 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

*11 CASE NO. 2:24-CV-05205-FMO-MAA*

Eric M. George Trent Copeland

Attorneys for Plaintiffs Jacquelyn “Jackie” Lacey and Jacquelyn “Jackie” Lacey as trustee of the D and J. Lacey Family Trust Dated November 23, 2016

p. 32

ID #:4295

1 ELLIS GEORGE LLP "QQFOEJY

Eric M. George (SBN 166403) 2 egeorge@ellisgeorge.com

Trent Copeland (SBN 136890) 3 tcopeland@ellisgeorge.com

2121 Avenue of the Stars, 30th Floor 4 Los Angeles, California 90067

Telephone: (310) 274-7100 5 Facsimile: (310) 275-5697

6 K&L GATES LLP

Ryan Q. Keech (SBN 280306) 7 Ryan.Keech@klgates.com

Kevin S. Asfour (SBN 228993) 8 Kevin.Asfour@klgates.com

Keian Vahedy (SBN 316708) 9 Keian.Vahedy@klgates.com

10100 Santa Monica Blvd., 8th Floor 10 Los Angeles, California 90067

Telephone: (310) 552-5000 11 Facsimile: (310) 552-5001

12 Attorneys for Plaintiff Jacquelyn “Jackie”

Lacey (in her individual capacity and as trustee 13 of the D and J Lacey Family Trust)

14 UNITED STATES DISTRICT COURT

15 CENTRAL DISTRICT OF CALIFORNIA

Case No. 2:24-cv-05205-FMO-MAA

Judge: Hon. Fernando M. Olguin

PLAINTIFFJACQUELYN “JACKIE” LACEY’S SECOND AMENDED BRIEF IN SUPPORT OF OBTAINING RELEVANT, NON-PRIVILEGED DOCUMENTS FROM DEFENDANT STATE FARM GENERAL INSURANCE COMPANY

ID #:4296

ID #:4297

ID #:4298

ID #:4299

ID #:4300

ID #:4301

[figure]

ID #:4302

1 2 3 4 5 6 7 8 See also, SF-CF (PLUP) 000028: 9 10 11 12 13 14 15 16

p. 40

ID #:4303

1 other functions in addition to providing legal advice, the lawyer’s role on a particular 2 occasion will not be self-evident as it usually is in the case of outside counsel.” 3 Minebea Co., Ltd. v. Papst, 228 F.R.D. 13, 21 (D.D.C. 2005). Accordingly, “courts 4 impose a higher burden on in-house counsel to ‘clearly demonstrate’ that advice was 5 given in a legal capacity.” Neuberger Berman Real Estate Income Fund, Inc. v. Lola 6 Brown Trust No. 1B , 230 F.R.D. 398, 411 n.20 (D. Md. 2005) (citation omitted). 7 And the principle applies equally here with regard to State farm’s coverage 8 counsel. To justify withholding communications with coverage counsel, the 9 “lawyer’s role as a lawyer must be primary to her participation” in the 10 communication. In re Vioxx Prods. Liability Litig., 501 F. Supp. 2d 789, 798 (E.D. 11 La. 2007). Communications with in-house counsel are not privileged to the extent 12 they “would have been made because of a business purpose,” regardless of whether 13 there may have been a “perceived additional interest in securing legal advice.” 14 McCaugherty v. Siffermann, 132 F.R.D. 234, 238 (N.D. Cal. 1990). See also, e.g., 15 Upjohn Co. v. U.S., 449 U.S. 383, 395-96 (1981) (ACP only protects

p. 41

ID #:4304

p. 42

ID #:4305

p. 43

ID #:4306

1 Dated: April 14, 2025 Respectfully Submitted,

2 ELLIS GEORGE LLP 3

4 By: /s/ Trent Copeland 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

*11 CASE NO. 2:24-CV-05205-FMO-MAA*

Eric M. George Trent Copeland

Attorneys for Plaintiffs Jacquelyn “Jackie” Lacey and Jacquelyn “Jackie” Lacey as trustee of the D and J. Lacey Family Trust Dated November 23, 2016

p. 44

ID #:4307

p. 45

ID #:4308

1 ELLIS GEORGE LLP Appendix 6

Trent Copeland (State Bar No. 136890)

2 tcopeland@ellisgeorge.com

2121 Avenue of the Stars, 30th Floor

3 Los Angeles, California 90067

Telephone: (310) 274-7100

4 Facsimile: (310) 275-5697

5 K&L GATES LLP

Ryan Q. Keech (State Bar No. 280306)

6 Ryan.Keech@klgates.com

Kevin S. Asfour (State Bar No. 228993)

7 Kevin.Asfour@klgates.com

Keian Vahedy (State Bar No. 316708)

8 Keian.Vahedy@klgates.com

10100 Santa Monica Blvd., 8th Floor

9 Los Angeles, CA 90067

Telephone: (310) 552-5000 10 Facsimile: (310) 552-5001

11 Attorneys for Plaintiff JACQUELYN

“JACKIE” LACEY, in her individual 12 capacity; and JACQUELYN “JACKIE”

LACEY as trustee of the D and J Lacey 13 Family Trust dated November 23, 2016

15 UNITED STATES DISTRICT COURT

16 CENTRAL DISTRICT OF CALIFORNIA

18 JACQUELYN “JACKIE” LACEY,

in her individual capacity; and 19 JACQUELYN “JACKIE” LACEY

as trustee of the D and J Lacey Family

Case No. 2:24-cv-05205-FMO-MAA

DECLARATION OF TRENT COPELAND IN RESPONSE TO SPECIAL MASTER’S ORDER TO SHOW CAUSE RE SANCTIONS

[Assigned to the Hon. Fernando M. Olguin, Courtroom 6D]

p. 46

ID #:4309

1 DECLARATION OF TRENT COPELAND 2 I, Trent Copeland, declare and state as follows: 3 1. I am an attorney at law, duly admitted to practice before this Court and 4 all courts of the State of California. I am a partner with Ellis George LLP, counsel 5 of record for Plaintiffs Jacquelyn “Jackie” Lacey and Jacquelyn “Jackie” Lacey as 6 trustee of the D and J. Lacey Family Trust Dated November 23, 2016 (collectively, 7 “Plaintiffs”) in this matter. 8 2. I submit this Declaration pursuant to the Special Master’s April 15, 9 2025, Order to Show Cause re: Sanctions (the “OSC”). I have personal knowledge 10 of all the matters set forth herein, and could and would testify competently thereto if 11 called upon to do so. 12 3. This problem began with me—full stop – in my failure to advise my 13 colleagues that a preliminary outline I forwarded to them had relied, in part, on the 14 use of generative AI capabilities found in CoCounsel and Westlaw Precision and 15 Google Gemini. To the extent my colleagues were tasked with the primary 16 responsibility for research and drafting of the memorandum, they did so in 17 reliance—at least initially—on my preliminary outline and notes I had provided 18 several days earlier. 19 4. Since I was engaged in preparing for a trial scheduled to start April 14, 20 2025, I was unable to produce a more comprehensive work product, so I emailed my 21 notes and high-level thoughts in outline format. I did so because I wanted to assure 22 our drafting team had the benefit of my preliminary thoughts and a general roadmap 23 before beginning their research and writing. I believe I initially used CoCounsel, 24 which I had recently been exposed to through a firm training, as well as Westlaw’s 25 AI tool to undertake research. I also briefly conducted internet research using

p. 47

ID #:4310

1 faithfully transcribed based on the sources I reviewed. It is unclear to me whether 2 there was human error in my transcription of that research, or whether one of the 3 research tools I utilized returned some erroneous information. 4 5. On April 9, 2025, I circulated to my colleagues Ryan Keech and Keian 5 Vahedy some of my notes along with a bullet-point outline of the legal arguments I 6 hoped the team would address as they prepared the memorandum. By April 11, 7 2025, it was my understanding the K&L Gates team, along with an associate from 8 Ellis George, had commenced drafting the memorandum. I understand they 9 engaged in their own legal research and writing to bring the brief to near-final form. 10 It is clear that they relied on the accuracy of some of the case citations included in 11 my initial outline, while also adding themselves the vast majority of the case 12 authority to the brief. In hindsight, there is no question I should have taken more 13 care to first check the accuracy of these citations before sending or explicitly request 14 my colleagues to do so before including any material from my preliminary outline in 15 the final version of the brief. 16 6. In reviewing versions 1 through 3 of the draft, it is apparent that no one 17 confirmed the accuracy of some of citations pulled from my preliminary outline.

p. 48

ID #:4311

1 my responsibility or not — I accept responsibility for (1) not alerting my colleagues 2 with respect to the tools I utilized in conducting the initial research; and (2) failing 3 to conduct cite-checking myself or to specifically request that the brief be properly 4 reviewed for citation errors; and (3) not adequately supervising the cite-checking 5 process. I am both deeply apologetic and embarrassed by this error. As for the 6 “bizarre” modification the Court referenced in version 2, I am informed this was the 7 result of a typographical error compounded by a technical glitch during the upload 8 process by my assistant. Not at any time was there a deliberate effort to deceive or 9 falsify the state of the law, nor did we. 10 8. Importantly, even before this event, I had reviewed and was familiar 11 with the State Bar’s ethical guidance on the responsible use of generative AI in the 12 practice of law. This guidance emphasized that while lawyers may use generative 13 AI, our ethical obligations apply in the same way as with any other technology. 14 Specifically, on July 24, 2024, the State Bar stated in its guidance order that “The 15 State Bar recognizes that generative AI systems are not without risks. COPRAC’s

p. 49

ID #:4312

1 including even the misplacement of a parenthetical. The below constitutes a list of 2 items, including typographical errors, that we believe should be brought to the 3 Special Master’s attention – irrespective of whether these errors are associated with 4 the use of AI, or not: 5 a. Page 3 of Dkt. 98: 6 i. People v. Superior Court, 25 Cal.4th 703, 725 (2001) (“A 7 trial court has broad discretion to review materials in camera to 8 determine whether a claimed privilege applies.”).–.there should be no 9 quotes in the parenthetical, which should refer to n. 7. 10 b. Page 4 of Dkt. 98: 11 i. Wellpoint Health Networks, Inc. v. Superior Court, 59 12 Cal.App.4th 110, 119 (1997) – the pincite should be page 123, not 119. 13 ii. Aetna Cas. & Surety Co. v. Superior Court, 153 14 Cal.App.3d 467, 476 (1984) (“Where the evidence sought is directly at 15 issue… a party should not be allowed to use privilege as both a sword 16 and a shield.”) – non-existent quote; however, this case exists and the 17 quote states a generally correct proposition of law. 18 iii. Zurich American Ins. Co. v. Superior Court, 155

p. 50

ID #:4313

1 within the parentheticals. 2 d. Page 6 of Dkt. 98: 3 i. Davis v. City of Santa Ana, 51 Cal.App.5th 1094, 1115 4 (2020)– inaccurate citation to a case that appears not to exist and 5 should be removed and not relied upon. 6 ii. National Steel Products Co. v. Superior Court, 164 7 Cal.App.3d 476, 489 (1985) (“Internal memoranda or claims file 8 materials, although they may discuss legal theories, litigation tactics or 9 potential liability, are not privileged unless they are written by or at the 10 direction of counsel and prepared for the purpose of transmitting 11 information to counsel for legal advice.”) – the pincite should be 477, 12 should not have quotes, and the parenthetical should be revised to 13 reflect that privilege is strictly construed because it suppresses relevant 14 facts which may be necessary for a just decision. 15 e. Page 9 of Dkt. 98: 16 i. Lipton v. Superior Court, 48 Cal.App.4th 1599, 1619 17 (1996) (“A party may not use the privilege as both a sword and a 18 shield.”) – inaccurate quote; quote from this case should be “The party 19 20 21 22 729. 23 f. 24 i. 25 26 faith.”) – inaccurate quote to a case that appears not to exist but is a 27 correct proposition of law. See, e.g., Zurich Ins. Co. v. State Farm Mut.

claiming the privilege has the burden to show that the communication sought to be suppressed falls within the terms of the claimed privilege.” See D. I. Chadbourne, Inc. v. Superior Court (1964) 60 Cal.2d 723,

Page 10 of Dkt. 98:

Booth v. Allstate Ins. Co., 198 Cal.App.3d 1357, 1366 (1989) (“An insurer cannot assert privilege to shield evidence of bad

p. 51

[figure]

ID #:4314

1 that the insurer has breached that duty to its insured, the insurer may 2 not use the attorney-client or work product privilege as a shield to 3 prevent disclosure which is relevant to the insured’s bad faith action”); 4 Boone v. Vanliner Ins. Co., 9 Ohio St. 3d 209, 213-14 (2001) (“in an 5 action alleging bad faith denial of insurance coverage, the insured is 6 entitled to discover claims file materials containing attorney client 7 communications related to the issue of coverage that were created prior 8 to the denial of coverage.”). 9 ii. Nei v. Travelers Home and Marine Ins. Co., 326 F.R.D. 10 652 (2018) (holding that attorney-client privilege does not apply when 11 an attorney acts as a claims adjuster, supervisor, or investigation 12 monitor rather than a legal advisor) – pincites should be 658. 13 Executed this 18th day of April, 2025, at Los Angeles, California. 14 I declare under penalty of perjury under the laws of the State of California 15 that the foregoing is true and correct. 16 17 18 19

Trent Copeland

20 21 22 23 24 25

*2550949.1 -7-*

ID #:4315

ID #:4316

ID #:4317

ID #:4318

ID #:4319

Appendix 7

1 ELLIS GEORGE LLP

Eric M. George (SBN 166403)

2 egeorge@ellisgeorge.com

Trent Copeland (SBN 136890)

3 tcopeland@ellisgeorge.com

2121 Avenue of the Stars, 30th Floor

4 Los Angeles, California 90067

Telephone: (310) 274-7100

5 Facsimile: (310) 275-5697

6 K&L GATES LLP

Ryan Q. Keech (SBN 280306)

7 Ryan.Keech@klgates.com

Kevin S. Asfour (SBN 228993)

8 Kevin.Asfour@klgates.com

Keian Vahedy (SBN 316708)

9 Keian.Vahedy@klgates.com

10100 Santa Monica Blvd., 8th Floor 10 Los Angeles, California 90067

Telephone: (310) 552-5000 11 Facsimile: (310) 552-5001

12 Attorneys for Plaintiff JACQUELYN

“JACKIE” LACEY, in her individual 13 capacity; and JACQUELYN “JACKIE”

LACEY as trustee of the D and J Lacey 14 Family Trust dated November 23, 2016

16 UNITED STATES DISTRICT COURT

17 CENTRAL DISTRICT OF CALIFORNIA, WESTERN DIVISION

18 JACQUELYN “JACKIE” LACEY,

in her individual capacity; and 19

JACQUELYN “JACKIE” LACEY as trustee of the D and J Lacey Family 20

Trust dated November 23, 2016, 21 KEECH IN RESPONSE TO THE

Plaintiffs,

vs. 23

24 STATE FARM GENERAL

INSURANCE COMPANY, an Illinois 25 corporation, and DOES 1-50, inclusive,

Case No. 2:24-cv-05205-FMO-MAA Judge: Fernando M. Olguin DECLARATION OF RYAN Q. SPECIAL MASTER’S ORDER TO SHOW CAUSE RE: SANCTIONS

p. 57

ID #:4320

1 DECLARATION OF RYAN Q. KEECH 2 I, Ryan Q. Keech, declare as follows: 3 1. I am an attorney licensed to practice law in this court and all courts of 4 the State of California. I am a partner at the law firm of K&L Gates LLP, attorneys 5 of record for Plaintiffs Jacquelyn “Jackie” Lacey and Jacquelyn “Jackie” Lacey as 6 trustee of the D and J. Lacey Family Trust Dated November 23, 2016 (collectively, 7 “Plaintiff”), in this action. 8 2. I submit this Declaration pursuant to the Special Master’s April 15, 2025 9 Order to Show Cause re: Sanctions (the “OSC”). I have personal knowledge of each 10 of the matters set forth herein, and would testify competently thereto if called upon to 11 do so. 12 3. To begin, I have the utmost faith in and respect for the professional 13 conduct and integrity of Mr. Copeland and his firm – with whom I have had the great 14 privilege of working and from whom I have had the great privilege of learning as a 15 partner and as co-counsel for years. His and their professionalism and ethics are 16 beyond reproach. 17 4. As described herein, Mr. Copeland and Mr. Vahedy have been primarily 18 responsible for the briefing associated with the privilege issue addressed by the Court 19 on April 7, 2025. I had limited involvement in the preparation and did not sign, file 20 or provide final approval of the contents of any of the three versions of the brief 21 addressed in the OSC prior to filing. 22 5. However, I understand and take seriously the critical importance of 23 accuracy in case citations in order for the process to function and know that my 24 colleagues and co-counsel have a similar view. I apologize that these versions of the 25 brief contained the inaccuracies initially identified by the Special Master, apologize 26 further that I did not personally catch and correct those inaccuracies, and respectfully 27 request, because – as discussed herein and as confirmed by the declarations of my

p. 58

ID #:4321

1 colleagues – these inaccuracies were inadvertent and the subject of an honest 2 miscommunication, the OSC be discharged. 3 6. After the Court’s April 7, 2025 hearing, I discussed the Special Master’s 4 request for briefing regarding the in-camera review procedures with Mr. Vahedy. I 5 provided initial guidance on what I thought the brief should contain. Mr. Vahedy 6 offered to prepare the draft of the brief, and I agreed. 7 7. Two days later, on April 9, 2025, I was copied on an email from Mr. 8 Copeland to me and to Mr. Vahedy, providing what appeared to be a detailed outline 9 of the brief. I recall that the outline contained a number of case citations. Mr. 10 Copeland re-forwarded that outline on April 10, 2025. Mr. Copeland did not indicate 11 where those citations came from and I did not independently verify those citations. 12 Given our long experience working with Mr. Copeland and his firm and our utmost 13 respect for his and his firm’s professional integrity – which respect, once again, 14 continues – I did not doubt the accuracy of any of those citations. 15 8. On the afternoon of Friday, April 11, 2025, Mr. Vahedy copied me on 16 his transmission to Mr. Copeland and his associate, Ms. Carpenter, of what I 17 understood to be an initial draft of the requested brief. I had not received a draft of 18 this brief prior to Friday. 19 9. While I knew that Mr. Copeland was taking the lead on this issue, I 20 reviewed that draft on the morning of Saturday, April 12, 2025 and provided high-21 level comments aimed at ensuring that we were making a properly-tailored request 22 and citing appropriately illustrative factual examples. I did not conduct a cite-by-cite 23 review of the document. Mr. Copeland provided additional comments and instructed

DECLARATION OF RYAN Q. KEECH IN RESPONSE TO THE SPECIAL MASTER’S

ORDER TO SHOW CAUSE RE: SANCTIONS

p. 59

ID #:4322

1 10. Early in the afternoon of April 13, 2025, Mr. Copeland confirmed that 2 the revisions were appropriate and that he and his firm would take responsibility for 3 finalizing, filing and submission to the Court. After Mr. Copeland provided that 4 confirmation, later that same afternoon, I made a high-level suggestion for Mr. 5 Copeland to consider incorporating relating to the brief’s introduction. I presumed, 6 but did not specifically confirm, that the finalization, filing and submission process 7 would include an appropriately robust proof and cite-checking procedure. 8 11. I did not participate in finalizing or filing this brief and did not sign off 9 on its contents. I did not hear anything relating to the brief until approximately noon 10 on April 14, 2025, when I learned that Mr. Copeland’s firm was experiencing 11 formatting and submission issues with the JAMS system that were creating difficulty 12 with meeting the Court’s noon deadline and that the initial filed version of the brief 13 was not able to correct all of those issues. A subsequent version of the brief was filed 14 that, I understand, corrected some of those issues. I had no involvement in these 15 filings. 16 12. After the Special Master sent his message to the parties on April 14, 2025 17 identifying apparent issues with two decisions in the brief, Mr. Copeland sent two 18 messages to me and to Mr. Vahedy identifying replacement parentheticals and 19 citations for the Boone and National Steel decisions identified in the Special Master’s 20 email. Mr. Copeland promptly filed a corrected brief, which I again did not review 21 and sign, and Mr. Vahedy sent an explanatory email to the Special Master explaining 22 the inadvertent inclusion of these two citations. While it was obvious by this point 23 that whatever cite check had been performed had issues, I was confident that the issue 24 was most likely limited to the issues identified by the Court, caught by my colleagues 25 and, even then, most likely had been caused by the formatting and submission 26 difficulties described above that had earlier come to my attention. 27 13. I can confirm that none of our firm’s work on this brief involved our use 28 of AI. In providing that confirmation, I do not mean to suggest that there is anything-4-

p. 60

ID #:4323

1 wrong with the appropriate use of AI: indeed, I understand that numerous profession-2 specific AI tools are becoming available – including Co-Counsel and Westlaw AI – 3 which clients are increasingly demanding that counsel develop familiarity with in 4 order to better align with their business focus, legal needs and market reality. What I 5 do mean to say is that our firm has developed policies and procedures governing 6 access to profession-specific AI tools, including Co-Counsel, and has decided to 7 block access to these tools absent, inter alia, tool-specific training developed for use 8 at our firm. Neither I nor Mr. Vahedy have such access. We did not have such access 9 at the time of the preparation and filing of these briefs. 10 14. However, in light of the OSC, I came to the conclusion that the citation 11 issue was broader than I had initially believed was the case when I reviewed the 12 Court’s April 14, 2025 correspondence. Accordingly, while Mr. Copeland was 13 conducting his own check, I personally conducted a check of each of the citations in 14 the brief in order to catch whatever issues may have escaped the Special Master’s 15 review. 16 15. After having conducted this check, I have determined that while most 17 citations in the brief stand for the propositions for which they are cited, and the 18 remainder of the citations largely involve familiar and supportable legal propositions 19 present in other cases, the following citations should be changed. I apologize once 20 again that, regardless of my and our level of involvement, I did not catch this issue 21 prior to the filing of the brief: 22 a. Page 3 of Dkt. 98: 23 i. People v. Superior Court, 25 Cal.4th 703, 725 (2001) 24 (“A trial court has broad discretion to review materials 25 in camera to determine whether a claimed privilege 26 applies.”) – there should be no quotes in the 27 parenthetical, which should refer to n. 7. 28 b. Page 4 of Dkt. 98:-5-

p. 61

1 i. 2 3 4 ii. 5 6 7 8 9 10 iii. 11 12 13 14 15 16 17 18 19 20 c. 21 i. 22 23 d. 24 i. 25

27 ii.

ID #:4324

Wellpoint Health Networks, Inc. v. Superior Court, 59

Cal.App.4th 110, 119 (1997) – the pincite should be page 123, not 119.

Aetna Cas. & Surety Co. v. Superior Court, 153

Cal.App.3d 467, 476 (1984) (“Where the evidence sought is directly at issue… a party should not be allowed to use privilege as both a sword and a shield.”) – inaccurate quote; however, this case exists and this is generally a correct proposition of law.

Zurich American Ins. Co. v. Superior Court, 155

Cal.App.4th 1485, 1503 (2007) (“Communications by corporate employees that are not made at the direction of counsel or for the purpose of legal advice are not privileged.”) – the pincite should be 1504 and state: “otherwise routine, non-privileged communications between corporate officers or employees transacting the general business of the company do not attain privileged status solely because in-house or outside counsel is ‘copied in’ on correspondence or memoranda.” Page 5 of Dkt. 98:

Costco, supra, 47 Cal.4th at 739 – should not have

quotes within the parentheticals. Page 6 of Dkt. 98:

Davis v. City of Santa Ana, 51 Cal.App.5th 1094, 1115

(2020) – inaccurate citation to a case that I have not been able to find and should thus be removed.

National Steel Products Co. v. Superior Court, 164

Cal.App.3d 476, 489 (1985) (“Internal memoranda or-6-

p. 62

1 2 3 4 5 6 7 8 9 10 e. 11 i. 12 13 14 15 f. 16 i. 17 18 19 20 21 22 23 24 25

ID #:4325

claims file materials, although they may discuss legal theories, litigation tactics or potential liability, are not privileged unless they are written by or at the direction of counsel and prepared for the purpose of transmitting information to counsel for legal advice.”) – the pincite should be 477 and the parenthetical should be revised to reflect that privilege is strictly construed because it suppresses relevant facts which may be necessary for a just decision. Page 9 of Dkt. 98:

Lipton v. Superior Court, 48 Cal.App.4th 1599, 1619

(1996) (“A party may not use the privilege as both a sword and a shield.”) – inaccurate quote; however, this case exists and this is a correct proposition of law. Page 10 of Dkt. 98:

Booth v. Allstate Ins. Co., 198 Cal.App.3d 1357, 1366

(1989) (“An insurer cannot assert privilege to shield evidence of bad faith.”) – inaccurate quote to a case that appears not to exist, but is a holding made by other courts: See, e.g., Zurich Ins. Co. v. State Farm Mut. Auto. Ins. Co., 137 A.2d 401, 402 (1st Dep’t 1988) (“Where it is alleged that the insurer has breached that duty to its insured, the insurer may not use the attorneyclient or work product privilege as a shield to prevent disclosure which is relevant to the insured’s bad faith action”); Boone v. Vanliner Ins. Co., 9 Ohio St. 3d 209, 213-14 (2001) (“in an action alleging bad faith denial of insurance coverage, the insure-7- d is entitled to discover

p. 63

ID #:4326

1 claims file materials containing attorney client 2 communications related to the issue of coverage that 3 were created prior to the denial of coverage.”). 4 ii. Nei v. Travelers Home and Marine Ins. Co., 326 F.R.D. 5 6 7 8 advisor) – pincite should be 658. 9 I declare under penalty of perjury, under the laws of the United States of 10 America, that the foregoing is true and correct. 11 Executed this 18th day of April 2025, in Los Angeles, California. 12 13 14 15 16 17 18 19 20 21 22 23 24 25

652 (2018) (holding that attorney-client privilege does not apply when an attorney acts as a claims adjuster, supervisor, or investigation monitor rather than a legal

/s/ Ryan Q. Keech

Ryan Q. Keech

p. 64

ID #:4327

1 ELLIS GEORGE LLP

Eric M. George (SBN 166403) Appendix 8

2 egeorge@ellisgeorge.com

Trent Copeland (SBN 136890)

3 tcopeland@ellisgeorge.com

2121 Avenue of the Stars, 30th Floor

4 Los Angeles, California 90067

Telephone: (310) 274-7100

5 Facsimile: (310) 275-5697

6 K&L GATES LLP

Ryan Q. Keech (SBN 280306)

7 Ryan.Keech@klgates.com

Kevin S. Asfour (SBN 228993)

8 Kevin.Asfour@klgates.com

Keian Vahedy (SBN 316708)

9 Keian.Vahedy@klgates.com

10100 Santa Monica Blvd., 8th Floor 10 Los Angeles, California 90067

Telephone: (310) 552-5000 11 Facsimile: (310) 552-5001

12 Attorneys for Plaintiff JACQUELYN

“JACKIE” LACEY, in her individual 13 capacity; and JACQUELYN “JACKIE”

LACEY as trustee of the D and J Lacey 14 Family Trust dated November 23, 2016

16 UNITED STATES DISTRICT COURT

17 CENTRAL DISTRICT OF CALIFORNIA, WESTERN DIVISION

18 JACQUELYN “JACKIE” LACEY,

in her individual capacity; and 19 JACQUELYN “JACKIE” LACEY

as trustee of the D and J Lacey Family 20

Trust dated November 23, 2016, 21 VAHEDY IN RESPONSE TO THE

Plaintiffs,

vs. 23

24 STATE FARM GENERAL

INSURANCE COMPANY, an Illinois 25 corporation, and DOES 1-50, inclusive,

Case No. 2:24-cv-05205-FMO-MAA Judge: Fernando M. Olguin DECLARATION OF KEIAN SPECIAL MASTER’S ORDER TO SHOW CAUSE RE: SANCTIONS

p. 65

ID #:4328

1 DECLARATION OF KEIAN VAHEDY 2 I, Keian Vahedy, declare as follows: 3 1. I am an attorney licensed to practice law in this Court and Associate at 4 the law firm of K&L Gates LLP, attorneys of record for Plaintiffs Jacquelyn “Jackie” 5 Lacey and Jacquelyn “Jackie” Lacey as trustee of the D and J. Lacey Family Trust 6 Dated November 23, 2016 (collectively, “Plaintiff”), in this action. I have personal 7 knowledge of each of the matters set forth herein, and would testify competently 8 thereto if called upon to do so. 9 2. I submit this Declaration pursuant to the Special Master’s Order to Show 10 Cause re: Sanctions, explaining my role in assisting with preparing Plaintiff’s 11 supplemental brief regarding defendant State Farm General Insurance Company’s 12 (“State Farm”) privilege log. 13 3. While I did not finalize the brief for filing, I sincerely apologize for the 14 evident errors in the citations provided within Plaintiff’s brief submitted on April 14, 15 2025 (“Brief”). The inaccuracies contained therein were inadvertent and a result of 16 honest miscommunication. I should have caught these errors beforehand and 17 apologize for not more actively checking all sources contained within Plaintiff’s

p. 66

ID #:4329

1 After the Court’s April 7, 2025 hearing, I spoke with Mr. Keech, who provided me 2 with an update regarding the hearing and initial guidance as to what the brief should 3 contain. I offered to prepare the draft of the brief, and he agreed. 4 5. On April 9, 2025, I and Mr. Keech received an email from Mr. Copeland, 5 providing what appeared to be a detailed outline of the brief. This brief contained a 6 number of case citations. Mr. Copeland re-forwarded that outline on April 10, 2025. 7 While Mr. Copeland did not indicate where those citations came from, having 8 previously worked at Ellis George LLP and understanding the high quality and 9 standards that the firm and Mr. Copeland uphold in their practice, I relied on this 10 outline when drafting the brief believing that its sources were true, accurate, and 11 already cite checked. I separately conducted legal research exclusively on Westlaw: 12 reviewing additional cases, secondary sources, and published trial documents, each 13 of which I relied upon to lay foundation and draft Plaintiff’s Brief. With respect to 14 the cases I found on Westlaw, I made sure to verify that these cases were valid and 15 stood for the proposition for which they were cited. 16 6. I submitted a draft of the brief on Friday, April 11, 2025 to Mr. Copeland 17 and his associate Ms. Carpenter, copying Mr. Keech. Mr. Keech provided high-level 18 comments on Saturday, April 12, 2025, which was followed by Mr. Copeland 19 providing additional comments to me and to Ms. Carpenter. Throughout the day on

p. 67

ID #:4330

1 I assumed, again, that the citations provided to me on April 9 and 10 were accurate 2 for the propositions they represented. 3 8. After the Court sent its message to the parties on April 14, 2025 4 identifying apparent issues with two decisions in the brief, Mr. Copeland sent two 5 messages to me and to Mr. Keech identifying replacement parentheticals and citations 6 for the Boone and National Steel decisions identified in the Special Master’s email to 7 the parties. I confirmed the accuracy of those parentheticals and prepared an email 8 for submission to the Special Master, which I then sent in close proximity to the filing 9 of the further revised brief. 10 9. After the Court issued its OSC, I personally conducted a full cite check 11 of the brief that was filed with the Court in order to catch whatever issues may have 12 escaped review. 13 10. At no point did I use or knowingly rely on any artificial intelligence tool 14 or program to assist in drafting any version of this Brief. I do not have access to Co-15 Counsel at our firm. I have never used artificial intelligence, or any artificial 16 intelligence program, with respect to my legal research or any law and motion practice 17 in my career, nor is or would it be my practice to do so. 18 11. I confirm personally conducting a citation-by-citation check of the 19 citations in the brief in order to catch whatever issues may have escaped the Special

p. 68

1 b. Page 4 of Dkt. 98: 2 i. 3 4 5 ii. 6 7 8 9 10 11 iii. 12 13 14 15 16 17 18 19 20 21 c. 22 i. 23 24 d. 25 i.

ID #:4331

Wellpoint Health Networks, Inc. v. Superior Court, 59

Cal.App.4th 110, 119 (1997) – the pincite should be page 123, not 119.

Aetna Cas. & Surety Co. v. Superior Court, 153

Zurich American Ins. Co. v. Superior Court, 155

Costco, supra, 47 Cal.4th at 739 – should not have

quotes within the parentheticals. Page 6 of Dkt. 98:

Davis v. City of Santa Ana, 51 Cal.App.5th 1094, 1115

(2020) – inaccurate citation to a case that appears not to exist and should be removed.

p. 69

1 ii. 2 3 4 5 6 7 8 9 10 11 12 e. 13 i. 14 15 16 17 18 f. 19 i. 20 21 22 23 24 25

ID #:4332

National Steel Products Co. v. Superior Court, 164

Cal.App.3d 476, 489 (1985) (“Internal memoranda or claims file materials, although they may discuss legal theories, litigation tactics or potential liability, are not privileged unless they are written by or at the direction of counsel and prepared for the purpose of transmitting information to counsel for legal advice.”) – the pincite should be 477, should not have quotes, and the parenthetical should be revised to reflect that privilege is strictly construed because it suppresses relevant facts which may be necessary for a just decision. Page 9 of Dkt. 98:

Lipton v. Superior Court, 48 Cal.App.4th 1599, 1619

(1996) (“A party may not use the privilege as both a sword and a shield.”) – inaccurate express quote; however, this case exists and this is a correct proposition of law. Page 10 of Dkt. 98:

Booth v. Allstate Ins. Co., 198 Cal.App.3d 1357, 1366

(1989) (“An insurer cannot assert privilege to shield evidence of bad faith.”) – inaccurate quote to a case that appears not to exist, but is a correct proposition of law. See, e.g., Zurich Ins. Co. v. State Farm Mut. Auto. Ins. Co., 137 A.2d 401, 402 (1st Dep’t 1988) (“Where it is alleged that the insurer has breached that duty to its insured, the insurer may not use the attorney-client or work product privilege as a shield to prevent disclosure which is relevant to the insured’s bad faith action”);-6-

p. 70

ID #:4333

1 Boone v. Vanliner Ins. Co., 9 Ohio St. 3d 209, 213-14 2 (2001) (“in an action alleging bad faith denial of 3 insurance coverage, the insured is entitled to discover 4 claims file materials containing attorney client 5 communications related to the issue of coverage that 6 were created prior to the denial of coverage.”). 7 ii. Nei v. Travelers Home and Marine Ins. Co., 326 F.R.D. 8 9 10 11 advisor) – pincite should be 658. 12 I declare under penalty of perjury, under the laws of the United States of 13 America, that the foregoing is true and correct. 14 Executed this 18th day of April 2025, in Irvine, California. 15 16 17 18 19 20 21 22 23 24 25

28 -7-

652 (2018) (holding that attorney-client privilege does not apply when an attorney acts as a claims adjuster, supervisor, or investigation monitor rather than a legal

/s/ Keian Vahedy

Keian Vahedy

p. 71

ID #:4334

Appendix 9

1 ELLIS GEORGE LLP

Eric M. George (SBN 166403)

2 egeorge@ellisgeorge.com

Trent Copeland (SBN 136890)

3 tcopeland@ellisgeorge.com

2121 Avenue of the Stars, 30th Floor

4 Los Angeles, California 90067

Telephone: (310) 274-7100

5 Facsimile: (310) 275-5697

6 K&L GATES LLP

Ryan Q. Keech (SBN 280306)

7 Ryan.Keech@klgates.com

Kevin S. Asfour (SBN 228993)

8 Kevin.Asfour@klgates.com

Keian Vahedy (SBN 316708)

9 Keian.Vahedy@klgates.com

10100 Santa Monica Blvd., 8th Floor 10 Los Angeles, California 90067

Telephone: (310) 552-5000 11 Facsimile: (310) 552-5001

12 Attorneys for Plaintiff JACQUELYN

“JACKIE” LACEY, in her individual 13 capacity; and JACQUELYN “JACKIE”

LACEY as trustee of the D and J Lacey 14 Family Trust dated November 23, 2016

16 UNITED STATES DISTRICT COURT

17 CENTRAL DISTRICT OF CALIFORNIA, WESTERN DIVISION

19 JACQUELYN “JACKIE” LACEY,

in her individual capacity; and 20 JACQUELYN “JACKIE” LACEY

as trustee of the D and J Lacey Family 21

Trust dated November 23, 2016,

Case No. 2:24-cv-05205-FMO-MAA Judge Fernando M. Olguin JAMS Case No. 1210040394 Michael R. Wilner (Ret.) PLAINTIFF’S RESPONSE TO SPECIAL MASTER’S NOTICE OF

p. 72

ID #:4335

1 Plaintiff and her counsel, Ellis George LLP and K&L Gates LLP, hereby 2 respond to the Special Master’s April 20, 2025 Notice pursuant to Paragraph 8 3 thereof and its five-page limitation. This submission consists of three discrete 4 components: Section I, submitted jointly by Plaintiff, Ellis George, and K&L Gates; 5 Section II, by K&L Gates alone; and Section III, by Ellis George alone. 6 I. JOINT SUBMISSION (BY PLAINTIFF AND BOTH FIRMS) 7 A. Introduction 8 As reflected in the declarations already submitted,1Plaintiff humbly 9 acknowledges, apologizes for, and takes full responsibility for the erroneous AI-10 generated citations that were inadvertently included in its briefing filed with the 11 Special Master on April 14, 2025. This has never happened before in this case (nor 12 in any other matter handled by these attorneys) and it will never happen again. 13 Respectfully, however, most of the contemplated sanctions referenced in the Notice 14 are unsupported by the facts and controlling legal principles, disproportionate to the 15 circumstances at hand, and run counter to the ends of justice, as detailed below. 16 B. Plaintiff’s Use of Erroneous AI-Generated Material Was Inadvertent,

Rule 11 b states, in relevant part, that when an attorney presents “a pleading, written motion, or other paperμ to a court, the attorney “certifies that to the best of that person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances [that the] legal contentions are warranted by existing law.μ Rule 11 c 3-4 states that a court may impose a sanction “limited to what suffices to deter repetition of the conduct or comparable conduct by others similarly situated.μ That may include “nonmonetary directivesμ or “an order directing payment [ ] of part or all of the reasonable attorney’s fees and other expenses directly resulting from the violation.μ

p. 73

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1 There is no indication whatsoever that any of Plaintiff’s counsel ever acted

with malice, an intent to deceive, or bad faith of any kind.

2 3 • Despite the above citation issues, Plaintiff’s Supplemental Brief did not

present any incorrect or non-existent proposition of law. Rather,

Plaintiff’s arguments stem from established legal principles supported by

5 valid precedent. Thus, the brief did not advance a frivolous legal position. 6

• Defendant did not rely upon, suffer any prejudice, or incur any expense

7 due to the incorrect citations. Indeed, such would be impossible, logically 8 and temporally, since per the Special Master’s orders, each side

concurrently submitted their Supplemental Brief on April 14, 2025. In

9 other words, Defendant’s submission was not filed in response to 10 Plaintiff’s submission, nor did the Special Master’s orders permit either

side to file a “reply” brief in response to the Supplemental Briefs. 11 12 C. The Contemplated Sanctions Are Not Appropriate Under the Law 13 The Ninth Circuit has long held that “[i]n determining the validity of any 14 judicial sanction, we must first consider the underlying authority for the court’s 15 action.” Zambrano v. City of Tustin, 885 F.2d 1473, 1476 (9th Cir. 1989). “For a 16 sanction to be validly imposed, the conduct in question must be sanctionable under 17 the authority relied on.” Id. at 1476-77 (citations omitted). Here, the Notice 18 identifies three sources of authority for imposing sanctions: (i) the Court’s inherent 19 authority to “regulate all proceedings” before it; (ii) FRCP 11; and (iii) FRCP 37.

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1 it was done in bad faith”); compare Unites States v. Hayes, --- F. Supp. 3d. ---, 2025 2 WL 235531, at *9 (E.D. Cal. 2025) (issuing sanctions against attorney who declined 3 to admit use of AI and persisted in asserting the validity of non-existent cases 4 despite opposition that expressly raised fictitious case concerns); Mata v. Avianca, 5 678 F. Supp. 3d 443, 466 (S.D.N.Y. 2023). 6 Likewise, for Rule 11: where, as here, the proposed sanction is imposed sua 7 sponte, a finding of bad faith is a prerequisite. See, e.g., United National Ins. Co. v. 8 R&D Latex Corp., 242 F.3d 1102, 1116 (9th Cir. 2001) (“sua sponte sanctions ‘will 9 ordinarily be imposed only in situations that are akin to a contempt of court’”); see 10 also Cohen, 724 F. Supp. 3d at 258 (“sua sponte [Rule 11] sanctions should only 11 issue upon a finding of subjective bad faith”). Again, there is no bad faith here.2 12 Turning to Rule 37: The specific prongs of the Rule cited in the Notice are 13 Rule 37(a)(5)(B) (award of attorney’s fees) and Rule 37(b)(2)(A)(ii-iii) (prohibiting 14 a party from “supporting or opposing designated claims or defenses” and “striking 15 pleadings in whole or in part”). Starting with the latter (Rule 37(b)(2)(A)(ii-iii)): by 16 their own terms, those provisions have no applicability here. To impose any 17 sanction under Rule 37(b)(2)(A), the Court must find that a party has “fail[ed] to 18 obey an order to provide or permit discovery.” Fed. R. Civ. P. 37(b)(2)(A). Here, 19 nothing of the sort is even alleged to have occurred, and thus there is no basis for the 20 contemplated sanction of striking Plaintiff’s Supplemental Brief wholesale. By 21 extension, then, the automatic denial of the underlying motion due to the 22 contemplated striking of Plaintiff’s brief is likewise inappropriate. Further, the 23 Notice’s contemplated sanction of ordering Plaintiff’s counsel “to pay reasonable 24 attorney’s fees that Defendant incurred in the preparation of its supplemental brief

Moreover, a Rule 11 sanction imposed sua sponte can never include a payment of attorney’s 26 fees to the opposing party, given the provision in Rule 11(c)(4) that fee awards are only available “if imposed on motion.” Fed. R. Civ. P. 11(c)(4) (emphasis added); see also Barber v. Miller , 146 F.3d 707, 711 (9th Cir. 1998); Nuwesra v. Merrill Lynch, Fenner & Smith, Inc., 174 F.3d 87, 94 28 (2nd Cir. 1999). PLAINTIFF’S RESPONSE TO SPECIAL MASTER’S NOTICE 16 Plaintiff’s counsel, the fundamental correctness of the legal arguments advanced, the 17 lack of any bad faith, and the lack of prejudice, Plaintiff respectfully submits that 18 imposing sanctions that substantively impact the case—including the striking of 19 briefing and denial of the motion—would unfairly penalize Plaintiff and her case. 20 See, e.g., id. at 1476 (cautioning against penalizing litigants for inadvertent 21 transgressions by counsel). 22 D. CONCLUSION 23 Plaintiff respectfully submits that the contemplated sanctions set forth in 24 Paragraph 6(a), 6(b), and 6(c) of the Notice are not appropriate. That said, 25 Plaintiff’s counsel reiterates their acknowledgement of the errors that occurred here 26 and their sincere apologies, and stipulate to the contemplated sanctions set forth in 27 Paragraph 6(d) (apportionment to Plaintiffs’ counsel of Special Master fees relating 28 to correction of the foregoing errors and these OSC proceedings) and Paragraph 6(e) PLAINTIFF’S RESPONSE TO SPECIAL MASTER’S NOTICE 19 Ellis George notes the following mitigating factors specific to its lawyer, 20 Trent Copeland: Mr. Copeland used generative AI tools specifically designed for 21 legal professionals when providing his colleagues with his initial thoughts in outline. 22 When doing so, he specifically indicated that they were “not intended to be a guide” 23 but rather an overview of the potential arguments. (See Copeland Decl., ¶¶ 4-8.) 24 Because Mr. Copeland was not tasked with primary responsibility for drafting the 25 brief, he assumed that case authority would be cite-checked by those who were 26 responsible for its drafting. Mr. Copeland acknowledges that, in hindsight, he should 27 have alerted the primary draftsman of his initial use of AI to assure proper cite 28 checking prior to submission. PLAINTIFF’S RESPONSE TO SPECIAL MASTER’S NOTICE 16 Date: April 25, 2025 By: s/ Kevin S. Asfour 17 18 19 20 21 22 23 24 25 PLAINTIFF’S RESPONSE TO SPECIAL MASTER’S NOTICE

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1 (filed April 14)” is, respectfully, not appropriate: First, Defendant’s Supplemental 2 Brief was filed concurrently with Plaintiff’s Supplemental Brief. Thus, any fees 3 expended in its preparation could not have resulted from any mistaken citations in 4 Plaintiff’s Supplemental Brief. Second, any attorney’s fee award under Rule 5 37(a)(5)(B) requires that the movant have lost the motion; as noted above, the 6 striking of Plaintiff’s brief is not permitted under these circumstances, and thus the 7 motion should not automatically be denied. Third, even if the Court denies the 8 motion on its merits, Rule 37(a)(5)(B) provides that “the court must not order this 9 payment if the motion was substantially justified.” And here, Plaintiff respectfully 10 submits that, if nothing else, the motion was substantially justified. 11 Finally, even when considering AI hallucination matters in isolation (separate 12 and apart from the foregoing legal impediments), Plaintiff respectfully notes that the 13 proposed sanctions discussed above do not comport with the principle that “any 14 sanction imposed must be proportionate to the offense and commensurate with 15 principles of restraint.” Zambrano, 885 F.2d at 1480. Here, given the candor of

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1 (written disclosures to Plaintiff). 2 II. SUBMISSION BY K&L GATES, ONLY 3 K&L Gates briefly notes the following additional facts and mitigating factors 4 specific to it and its lawyers. K&L Gates has strict policies and prohibitions on the 5 use of generative AI tools, and indeed blocks its attorneys from accessing such tools 6 absent, inter alia, tool-specific training. (See Keech Decl., ¶ 13; Vahedy Decl., 7 ¶ 10.) None of the K&L Gates attorneys who worked on the subject brief used any 8 AI tools; had access to any AI tools; or had any awareness that an Ellis George 9 attorney had used such tools in connection with the subject brief, until after the 10 Special Master’s inquiries. (See Keech Decl., ¶ 13; Vahedy Decl., ¶ 10; see also 11 Copeland Decl., ¶ 3.) K&L Gates further notes that it had no reason to doubt the 12 accuracy of the citations provided by its trusted co-counsel, and that it did not sign 13 or file the subject brief. (See Keech Decl., ¶¶ 3-7; Vahedy Decl., ¶¶ 3-5.) see also 14 Braun ex rel Advanced Battery Techs., Inc. v. Zhiguo Fu, 2015 WL 4389893, at *19 15 (S.D.N.Y. Jul. 10, 2015) (declining to impose sanctions where no evidence that 16 anybody at firm had actual knowledge that pleading contained false allegation). No 17 sanctions against K&L Gates are appropriate in this situation. 18 III. SUBMISSION BY ELLIS GEORGE, ONLY

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1 2 3 4 5

Date: April 25, 2025 By: s/ Trent Copeland

6 7 8 9 10 11 12 13 14 15

ID #:4340

Respectfully submitted,

ELLIS GEORGE LLP

Eric M. George Trent Copeland

Trent Copeland

Attorneys for Plaintiff Jacquelyn “Jackie” Lacey in all capacities

Respectfully submitted,

K&L GATES LLP

Ryan Q. Keech Kevin S. Asfour Keian Vahedy

Kevin S. Asfour

Attorneys for Plaintiff Jacquelyn “Jackie” Lacey in all capacities