In re Marla C. Martin (Bankr. N.D. Ill.): $5,500 Rule 9011 Sanction for a ChatGPT-Fabricated Brief

This is a court-adjudicated honest-negative: a cautionary AI-governance story sourced from a signed federal court order, not a vendor deployment win. It is the first published bankruptcy-court opinion in the United States to sanction a lawyer for AI-fabricated authority (source).

The problem

Marla C. Martin, a serial Chapter 13 debtor, was represented by Thomas E. Nield of The Semrad Law Firm, LLC, described in the opinion as a prolific filer of Chapter 13 cases (source). Facing a creditor objection to the feasibility of her plan, Nield filed a reply brief citing four bankruptcy decisions — In re Montoya, In re Jager, In re Coleman and In re Russell — with quotations that did not appear in the real opinions (source). One of the four did not exist at all; the others were real cases misattributed and cited for propositions they did not support (source). On 11 June 2025 Judge Michael B. Slade ordered counsel to show cause why they should not be sanctioned for filing a brief containing fake quotations and nonexistent authority manufactured by artificial intelligence (source).

What was built

Nothing was built — this is a misuse case. Asked at the hearing whether he had used AI, Nield admitted he had run the research through AI and had not thought the citation was wrong (source). The firm’s response to the show-cause order identified the tool as ChatGPT and characterised its use as outside the firm’s research protocol (source). Semrad told the court it had since created a formal AI policy, required CLE training in the ethical use of AI, and withdrawn its fee application in the case (source).

The outcome

In a Memorandum Opinion issued 18 July 2025, Judge Slade held that the conduct violated Rule 9011(b)(2) of the Federal Rules of Bankruptcy Procedure, which requires that legal contentions be warranted by existing law after reasonable inquiry (source). The court imposed a $5,500 joint-and-several sanction payable to the Clerk of the Bankruptcy Court, together with a requirement that Nield and another senior Semrad attorney attend a course on the dangers of AI at the National Conference of Bankruptcy Judges annual meeting that September (source). The U.S. Trustee had argued for as much as $15,000; the court imposed the lesser sum as the least harsh sanction that would address the conduct (source). Of the four citations in the brief, 1 was wholly fictitious and the remaining 3 were real cases misused (source). The court’s summary of the lesson was blunt: any lawyer unaware that using generative AI to do legal research is playing with fire is living in a cloud (source).

What it means

The $5,500 is a single joint-and-several figure on the attorney and the firm — not a per-attorney amount — and the NCBJ course, the disciplinary self-report and the withdrawn fee application are additional non-monetary elements, not separate fines. The significance is jurisdictional rather than financial: the bankruptcy courts, a high-volume forum where consumer filings are drafted at speed and scale, now have a published opinion establishing that Rule 9011 reaches AI-fabricated authority exactly as Rule 11 does in the district courts (source). Firm-level exposure is the second signal: the sanction ran against the firm as well as the individual, so an AI research protocol that exists on paper but is not enforced is itself the liability (source).

How this was verified

Method: independent audit of the public record, re-run 14 August 2026. The primary source is the signed Memorandum Opinion itself, read in two independent repositories — the issuing court’s own site and govinfo.gov, the U.S. Government Publishing Office. Every figure on this page is taken from that opinion. Three mutually independent secondary sources were then read to confirm the same facts were reported firsthand and not derived from each other: Reason/Volokh, the American Bankruptcy Institute, and FindLaw’s published opinion text.

No party to the case was contacted. TIN does not seek confirmation from the subject of a story; a claim confirmed by its own subject is testimonial, not independent. Where the record is silent, this page is silent: whether the sanction was paid, appealed, or how the disciplinary referral resolved is not asserted here, because no public document consulted establishes it.

Related case files

• Wadsworth v. Walmart — $5,000 Rule 11 sanction for AI-hallucinated citations — the district-court analogue to this bankruptcy-court first.
• Gauthier v. Goodyear — $2,000 sanction plus a generative-AI CLE requirement — the same education-as-remedy pattern the NCBJ course follows here.
• Kruse v. Karlen — 22 of 24 citations fake, $10,000 frivolous-appeal sanction — the upper end of the fabrication-rate range this case sits at the low end of.

Sources

1. U.S. Bankruptcy Court, N.D. Illinois — In re Marla C. Martin, Case No. 24 B 13368, Rule 9011 Sanctions Memorandum Opinion (Hon. Michael B. Slade), 18 July 2025. Tier 1 (primary court document). https://www.ilnb.uscourts.gov/sites/ilnb/files/opinions/179623_MartinRule9011SanctionsOpinionwTransmittalSheet%201.pdf
2. U.S. Government Publishing Office (govinfo.gov) — USCOURTS-ilnb-1_24-bk-13368-0, official published text of the same opinion. Tier 1 (primary, independent repository). https://www.govinfo.gov/content/pkg/USCOURTS-ilnb-1_24-bk-13368/pdf/USCOURTS-ilnb-1_24-bk-13368-0.pdf
3. U.S. Bankruptcy Court, N.D. Illinois — case page, “Rule 9011(b) sanctions: cites hallucinated by artificial intelligence.” Tier 1 (primary court publication). https://www.ilnb.uscourts.gov/content/rule-9011b-sanctions-cites-hallucinated-artificial-intelligence
4. Reason / The Volokh Conspiracy, “Any Lawyer Unaware That [Generative AI Research] Is Playing with Fire Is Living in a Cloud,” 19 July 2025. Tier 2 (independent legal press, named author). https://reason.com/volokh/2025/07/19/any-lawyer-unaware-that-generative-ai-research-is-playing-with-fire-is-living-in-a-cloud/
5. American Bankruptcy Institute, “Setting the Standard: The Bankruptcy Court System’s First Case of AI Hallucination.” Tier 2 (independent professional body). https://www.abi.org/member-resources/blog/setting-the-standard-the-bankruptcy-court-system%E2%80%99s-first-case-of-ai
6. FindLaw — In re: Marla C. Martin (2025), published opinion text. Tier 2 (independent legal database). https://caselaw.findlaw.com/court/us-ban-crt-n-d-ill-eas-div/117492696.html