This week
Three stories. Two are cautionary. One is a competitive warning most small firm attorneys will ignore until it's too late.
None of them are theoretical.
What's worth your attention
1. Even Sullivan & Cromwell can't keep AI hallucinations out of court filings.
S&C partner Andrew Dietderich sent a three-page apology letter to a federal bankruptcy judge this week. An emergency motion contained fabricated citations.
The firm already had an AI policy. Two required training modules. A written directive to verify everything. Didn't matter.
If you're tempted to read this as a big-firm problem that proves you're fine — read it again.
The only guardrail that actually works is pulling every cited case yourself before anything goes out the door.
2. A Pennsylvania solo just got his second $5,000 sanction for AI hallucinations. His license is next.
Raja Rajan has been practicing for nearly 40 years. He picked up a case to help his brother. He used AI, didn't verify the citations, filed the brief.
Second sanction from the same judge in 12 months. Judge ruled next offense: bar referral.
Courts have issued more than $145,000 in AI-hallucination sanctions in Q1 2026 alone.
The first U.S. license suspension tied to AI happened two weeks ago in Nebraska.
Your signature is your signature. Courts are done issuing warnings.
3. AI-native law firms just raised $60 million to take your clients, starting with fixed-fee pricing.
Manifest OS closed a $60M Series A this week, backed by Menlo Ventures and Kleiner Perkins.
Their model: AI-powered law firms competing on flat-fee pricing. First target: business immigration.
One of their investor said it plainly. The opportunity isn't giving lawyers better tools. It's replacing the delivery model entirely.
This is the Blockbuster moment.
AI-native firms can't replicate your courthouse relationships, your judgment, or a phone call where a client actually feels heard. But they will compete on price for routine, document-heavy work.
If you're still billing hourly for that work, the math is about to change.
Tool of the week
Claude Team or Microsoft 365 Copilot — first-draft engine for demand letters.
You probably already pay for Microsoft 365. Copilot adds roughly $30/user/month. Claude Team runs $25/user/month.
Both are configured by default not to train on your inputs. That's the entire confidentiality story.
The free versions of ChatGPT and Gemini are not confidential. Do not use them with confidential client information.
The workflow: drop anonymized facts into Claude or Copilot. Ask for a first-draft demand letter. Explicitly tell it not to cite any cases.
AI hallucinations live in citations, not in prose. Let it write the narrative. You add the citations from a real database. Edit, personalize, send.
A demand letter that once took 90 minutes now takes 30. Across a typical week, that's 3 to 5 hours back. On flat-fee matters, that's margin. That's capacity for another client.
One rule: note in the file that you reviewed and verified the draft independently. One line. Date it. That's the difference between defensible and problematic.
Prompt of the Week
Draft a demand letter — without hallucinated citations.
Paste this into Claude or Microsoft Copilot. Fill in the brackets. Do not ask it to find cases — that step is yours.
Copy & Paste This Prompt
You are a legal writing assistant. Draft a professional demand letter based on the following facts. Do not cite any cases, statutes, or regulations — I will add those myself. Use a firm but professional tone. Keep it under two pages. Party sending the letter: [my client's name and role] Party receiving the letter: [opposing party's name and role] Core dispute: [brief description — e.g., unpaid invoice, breach of contract, lease violation] Key facts: [3–5 bullet points] What I'm demanding: [specific remedy and deadline] Consequences if ignored: [what you intend to do next] Output in standard business letter format. Leave a signature block for me to complete. |
One more thing
Every story above has the same throughline.
AI is a competent junior associate who is sometimes confidently wrong. Treat it as a first drafter you supervise — not a finished work product you sign.
The attorneys getting sanctioned aren't bad lawyers. They're busy lawyers who skipped the supervision step.
Don't skip the supervision step.
– Greg
Actionable AI
Less hype. More results.
Greg Yates · Actionable AI for Lawyers · actionableai.net · [email protected] · (212) 765-0685