AI Regulation Tracker / Courts and professional conduct
A Brazilian federal court did not fine the unreviewed AI-assisted defence. It ruled the filing never existed.
A judge in Novo Hamburgo, Rio Grande do Sul, declared a defence pleading juridically non-existent because it carried generative-AI output that nobody checked. Default followed, and with it a bad-faith fine of 10 percent of the value of the claim.
What did the court actually decide?
The dispute itself is unremarkable. The defendant was the CREA-RS, the Rio Grande do Sul council for engineering and agronomy, a public body of the kind that litigates constantly and rarely makes news for it.
The defence pleading was the problem. According to the court's judgment, as reported by the Federal Justice of the 4th Region, it reproduced generative-AI output that had not been checked, and it cited case numbers whose subject matter had nothing to do with the case. The cited cases included matters such as a contribution-time pension and a tax matter.
The judgment puts it in terms that travel across legal systems:
"Esse tipo de fenômeno - tecnicamente conhecido como alucinação da inteligência artificial -, ao simular precedentes inexistentes ou desvirtuados, resulta na criação de uma "realidade" jurídica paralela, que induz o julgador a erro e compromete a lealdade processual. A gravidade do fato, portanto, reside na falta de revisão humana efetiva e qualificada, na medida em que, ao chancelar e subscrever uma peça com citações falsas, a defesa descumpre o princípio da boa-fé processual"
Judgment of the 1st Federal Court of Novo Hamburgo, published 14 July 2026, as reported by the JFRS
In English: "This type of phenomenon, technically known as artificial-intelligence hallucination, by simulating non-existent or distorted precedents, results in the creation of a parallel legal 'reality', which leads the judge into error and compromises procedural loyalty. The gravity of the fact therefore lies in the absence of effective and qualified human review, insofar as, by endorsing and signing a pleading containing false citations, the defence breaches the principle of procedural good faith."
Read the second sentence again. The court did not locate the wrong in the machine. It located it in the signature, in the absence of effective and qualified human review by the person who put their name on the document.
Why is "juridically non-existent" worse than a fine?
US practitioners have a mental model for this by now. A lawyer files bad citations, the judge catches it, an order to show cause issues, and the outcome is a monetary sanction under Rule 11 or the court's inherent power, often a bar referral and a published opinion that follows the lawyer around. The consequences are painful and career-denting, but survivable. The case continues.
Novo Hamburgo went somewhere else. Declaring the contestação juridically non-existent means the pleading has no legal being. It is not a defective defence. It is not a defence at all. A defendant with no defence on the record stands where a defendant who never answered stands, which is why the court decreed revelia, the Brazilian equivalent of default.
The 10 percent bad-faith fine sits on top of that, and it is the smaller half of the story. The larger half is that the client lost its ability to contest the merits because of a drafting decision inside its own legal function.
Most AI-citation cases so far have punished the filing. This one erased it.
Who was sanctioned, and who was not?
This is easy to get wrong in a headline. The 10 percent bad-faith penalty fell on the party. The CREA-RS pays it. The primary source is explicit that the Brazilian Code of Civil Procedure does not permit a judge to sanction the lawyer directly here, which is why the court took the other route available and ordered the OAB-RS, the Rio Grande do Sul section of the Brazilian Bar, formally notified.
The lawyer has been referred, not disciplined, and there is no reported outcome. The judgment points to the Bar's Recomendação nº 01/2024 on generative AI as the governing professional guidance, which tells you the court saw a breach of an existing standard rather than a gap in the rules.
The court named neither the lawyer nor the process number. We follow the same restraint here.
What did the ruling actually cost the defendant?
The useful axis is not the size of the sanction. It is whether a court treats the offending document as a filing that gets punished or as a filing that does not exist. Novo Hamburgo chose the second, and the consequences stack from there.
| Question | Brazil, Novo Hamburgo, July 2026 |
|---|---|
| Is the filing struck as a nullity? | Yes. The defence pleading was declared juridically non-existent. |
| Who bears the financial hit? | The party. A bad-faith fine of 10 percent of the value of the claim, on the CREA-RS. |
| Professional referral | Yes. The OAB-RS was ordered notified. No disciplinary outcome reported. |
| Effect on the client's case | Severe. Default, revelia, was decreed and the merits defence was lost. |
| Precedential reach | Inter partes only, and appealable to the TRF-4. |
The Brazil example comes from the primary source below. At present this tracker has a verified case only from Brazil, and it will compare treatment across jurisdictions as additional cases are verified.
What does this mean for a US lawyer using generative AI?
Start with this: the exposure is not only yours. Every US discussion of AI citations has been framed around the lawyer, your sanction, your referral, your name in a published order. Novo Hamburgo routed the consequence to the client instead, because that was the tool the procedural code gave it. A client that loses its defence because of an unchecked pleading has a malpractice claim sitting right there. For a risk partner, that reframes the question. This is client harm with a discipline attachment, not the reverse.
Next, real citations are not safe citations. The pleading here used real case numbers that had nothing to do with the dispute, a failure mode that survives every verification workflow built around "does this case exist". Checking existence is not checking relevance. A junior who confirms each cited decision is real and stops there has done half the work and produced a document that reads as verified.
Third, the operative duty is human review by the signer of the filing. Not disclosure, not a policy on the intranet. The court's language is effective and qualified human review, attached to the act of endorsing and signing. An AI policy that ends at disclosure does not address what this court cared about.
One more point for in-house and public-sector teams. The defendant was a regulatory council whose own function is holding others to standards. Volume litigants are where unreviewed generative output is most tempting and least visible.
How much weight does this decision actually carry?
Less than the headline suggests. It is a first-instance judgment from a single federal court. It binds the parties and nobody else. It is not an erga omnes precedent, it does not bind other Brazilian judges, and it is appealable to the Tribunal Regional Federal da 4ª Região, which may take a different view of whether nullity was the right instrument. Treat it as a signal of where Brazilian judicial thinking is heading, not as settled Brazilian law.
What gives it weight beyond its formal reach is the reasoning. The court reached for the strongest procedural tool available rather than the customary one, resting on an existing good-faith principle and the Bar's 2024 recommendation. No new statute was needed. That is the part other judges can copy tomorrow.
Frequently asked questions
Were the cited precedents fake?
Not in the sense US lawyers usually mean. According to the Federal Justice of the 4th Region, the pleading cited real case numbers whose subject matter had no relation to the dispute, one a contribution-time pension, another a tax matter. The judgment calls the phenomenon artificial-intelligence hallucination.
Was the lawyer fined?
No. The fine fell on the party, the CREA-RS. The primary source is explicit that the Code of Civil Procedure bars sanctioning a lawyer directly this way. The lawyer was referred to the OAB-RS, and no disciplinary outcome has been reported.
Does this decision bind other Brazilian courts?
No. It is a first-instance judgment binding only between the parties, appealable to the TRF-4. It is not an erga omnes precedent and does not bind other judges.
Last verified: July 28, 2026