From In re Jackson Hospital & Clinic, Inc., issued by Bankruptcy Judge Christopher Hawkins Thursday, following the court's earlier observation of "pervasive inaccurate, misleading, and fabricated citations, quotations, and representations of legal authority in the Motion to Reconsider":
Pursuant to the [court's] Order, … the Firm filed its Status Report on Pending Motions for Sanctions. In the Status Report, the Firm stated that it agreed to pay—and had paid—the DIP Lender the full amount of attorneys' fees sought in the DIP Lender's Motion for Sanctions. In connection with that payment, the DIP Lender agreed not to seek further fees related to the prior filings that were withdrawn or with respect to attendance at the hearing on the Show Cause Order or the Motions for Sanctions, provided that the agreement did not apply to future filings or the renewal of withdrawn motions. The Firm also stated that it had sent to the Debtors the full amount of the fees and expenses sought in the Debtors' Motion for Sanctions, which counsel for the Debtors was holding pending the hearing….
To the Firm's credit, it squarely and unequivocally conceded [in a follow-up document] that under Bankruptcy Rule 9011, it was responsible for the conduct of its attorneys. The Firm further acknowledged its lawyers' duties under the Local Bankruptcy Rules and the Alabama Ethics Rules, and it admitted that one of its lawyers violated those duties. It expressed its willingness to accept "whatever sanction the Court finds appropriate under these circumstances."
The Firm described several steps it had taken regarding its employees' use of artificial intelligence, both before and after the Show Cause Order. On June 28, 2023, the Firm adopted and distributed its official policy regarding the use of artificial intelligence…. On July 30, 2025, without knowledge of the issues beginning to surface in this case, the Firm updated its policy on artificial intelligence (the "Updated AI Policy")…. After learning of the Show Cause Order, the Firm undertook additional remedial and preventive measures. On the remediation side, the Firm paid the fees sought in the Motions for Sanctions—totaling $55,721.20—without haggling with the DIP Lender and the Debtors or otherwise forcing a contested hearing. The Firm also conducted an internal investigation to determine whether any of Ms. Preston's other filings contained "suspected artificial intelligence hallucinations." …
