AI Class Action

Character Technologies Inc., which operates the AI companion platform Character.ai, filed for voluntary Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on October 12, 2026. The company is pursuing a court-supervised sale and has signed a stalking horse agreement with a Disney affiliate to buy select intellectual property and software licenses for $20 million. CEO Colin Adams cited "significant legal, regulatory and operational headwinds" as the reason for the filing. The filing follows a January 2026 settlement, reached with Google, of several lawsuits, including the case brought by Megan Garcia over the 2024 suicide of her 14-year-old son, Sewell Setzer III. Separately, New Hampshire Attorney General John M. Formella and 39 other state attorneys general have intervened in the bankruptcy, demanding binding consumer protection and privacy safeguards. Pennsylvania sued the company in May, and Kentucky sued in January.

Sanford Heisler Sharp McKnight, a New York-based plaintiffs firm, announced on October 20, 2026, a national practice group for artificial intelligence and emerging technology cases. The group pulls together lawyers from across the firm: 22 partners and senior attorneys and 21 junior attorneys, or 43 lawyers in all, which the firm says is more than half of its attorneys nationwide. It is chaired by Palo Alto managing partner Ella Zheng, who is also counsel to Devin Kim in his retaliation lawsuit against xAI and SpaceX. The group's work falls into seven areas: executive and founder representation, technology whistleblower and AI fraud, AI safety and compliance, cyber sexual abuse, privacy and data breach, product safety, and algorithmic bias. Christine Dunn, co-chair of the firm's Sexual Violence, Title IX and Victims' Rights Practice Group, will lead work on technology-facilitated harassment, exploitation and abuse. The firm says the group builds on its existing employment discrimination, whistleblower and qui tam, civil rights, and class action work, and that its lawyers have recovered more than $5 billion for clients through verdicts and settlements.

Shoppers increasingly suspect retailers and restaurants are using AI and personal data to charge more based on individual habits or urgent need. Walmart, Kroger and McDonald's deny doing so. Walmart CEO John Furner said in a September 25 customer letter that the company prices products, not people, and that income, shopping history and moment of need would never set a price. Walmart also rejected claims that its electronic shelf labels enable real-time or personalized pricing; Dan Bartlett, its head of corporate affairs, argued that shelf labels do not by themselves mean dynamic pricing. McDonald's is the sharpest point of contention. According to a Reuters report, the company has pushed franchise operators to use an AI-powered algorithm that analyzes data across its 14,000 restaurants to estimate "customer willingness to pay in your area." McDonald's says the tool does not set prices in real time and only suggests prices, which franchisees decide for themselves. A proposed class action filed in federal court in Chicago in early October goes further, alleging the platform lets McDonald's and its franchisees coordinate menu prices. McDonald's maintains franchisees set their own prices.