Litigation

A California Court of Appeal reversed summary judgment against a nursing student who alleged sexual harassment during a clinical rotation at a hospital, holding that she could qualify as an "unpaid intern" protected under the Fair Employment and Housing Act. In Walton v. Victor Valley Community College District, the court rejected the trial judge's dismissal on standing, notice, and deliberate-indifference grounds. The student, Walton, claimed a hospital supervisor named Garcia subjected her to verbal and physical sexual harassment during her training and that Victor Valley Community College District failed to respond adequately.

xAI filed suit on April 9, 2026, in U.S. District Court for the District of Colorado to block enforcement of Colorado's SB24-205, a comprehensive AI anti-discrimination law scheduled to take effect June 30, 2026. The statute requires developers and deployers of high-risk AI systems—those used in hiring, lending, and admissions decisions—to conduct impact assessments, make disclosures, and implement risk mitigation measures to prevent algorithmic discrimination. Two weeks later, on April 24, the U.S. Department of Justice intervened with its own complaint, arguing the law violates the Equal Protection Clause by compelling demographic adjustments through disparate-impact liability while simultaneously authorizing discrimination through exemptions for diversity initiatives. The court granted DOJ's intervention and issued a stay suspending enforcement pending resolution.

Attorneys face mounting professional responsibility exposure as courts increasingly hold lawyers accountable for hallucinated citations and fabricated case law generated by legal AI tools. Recent cases show judges treating AI-produced errors not as technical glitches but as malpractice and sanctions violations, with some decisions naming specific vendors—Lexis+ AI, Ask Practical Law AI, and Westlaw's AI-Assisted Research—as sources of the defective work product.

A federal class action filed in the Northern District of California alleges that Mixpanel used OpenAI-developed AI technology to collect user data, and that a third-party cyberattack subsequently exposed OpenAI account holders' information stored on Mixpanel's platform. The suit, Woodard v. OpenAI, Inc. & Mixpanel, Inc. (3:25-cv-10301), names both companies and asserts claims for negligence, breach of implied contract, and unjust enrichment on behalf of consumers and businesses alike.

A Massachusetts judge has barred T. Michael Morgan of Morgan & Morgan from appearing in a lawsuit against Harvard University and Harvard Medical School over the alleged theft of donated body parts. Suffolk Superior Court Justice Kenneth W. Salinger ruled that Morgan failed to demonstrate he had learned from a prior misconduct incident and therefore could not join other firm lawyers already admitted to practice in the case.

A federal judge in the Southern District of New York has ruled that a criminal defendant's conversations with a publicly available generative AI platform fall outside attorney-client privilege and the work-product doctrine, potentially exposing them to prosecution. In United States v. Bradley Heppner, Judge Jed S. Rakoff held that exchanges with consumer AI tools like Claude are not protected communications simply because they are later shared with counsel. The court reasoned that communications with public, non-enterprise AI systems lack the confidentiality required for privilege protection and do not become privileged retroactively through disclosure to an attorney.

A Delaware Court of Chancery has invalidated restrictive covenants in a business sale, refusing to narrow overbroad language to save the deal's noncompete, nonsolicit, and confidentiality provisions. In BluSky Restoration Contractors, LLC v. Robbins & Popwell, decided March 4, 2026, the court found that BluSky's five-year, worldwide restrictions extended far beyond the acquired company's actual geographic footprint and improperly covered the buyer's affiliates, employee recruitment, and customer solicitation across an unreasonably broad scope.

K&L Gates published guidance on May 20, 2026, advising organizations to treat generative AI materials as discoverable evidence subject to standard preservation obligations. The firm's "Litigation Minute," authored by Julie Anne Halter and Christopher J. Valente, identifies prompts, outputs, chat histories, logs, and metadata from GenAI tools as potentially relevant ESI that must be preserved once litigation is reasonably anticipated. The advisory targets corporate legal and IT teams navigating the gap between rapid AI adoption in business workflows and existing discovery frameworks designed before these tools became commonplace.

Two of Florida's largest trial courts have imposed mandatory disclosure requirements for generative AI use in court filings. The Eleventh Judicial Circuit in Miami-Dade County and the Seventeenth Judicial Circuit in Broward County issued administrative orders requiring attorneys and self-represented litigants to disclose when AI assisted in preparing documents and to certify independent verification of all factual assertions, legal citations, and other AI-generated content. Chief Judge Ariana Fajardo Orshan issued the Miami-Dade order on January 15, 2026, with Broward following later that month. Violations carry sanctions including striking filings, monetary penalties, contempt findings, and bar referrals.

A federal court rejected Elon Musk's lawsuit against OpenAI, CEO Sam Altman, and co-founder Greg Brockman on statute of limitations grounds, dismissing claims that the company abandoned its nonprofit mission in favor of a for-profit model backed by Microsoft. The ruling eliminates Musk's bid for damages and any court-ordered structural changes to the organization.

The Federal Circuit affirmed that two Fortress Iron patents are invalid due to incomplete inventorship and rejected the company's attempt to cure the defect under 35 U.S.C. § 256. The court held that an omitted co-inventor qualifies as a "party concerned" entitled to notice and a hearing before inventorship can be corrected. Fortress Iron had successfully added one omitted co-inventor, Lin, but could not locate a second omitted inventor, Huang, to complete the correction. The patents at issue—U.S. Patent Nos. 9,790,707 and 10,883,290—cover pre-assembled vertical cable railing panels. The Northern District of Indiana had granted summary judgment for invalidity, and the Federal Circuit affirmed that ruling on April 2, 2026.

The Federal Circuit issued a precedential opinion this week establishing that patent owners retain Article III standing to sue when they hold a retained right to litigate, a sublicensing veto, and royalty interests in the licensed patent. The court held that these three rights together create a "non-illusory exclusionary interest" sufficient to confer appellate jurisdiction. The opinion arose from a case originating in the Eastern District of Michigan. The Federal Circuit also issued two nonprecedential decisions from the Patent Trial and Appeal Board during the same period.

SpaceX filed a confidential draft registration statement on April 1, 2026, for what would be a highly unusual public offering. The proposed structure grants Elon Musk, who serves as CEO, CTO, and chair, approximately 85.1% of voting power through super-voting Class B stock, while public investors would receive Class A shares with substantially diminished voting rights. The draft registration also incorporates Texas corporate law, controlled-company exemptions, and mandatory arbitration provisions that would bar shareholders from pursuing class-action lawsuits or jury trials in disputes with the company.

A federal judge in the District of Massachusetts ruled that a former business partner's continued use of proprietary formulations after the relationship ended could constitute unfair or deceptive trade practices under Massachusetts Chapter 93A, rather than a simple contract breach. The decision allowed the plaintiff's unfair-deception claim to proceed past the pleading stage, finding that the alleged conduct—if proven—may satisfy the statute's requirement of bad-faith or commercially unfair behavior in business dealings.

California has settled a $12.75 million enforcement action against General Motors over the sale of customer location and driving data without adequate notice or consent. From 2020 to 2024, GM shared names, contact information, geolocation data, and driving behavior collected through its OnStar service with LexisNexis Risk Solutions and Verisk Analytics, which used the information to develop driver-rating products for insurers. California Attorney General Rob Bonta, joined by district attorneys from San Francisco, Los Angeles, Napa, and Sonoma counties and the California Privacy Protection Agency, brought the case.

On May 14, 2026, the USPTO Director issued a precedential decision denying institution of an inter partes review petition in Magnolia Medical Technologies, Inc. v. Kurin, Inc., involving U.S. Patent No. 12,138,052 B1. The ruling reframed the statutory purpose of AIA reviews: they exist as an alternative to district-court litigation, not as a second forum after a party has already litigated and lost. Magnolia had challenged the patent's validity in district court, failed, and then filed an IPR petition at the Patent Trial and Appeal Board. The Director rejected the petition, holding that the Leahy-Smith America Invents Act created IPR and post-grant review to provide a streamlined administrative path to validity testing—not to relitigate issues already decided by courts.

The Ninth Circuit has partially vacated a preliminary injunction blocking California's Age-Appropriate Design Code Act, allowing some provisions to take effect while keeping others blocked. The panel found that a district court had gone too far in enjoining the statute wholesale, but upheld the injunction for data-use and dark-patterns restrictions. The court determined that key statutory terms—"materially detrimental," "best interests," and "well-being"—are unconstitutionally vague.

The Federal Circuit reversed a district court dismissal and held that a patent owner retains Article III constitutional standing to sue for infringement even after granting a broad license, provided it keeps some exclusionary rights and has not transferred all substantial rights in the patent. In A.L.M. Holding Company v. Zydex Industries Private Ltd., No. 25-1317 (Fed. Cir. May 18, 2026), the court found that A.L.M. and related patent owners had standing despite the scope of their licensing arrangement because they retained royalty rights and veto power over sublicensing.

Alston & Bird's May 2026 Fintech Case Files highlights three concurrent legal developments reshaping payments and fintech regulation: constitutional challenges to Illinois's Interchange Fee Prohibition Act, a Nevada court ruling that crypto contract traders cannot evade gaming regulations, and class actions alleging undisclosed fees across payment platforms.

A Florida appellate court dismissed a roofing company's contract dispute after the parties agreed to settle, but used the occasion to order the company's attorney to explain apparent AI-generated citations in his brief. The panel found the filing may have contained fabricated or unsupported legal authorities and directed the lawyer to justify the anomalies before deciding whether to impose sanctions.

The U.S. Supreme Court declined to hear Meta Platforms' jurisdictional appeal in a Vermont lawsuit alleging that Instagram was deliberately designed to addict young users. The decision leaves intact a lower-court ruling that permits the case to proceed. Meta had argued that Vermont courts lacked authority over the dispute, but the justices rejected that argument without comment.

Anthropic has asked a California federal judge to rule that its use of copyrighted materials to train Claude qualifies as transformative fair use, comparing the AI's training process to how humans learn by reading and absorbing themes. The filing stands apart from the $1.5 billion class-action settlement in Bartz v. Anthropic, where the claims deadline passed on March 30, 2026, and a fairness hearing is scheduled for May 14, 2026, in San Francisco federal court.

A data breach at Wiley Rein has triggered litigation alleging that the firm's cybersecurity incident exposed sensitive information and created liability for affected parties. The lawsuit underscores a growing risk for law firms and professional services organizations: breach response costs are only the beginning. Once data is compromised, claims from affected individuals or entities often follow.

Breathitt County Schools in Kentucky has settled its lawsuit against major social media platforms for $27 million, resolving claims that Meta, Snap, TikTok, and YouTube designed addictive products that harmed students. Meta is contributing $9 million of the total—the largest individual payment among defendants.

AI-generated hallucinations are creating real liability exposure in legal practice. Large language models routinely produce fabricated or incorrect case citations, statutory references, and legal propositions that read as authoritative but are entirely false. Courts are already responding by scrutinizing filings for citation errors and imposing sanctions when lawyers submit unverified AI-generated work. The issue implicates attorneys, law firms, and the legal research platforms—including Westlaw and LexisNexis—that lawyers rely on to verify citations before filing.

The Supreme Court unanimously held that the Federal Arbitration Act does not strip federal courts of jurisdiction to confirm or vacate arbitration awards, provided an independent basis for federal jurisdiction exists. In Jules v. Andre Balazs Properties, the Court clarified that while the FAA itself does not create jurisdiction over post-arbitration petitions, it does not eliminate jurisdiction once a court otherwise possesses it—particularly when that court previously handled the underlying dispute before the case went to arbitration.

Stilta, a Stockholm-based AI startup, closed a $10.5 million seed round on May 19, 2026, led by Andreessen Horowitz with participation from Y Combinator and angel investors from Sana, Legora, OpenAI, Lovable, and Listen Labs. The company, founded in 2026 and led by CEO Block alongside cofounders Estreen, Petrus Werner, and Oscar Adamsson, has built software designed to automate research and analysis in patent litigation—including enforcement, defense, and commercialization work. The platform generates litigation-grade reports and claim charts by searching patents, scientific publications, and archived web data while keeping lawyers in control of the process.

Singer Dua Lipa sued Samsung for $15 million on May 8, 2026, in federal court in California, alleging copyright infringement, trademark infringement, right of publicity violations, and false endorsement under state law and the Lanham Act. The dispute centers on a backstage photograph taken at the 2024 Austin City Limits Festival—an image Lipa owns—that Samsung allegedly manipulated and used on television packaging and global marketing materials beginning in early 2025 without permission, payment, or her involvement. Lipa claims the placement implied her endorsement of Samsung products and drove sales.