By Sara Merken

Feb 25 (Reuters) - Three lawyers suing Walmart in a personal injury lawsuit must pay fines totaling $5,000 for citing fake cases generated by artificial intelligence in a court filing, a federal judge ruled.

The lawyers, including two from national law firm Morgan & Morgan and one from a smaller firm, had an ethical obligation to ensure that the cases they cited were real, U.S. District Judge Kelly Rankin in Wyoming said in his sanctions order on Monday.

"As attorneys transition to the world of AI, the duty to check their sources and make a reasonable inquiry into existing law remains unchanged," Rankin wrote.

Judges across the country have questioned or disciplined a growing number of lawyers over the past two years for including AI-generated cases and quotations in court documents. Examples have cropped up in at least nine lawsuits since chatbots like ChatGPT ushered in the AI era, highlighting a new litigation risk.

Rankin imposed a $3,000 fine on Rudwin Ayala of Morgan & Morgan, who earlier this month apologized and said he used an internal AI program that "hallucinated" the cases, which he incorporated into a filing in the case.

The judge also removed Ayala from the lawsuit, and he imposed fines of $1,000 each on T. Michael Morgan and local counsel Taly Goody of Goody Law Group for not doing enough to ensure the accuracy of the filing that Ayala drafted.

Ayala, Morgan and a representative for Morgan & Morgan did not immediately respond to requests for comment on Tuesday. Morgan is the son of Morgan & Morgan founder John Morgan, according to past media reports.

Goody said in an email that she did not receive the filing to review before it was submitted, and pointed to an earlier explanation she provided to the court.

Walmart declined to comment. It has denied the allegations in the underlying lawsuit, which accuses the retailer of selling a defective hoverboard toy that allegedly caught fire and burned down the plaintiffs' house. The case is scheduled to go to trial next month.

In deciding sanctions, the judge said he weighed the fact that lawyers "have been on notice" about generative AI's ability to hallucinate cases. He said Ayala's "honesty and candor" and steps taken by Morgan & Morgan to head off future incidents helped lead to a less severe punishment.

"When done right, AI can be incredibly beneficial for attorneys and the public," Rankin wrote. "The instant case is simply the latest reminder to not blindly rely on AI platforms’ citations regardless of profession."

In a separate case, a federal magistrate judge in Indiana last week recommended a $15,000 fine for a lawyer who submitted three briefs that had non-existent case citations generated by AI and referred him to the chief judge for possible additional discipline.