Lawsuit Tests Defamation Law’s Application to AI Hallucinations

Aaron Mak, reporting for Politico, writes that as AI chatbots become integrated into everyday usage, questions about accountability grow more urgent. AI poses serious risks when its inaccuracies, known as AI hallucinations, harm reputations.

A new federal defamation lawsuit in Minnesota, LTL LED, LLC et al v. Google LLC, may help determine whether existing laws can hold companies liable for the actions of their AI tools.

The case was filed by Wolf River Electric, a Minnesota-based solar panel company with 200 employees. The company alleges that Google’s AI Overview stated it was being sued by the state AG, leading to financial damage and reputational harm.

While the cited sources in the AI’s response do mention solar industry lawsuits, Wolf River Electric is not a defendant in these lawsuits. The company claims this mistake cost them clients and damaged a reputation built over a decade.

Wolf River’s lawsuit joins a growing list of legal actions targeting AI-generated defamation. Previous suits, including one dismissed case against OpenAI and another ongoing against Meta, have focused on public figures.

Wolf River’s status as a private entity lowers the threshold for proving defamation: it need only show negligence rather than “actual malice.”

This case could establish critical precedent regarding what constitutes reasonable design and oversight in AI-generated content.

The lawsuit highlights the need for robust legal frameworks that address the risks associated with negligent AI design and misinformation. Lawyers advising tech developers or clients harmed by AI hallucinations should closely monitor this case, as it may shape liability standards and regulatory approaches nationwide.

Courts, lacking technical benchmarks, may increasingly rely on expert input or call for national legislation to navigate these new challenges.