Courts and legal regulators are increasingly punishing fabricated citations and quotations produced by AI tools, creating a compliance case study that higher education research and professional programs can’t ignore. Reports include an Alabama sanctions outcome where a lawyer was barred from filing again without co-counsel sign-off after citing non-existent cases, and a large Oregon penalty where lawyers were sanctioned for submitting fabricated citations and invented quotations. The emerging pattern is that general-purpose large language models can produce fluent text without factual verification, while courts respond with sanctions when hallucinations affect adjudication. The decision in Manhattan about waiver of attorney-client privilege also highlights new risks: information entered into chatbots can be subpoenaed. For law schools, clinical programs, and compliance offices, the message is clear—AI use requires stronger verification workflows, documentation, and training aligned to courtroom standards.