The precursor: Texas and Pieces Technologies

In the Matter of the State of Texas and Pieces Technologies, Inc. · Cause No. DC-24-13476, 191st Judicial District, Dallas County · petition filed August 21, 2024

Before any of the consumer-harm actions, Texas built the template. The Attorney General resolved a deceptive-marketing case against a generative AI company without filing a lawsuit and without collecting a dollar. It is the first state enforcement resolution of its kind in the country.

The vehicle was an Assurance of Voluntary Compliance, a settlement device under Section 17.58 of the Deceptive Trade Practices Act that the company signs and the court then approves. Pieces signed on August 5, 2024. The State petitioned for approval on August 21.

Pieces is a business-to-business clinical documentation company in Irving whose products summarize and draft clinical notes inside hospital electronic health records. The State alleged that its marketing claims of a "critical hallucination rate" and "severe hallucination rate" of "<.001%" and "<1 per 100,000" may have violated the DTPA as false, misleading, or deceptive. Pieces denies wrongdoing, and the Assurance is expressly not an admission.

No money changed hands. What Pieces agreed to instead, for five years, is the part worth reading, because it is the disclosure regime every subsequent state action is reaching for by other means:

  • Any metric or benchmark used in marketing must come with a clear and conspicuous disclosure of both what the metric means and how it was calculated. The alternative is retaining an independent third-party auditor whose findings must substantiate every claim made.
  • Every claim must be substantiated: how accurate, reliable, or effective the products are, how they are tested and monitored, what any metric means, and what data trained them.
  • Customers must receive documentation covering the training data and models, the intended purpose, known limitations including the risk of physical or financial injury from inaccurate output, and known misuses that increase the risk of inaccuracy.
  • Financial arrangements with anyone who endorses or promotes the products must be disclosed.

Two provisions matter for anyone reading this as a private practitioner. Paragraph 24 states that the Assurance creates no private rights or causes of action and waives none. And Pieces may request rescission after one year, with the listed factors including changes in generative AI technology and related industry standards. The order has an expiry and an escape hatch built into it.

Texas ran the matter entirely in-house through its Consumer Protection Division, with no outside counsel. Pieces was defended by Mayer LLP and Sheppard Mullin.

Pieces sits outside the table below because it is a business-to-business accuracy-marketing case with no end-user harm count. Everything after it is about consumers.

The matters

State Respondent Filed Forum Counts as pleaded Remedy sought Status
Kentucky Character Technologies, Inc.; Noam Shazeer; Daniel De Freitas Adiwarsana Jan. 8, 2026 Franklin Circuit Court, No. 26-CI-00029 (Hon. Phillip J. Shepherd) Five: KCPA deceptive practices; KCPA unfair collection of children's data; KCDPA (declaratory and prospective); Kentucky privacy protections and Ky. Const. §§ 1, 10; unjust enrichment Permanent injunction; $2,000 per willful KCPA violation; up to $25,000 per violation of an injunction; disgorgement; restitution; fees. Jury demanded Pending
California xAI Corp. and X Jan. 14, 2026 (investigation); Jan. 16, 2026 (demand letter) Office of the Attorney General None filed. Letter cites Cal. Civ. Code § 1708.86; Penal Code §§ 311 et seq. and 647(j)(4); Bus. & Prof. Code § 17200 Immediate cease and desist; written confirmation by Jan. 20, 2026; litigation hold Open; no suit filed as of this update
Pennsylvania Character Technologies, Inc. May 1, 2026 Pa. Commonwealth Court, No. 220 MD 2026 One: unlawful practice of medicine and surgery, 63 P.S. § 422.38 A permanent order to cease and desist, plus an application for special relief in the nature of a preliminary injunction filed the same day. No damages, no penalties, no monetary relief Active, awaiting answer. Injunction hearing continued twice by joint motion; answer due Nov. 2, 2026
Florida OpenAI Global, LLC; OpenAI Foundation; OpenAI OpCo, LLC; OpenAI Group PBC; OpenAI Holdings, LLC; Sam Altman June 1, 2026 Circuit Court, Tenth Judicial Circuit, Highlands County Ten: four FDUTPA counts; negligence; gross negligence; strict liability design defect; strict liability failure to warn; fraudulent misrepresentation; public nuisance Permanent injunctions; nuisance finding; civil penalties up to $10,000 per willful FDUTPA violation; treble and punitive damages; fees and investigation costs Pending; separate criminal investigation opened April 2026
Multistate OpenAI June 12, 2026 (subpoena served) Coalition of state attorneys general Investigative process; theory not public Documents and information on OpenAI's activities and impact on users Open

Table scrolls horizontally on narrow screens.

Matter detail

Why one company draws two of the five

Character Technologies is the respondent in two matters, in two states, on unrelated theories. It is also one of thirteen companies named in the December coalition letter. Its user base is the reason.

  • Over twenty million monthly active users, per both pleadings.
  • 180 million website visits and more than two billion minutes of chat a month, per Kentucky's complaint.
  • Free to use, with a subscription tier at $9.99 a month.
  • More than half of users are 24 or younger, per SimilarWeb data reported in October 2024. That figure is from outside the pleadings.
  • Around 80 minutes a day on average, per the company's chief executive. Close to TikTok, ahead of Instagram.

Kentucky's complaint pleads the demand side from Common Sense Media and Center for Democracy and Technology research. Seventy-two percent of teens report using AI companions. Twelve percent use them for emotional or mental health support. More than a third say they would choose one over a person for a serious conversation.

One figure to handle carefully. Kentucky cites more than 100 million chatbot characters as of August 2025. Pennsylvania's petition, nine months later, says more than 18 million. Both are secondary-sourced and they are not counting the same thing.

Kentucky · the first state suit against an AI chatbot company

Commonwealth of Kentucky, ex rel. Russell Coleman, Attorney General v. Character Technologies, Inc.; Noam Shazeer; and Daniel De Freitas Adiwarsana · Franklin Circuit Court, No. 26-CI-00029, Hon. Phillip J. Shepherd · filed January 8, 2026

Counsel of record

The Office of the Attorney General filed through its Civil and Consumer Protection divisions.

Retained outside counsel is Motley Rice LLC, appearing through Linda Singer, a former Attorney General of the District of Columbia who led state-side opioid litigation. That puts the opioid model inside the first state AI chatbot case.

Capacity
The Commonwealth sues in its sovereign and parens patriae capacity under KRS 15.020 and KRS 367.190. Standing is pleaded on the front end rather than left to a motion.
Counts
  1. Unfair, false, misleading, or deceptive acts and practices, KRS 367.110 et seq.
  2. Unfair collection and exploitation of children's data, KRS 367.170
  3. Kentucky Consumer Data Protection Act, KRS 367.3611 et seq., pleaded for declaratory and prospective relief because the Act took effect January 1, 2026
  4. Kentucky privacy protections, KRS 365.732 and 365.734, with Ky. Const. §§ 1 and 10
  5. Unjust enrichment, at common law and under KRS 15.020(3)
The Section 230 move

Paragraph 50 argues the defense before the defense exists. Liability is pleaded as arising from the defendants' own design and marketing decisions, and the model's outputs as products of their architecture and training.

Paragraphs 47 through 49 disclaim every federal claim and remedy. That disclaimer is aimed at removal. Paragraph 50 is aimed at reaching immunity first, in state court, before any defendant frames the question.

Product language, no product count

The factual allegations repeatedly call Character.AI a defective and unreasonably dangerous product placed into the stream of commerce. That is product liability vocabulary. None of the five counts is a product liability claim.

Kentucky uses the language to establish unfairness, and stops short of asking a court to hold that a model is a product. Florida asked five months later.

The founders as defendants

Noam Shazeer and Daniel De Freitas Adiwarsana founded Character Technologies in 2021. Shazeer is pleaded as former chief executive and majority shareholder, De Freitas as former president.

Each is alleged to have personally coded a substantial portion of the model. Jurisdiction over both runs through KRS 454.210(2)(a).

Why Google runs through the complaint

Google is not a defendant. Both founders were principal engineers on Google's LaMDA project, and Google declined to release it publicly over safety and moderation concerns. They left and built the same kind of system as a startup.

That sequence is how Kentucky pleads knowledge. The men who shipped the product had already been told by their employer it was not safe to ship. The complaint quotes Shazeer saying a startup was the right vehicle because it could move faster.

Why the filing is redacted

The Commonwealth signed a confidentiality agreement with Character Technologies during its pre-suit investigation, and the complaint quotes documents the company produced under it.

So the state already holds the company's confidential production. It has reserved the right to challenge the designations.

Revoked in Kentucky since 2024
The Secretary of State revoked Character Technologies' authority to transact business in Kentucky on October 12, 2024, after the company failed to file its annual report. It was still reaching Kentucky users when the Commonwealth sued fifteen months later.
Primary sources
Complaint, motion to conditionally seal, proposed order, and summonses (69 pages, partially redacted) · Office of the Attorney General announcement, January 8, 2026

California · investigation and cease-and-desist against xAI

In re xAI / Grok · California Department of Justice · investigation announced January 14, 2026; demand letter sent January 16, 2026

Brought by
Attorney General Rob Bonta. The letter is addressed to Elon Musk personally, as chief executive, and was sent by FedEx and email with service on the company's registered agent.
The demand
The letter ordered xAI to stop three things:
  1. Creating, disclosing, or publicizing digitized sexually explicit material of a person who did not consent, or who was a minor
  2. Facilitating or aiding and abetting anyone else doing the same
  3. Creating or facilitating any image, including AI-generated matter, involving a person under 18 or apparently under 18 engaging in or simulating sexual conduct
Statutory basis

Civil Code § 1708.86 supplies the definition of digitized sexually explicit material. Penal Code §§ 311 et seq. and 647(j)(4) carry the criminal provisions.

The citation to watch is Business & Professions Code § 17200. The Unfair Competition Law is the vehicle that would carry a filed civil enforcement action.

The deadline

The letter demanded written confirmation no later than January 20, 2026 at 5 p.m. Pacific, four days out. The press release described the window only as "within the next five days."

That deadline passed eight months ago. No suit has followed. Whether xAI answered the letter does not appear in any public record reviewed here.

The preservation demand

Bonta orders xAI, Grok, and X to preserve all potentially relevant material and to prevent deletion or spoliation of prompts, images, posts, and stored data. The press release omits this entirely.

A hold this early signals the office expects to file. It also puts xAI on dated, public notice. A plaintiff who sues these entities later and finds relevant material missing can point to January 16 as the day the duty to preserve attached, rather than litigate when the company should have anticipated a claim.

The admission
The letter quotes a post from the company's own @Grok account. The post concedes the model generated and shared an image of two young girls in sexualized attire, and that doing so potentially violated federal law. A party admission, published by the party, cited by an attorney general.
The design theory
The office frames the explicit-content generation mode as a marketing point rather than a moderation failure. That is a deliberate-design theory, closer to Florida's than to a content-takedown posture.
Primary sources
Cease-and-desist letter, January 16, 2026 · Investigation announcement, January 14, 2026 · Letter announcement, January 16, 2026

Separate case, same parties

X.AI LLC v. Bonta, No. 2:25-cv-12295 (C.D. Cal., filed December 29, 2025), on appeal as No. 26-1591 (9th Cir.). Three days before California's AI training-data disclosure law took effect, xAI sued to block it on Takings Clause and First Amendment grounds. Sixteen days later Bonta opened the Grok investigation. The two matters are unrelated on the merits. Both are live, and xAI lost below.

Two things in it matter for the work this page covers.

The same statute sits on both sides. California's disclosure law has no enforcement mechanism of its own. xAI's standing argument is that the Unfair Competition Law supplies one, and that Bonta could use it against them. Eighteen days later, Bonta cited the Unfair Competition Law against xAI over Grok.

Training data is pleaded as a trade secret. xAI argues that its dataset sources, volumes, and processing methods are protected under state and federal trade secret law. It cites protective orders from the OpenAI and Perplexity cases that already treated training data as highly confidential.

Any AI defendant will make that argument the first time a plaintiff asks for training data in discovery. This filing is where it is set out in full.

Pennsylvania · a licensing petition, not an attorney general action

Commonwealth of Pennsylvania, Department of State, State Board of Medicine v. Character Technologies, Inc. · Petition for Review in the Nature of a Complaint in Equity · No. 220 MD 2026, Pa. Commonwealth Court · filed May 1, 2026 at 3:16 p.m.

Brought by
The State Board of Medicine, through the Pennsylvania Department of State, litigated by the Department's own lawyers. This is a licensing prosecution, not a consumer protection case. The Attorney General's office is not a party to it, though much of the coverage says it is.
Why the statute matters

63 P.S. § 422.38 lets the Board enjoin unlicensed practice and says "it shall not be necessary to show that any person is individually injured." A licensing board does not need a victim.

Section 422.10 supplies the definition. Purporting to practice, or holding out as authorized through use of a title, is itself the violation.

The cost of bringing it

Pennsylvania needed no injured party, no pre-suit production, no outside counsel, and no damages theory.

Kentucky obtained confidential documents before filing and brought in Motley Rice. Florida brought in Keller Postman and pleaded ten counts. Pennsylvania pleaded one count, in-house, on evidence its investigator generated in an afternoon.

Facts pleaded

A Professional Conduct Investigator created a free account, searched "psychiatry," and selected a character described as "Doctor of psychiatry. You are her patient."

He said he felt sad, empty, tired, and unmotivated. The character raised depression, offered to book an assessment, and said assessing him for medication was within its remit as a doctor. It claimed medical school at Imperial College London and registration with the UK General Medical Council.

Asked directly, it gave a Pennsylvania license number. The number is not valid. The petition puts that character at roughly 45,500 user interactions.

Where it stands: nowhere

The Board asked for a permanent cease-and-desist order and applied for a preliminary injunction the same day. The court set a hearing for June 8. It has never been held.

The parties jointly continued it in May and again in August. The answer deadline moved from May 28 to September 1 to November 2. Four months in, the docket still reads "awaiting answer."

Which is the part to watch

Why a plaintiff seeking emergency relief would twice postpone its own hearing is not apparent from the docket. Settlement is the obvious guess. The character coming down is an equally good one. The record does not settle it either way.

No court has ruled on anything in this case. The licensing theory remains untested.

Primary source
Commonwealth announcement, May 2026 · Commonwealth Court docket No. 220 MD 2026

Florida · the first state suit against OpenAI, and the first to plead design defect

Office of the Attorney General, State of Florida, Department of Legal Affairs v. OpenAI Global, LLC; OpenAI Foundation (f/k/a OpenAI, Inc.); OpenAI OpCo, LLC; OpenAI Group PBC; OpenAI Holdings, LLC; and Sam Altman · Circuit Court of the Tenth Judicial Circuit, Highlands County · filed June 1, 2026, 9:34 a.m.

Counsel of record
Attorney General James Uthmeier, filed through the office's Civil Enforcement and Consumer Protection divisions with signatories in Miami, Tampa, and Fort Lauderdale. Retained outside counsel is Keller Postman LLC, appearing through Ashley Keller in Coral Gables, with two Chicago colleagues seeking admission pro hac vice.
Five entities, not one
The caption names OpenAI Global, the Foundation formerly known as OpenAI, Inc., OpCo, OpenAI Group PBC, and Holdings, plus Altman individually.
Why the corporate form matters here

OpenAI recapitalized on October 28, 2025, seven months before Florida filed. The nonprofit became the OpenAI Foundation. The operating business became OpenAI Group PBC, a Delaware public benefit corporation the Foundation controls.

The conduct alleged runs on both sides of that line, so naming the Foundation as the former OpenAI, Inc. reaches the entity that made the earlier decisions. And a public benefit corporation is required by statute to weigh its mission against shareholder returns, which makes it a pointed defendant on a complaint alleging the opposite.

The restructuring was negotiated over nearly a year with the Attorneys General of California and Delaware. Florida is suing a corporate form two other state attorneys general helped shape.

Counts
  1. FDUTPA, § 501.204 — unfair and immoral acts or practices
  2. FDUTPA — unconscionable acts or practices
  3. FDUTPA — deceptive acts or practices
  4. FDUTPA — unfair and immoral acts or practices
  5. Negligence
  6. Gross negligence
  7. Strict liability — design defect
  8. Strict liability — failure to warn
  9. Fraudulent misrepresentation (against OpenAI only)
  10. Public nuisance, §§ 60.05 and 823.01 and common law
Why counts VII and VIII matter

These are the private bar's theory, brought by a sovereign. Every other action on this page routes through a regulatory framework that predates the technology and avoids asking whether a model is a product.

Florida asks that question directly. A ruling on design defect as applied to a large language model would carry a state's resources behind it. It would also land before the private wrongful death cases reach the same issue.

How it opens

The first page reproduces the product's parental-controls page and its claim that the model is trained to avoid harmful material. Paragraph 1 in its entirety is two words: "Not so."

The pleading alleges growth built on deceit and the exploitation of users, and notes the move from roughly $17 billion in valuation to over $850 billion in under four years.

Remedies
The prayer asks for five things:
  • Permanent injunctions against the practices alleged
  • A judgment finding that the marketing, promotion, sale, and distribution of the product in Florida is a public nuisance
  • A judgment finding a breach of the duty of care owed to Florida consumers
  • Civil penalties up to $10,000 per willful violation under § 501.2075
  • All damages available at statute and common law, including treble and punitive damages
Paragraph E asks separately for a COPPA-shaped injunction over data collection from children under 13, including verifiable parental consent and parental review rights. No COPPA count is pleaded.
Venue
Highlands County is a rural interior circuit rather than Tallahassee, Miami, or Tampa, and the office's own signatories are based in the latter three. Venue selection of this kind is a choice about jury pool and docket speed. Whether the defense moves to transfer is the first thing to watch.
Parallel track
The civil suit is separate from a criminal investigation the office opened in April 2026 arising from a mass shooting suspect's reported use of the product. The attorney general has said that investigation continues alongside the civil case.
Primary source
Office of the Attorney General announcement, June 1, 2026. Complaint filing number 249302659, 83 pages.

Multistate · the OpenAI subpoena

Coalition of state attorneys general · subpoena served June 12, 2026

What is known
OpenAI received a subpoena from a coalition of state attorneys general seeking information and documents concerning its activities and its impact on users. The company said publicly that it is engaging constructively with the offices involved.
What is not known
The participating states, the lead office, and the theory under investigation have not been made public.

Coalition letters

Each filed matter was preceded by multistate correspondence. The letters carry no legal force, but they name the conduct the offices consider actionable and they show which attorneys general have already signed onto a theory. Kentucky's complaint quotes the 2023 letter directly, which is how the correspondence becomes pleading material.

Date Signatories and leads Addressed to Substance
Sept. 5, 2023 54 attorneys general Congress Urging a study of AI-enabled child exploitation and extension of child sexual abuse material prohibitions to AI-generated content. Letter, quoted in the Kentucky complaint
August 2025 44 attorneys general; led by Illinois, North Carolina, South Carolina, and Tennessee Major AI developers Urging protection of children from harmful chatbot interactions, citing reports of inappropriate and sexualized content involving minors. Letter, via NAAG
Dec. 9, 2025 42 attorneys general; co-led by Pennsylvania's Dave Sunday, New Jersey's Matthew Platkin, West Virginia's JB McCuskey, and Massachusetts's Andrea Joy Campbell Thirteen companies: Anthropic, Apple, Chai AI, Character Technologies, Google, Luka, Meta, Microsoft, Nomi AI, OpenAI, Perplexity AI, Replika, and xAI Sixteen enumerated safeguards covering safety testing, recall procedures, consumer warnings, reporting, executive accountability, and third-party audits, with meetings requested and written confirmation demanded by January 16, 2026. Letter

The December letter gave thirteen companies until January 16, 2026 to confirm the safeguards in writing. That deadline is long past. What followed it is the more useful fact: every live matter on this page was filed or opened in the six months after that letter went out. Kentucky sued Character Technologies on January 8, eight days before the deadline. Bonta sent his cease-and-desist to xAI on January 16 itself. Florida sued OpenAI on June 1. Three of the thirteen recipients drew state action inside six months.

What the filings show

Four matters have been filed and no two use the same vehicle. Kentucky pairs a consumer protection act with a data privacy statute that was eight days old. Pennsylvania pleads a single count under a medical licensing act. California works from imagery law and has not filed at all. Florida pleads ten counts, two of them in strict liability.

Florida changed the question

The convenient framing has been that states ask whether existing regulatory law reaches a model's conduct, while the private bar asks whether a model is a product. Counts VII and VIII collapse that.

A state is now litigating design defect and failure to warn against a large language model, with a state's discovery budget, on a rural circuit docket. Whatever that court says about defect will be the first word from any court on the question.

Pennsylvania is cheap, and untested

Section 422.38 requires no showing that anyone was injured. A licensing board with an investigator, a free account, and an afternoon produced a filed action against a twenty-million-user platform. Every state has boards with the same statutory posture.

Cheap to file is not the same as tested. Pennsylvania applied for its injunction on day one and has twice continued its own hearing. No answer in four months. No court has said whether the theory works.

The defense moved first

xAI's challenge to California's disclosure law is a pre-enforcement suit against the same attorney general now investigating it. It rests on two arguments: that training data is a trade secret the state cannot compel it to publish, and that the Unfair Competition Law is the threat giving it standing to sue.

Companies are litigating the enforcement architecture and the enforcement action at the same time, in front of the same official.

Who gets hired tells you what a matter is worth

Kentucky brought in Motley Rice. Florida brought in Keller Postman. Both firms built their reputations on aggregate litigation. Texas and Pennsylvania ran theirs in-house and asked for disclosure and cessation rather than money.

Contingency counsel is the tell for which matters are being built toward damages, and where a state's discovery will eventually converge with a private inventory.

Scope and corrections

This tracker covers state and state-agency enforcement actions against generative AI companies arising from consumer harm.

  • Algorithmic-pricing and biometric-scraping matters are excluded. They are a different fight.
  • Constitutional challenges brought by AI companies appear only as marked cross-references, where they bear on a listed matter.
  • Private injury litigation is covered separately in The Inventory Nobody Knows How to Price and The Handwritten Line.
  • Every entry was read from the filed document. The multistate subpoena is the exception, because it is not public.
  • Where a fact is not publicly available, the page says so.

Send filings, docket entries, and corrections to editor@lawsuitintelligencer.com. They appear in the next update, with attribution if you want it.

All claims described are allegations by the moving parties and have not been adjudicated. Nothing here is legal advice.