AI Legal Watch - February

California Takes Significant Step Forward to Regulate the Use of AI by Attorneys and Arbitrators
Ariel House
On January 30, 2026, the California Senate passed a new bill, SB 574, to impose restrictions on attorneys (and arbitrators) using generative artificial intelligence ("generative AI") in their practice. SB 574 is not yet the law – it will now proceed to Assembly committees for hearings and a potential vote before lawmakers adjourn in late August 2026.

The proposed bill, which was introduced by Senate Judiciary Chair Tom Uberg, D-Santa Ana, reflects a growing concern that the rapid adoption of generative AI creates unique risks in certain regulated professions, such as the law. Even robust, well-trained AI models invent, or "hallucinate," supporting legal authorities in their drafts. To date, there have been hundreds of cases across the country in which attorneys were caught filing briefs and other documents in court that contain cases, quotes, and citations that were "hallucinated" by AI and do not actually exist.

SB 574 seeks to regulate attorneys' and arbitrators' use of "generative artificial intelligence," which is defined to mean "an artificial intelligence system that can generate derived synthetic content, including text, images, video, and audio that emulates the structure and characteristics of the system's training data." The proposed bill would codify existing guidance from the California State Bar on the ethical considerations associated with generative AI use, and impose some additional restrictions on both attorneys and arbitrators.

Here's what legal practitioners need to know about this proposed bill ...

Read more here.

Potential Legal Risks Surrounding AI Meeting Transcription Tools
Coleman Strine
Companies across all industries are rapidly integrating AI tools into their workflows. In particular, many companies have implemented AI transcription tools to automatically transcribe meetings. However, it is increasingly apparent that the use of such tools may present significant legal risks. In one particular instance, Otter.ai, a popular real-time AI transcription tool, has been accused of several legal wrongdoings, including violations of federal wiretapping laws.

In re Otter.ai Privacy Litigation, No. 5:25-cv-06911 (N.D. Ca. filed Aug. 15, 2025) is a class action litigation, in which a class of plaintiffs has alleged that Otter.ai "slips surreptitiously into meetings as a silent participant," without providing proper notice to other attendees. According to the Complaint, when Otter.ai is connected to a user's calendar, the tool "automatically joins every meeting and begins recording and transcribing the conversation, as well as taking screenshots of the video call." Further, the plaintiffs allege that Otter.ai creates a "voiceprint" of each participant in a meeting, which is used to identify speakers in a transcript. These voiceprints are stored for use in future meetings, to maintain consistency in applying speaker labels. However, the Complaint alleges that Otter.ai does not provide notice to meeting attendees or obtain their consent before recording their statements, taking screenshots, or forming voiceprints. Based on these allegations, the Complaint raises several causes of action, including (1) violations of the Electronic Communications Privacy Act, which prohibits wiretapping, (2) the Computer Fraud and Abuse Act, which prohibits unauthorized access to a computer, and (3) the Illinois Biometric Information Privacy Act, which prohibits the unauthorized collection of biometric information. On January 1, 2026, Otter.ai filed a motion to dismiss, arguing that the plaintiffs lack standing and have failed to sufficiently state their claims.

While this case has not yet been resolved, companies should consider the legal risks associated with the use of AI transcription tools, and other similar AI services. In particular, companies should be sure to provide notice to all meeting attendees and obtain their consent before facilitating the recording of conversations. In addition, document retention and confidentiality concerns should be considered, depending on the nature of the meeting.

AI Chatbot Regulation: 78 State Bills, 58 Lawsuits
Samir Bhavsar, Parker Hancock, Justin Bryant
State legislatures are regulating what AI chatbots say. Plaintiffs' lawyers are suing over what AI chatbots collect. Most compliance teams are only watching one front.

In the first weeks of 2026, 78 chatbot-related bills have been filed across 27 states. In the two months since California's companion chatbot law took effect on January 1, 2026, at least six additional states have advanced chatbot legislation past committee or through a full chamber. Meanwhile, an analysis of 284 deployer-facing AI litigation matters reveals that chatbot wiretap lawsuits (claims under the Electronic Communications Privacy Act and state wiretap statutes) have grown from 2 matters in 2021 to 30 in 2025, making chatbot wiretap the fastest-growing category of deployer-facing AI litigation.

Read more here.

Quick Links
For additional insights on AI, check out Baker Botts' thought leadership in this area:

1. AI Licensing Suit Exhibits Pitfalls Of Vague Contract Terms: Baker Botts Partner Paul Ragusa and Associate Coleman Strine examine Fastcase Inc. v. Alexi Technologies Inc. as a cautionary example of how pre generative AI data licensing agreements can produce costly disputes when vague terms collide with unforeseen technological advances such as AI model training.
2. Where AI, Employees, and the Law Intersect: Key takeaways from Baker Botts and ACC Houston's half-day seminar that featured timely discussions on AI, employment law, and what's ahead for the workplace.
3. When AI Agents Misbehave: Governance and Security for Autonomous AI: Senior Associate Parker Hancock examines the legal frameworks emerging legal framework for AI agent governance.
4. What Kind of Person Is Your AI? Model Character and the New Alignment Ecosystem: Senior Associate Parker Hancock looks at how new developments are giving deployers something new: a way to assess the character of an AI model, not just its capability.
5. What is OpenClaw, and Why Should You Care? Senior Associate Parker Hancock explains what happened and why it matters.
6. Bits and Bytes Webinar: Proactive AI Risk Management: Empowering Legal Teams to Navigate and Mitigate Emerging Compliance Challenges: In our latest webinar, Samir Bhavsar, Parker Hancock, and Justin Bryant discuss the unprecedented challenges in identifying, managing, and mitigating the risks associated with AI adoption.
7. AI Counsel Code Podcast - What to Watch for in 2026: In the latest episode, Maggie Welsh and Parker Hancock break down what to watch for in 2026 with respect to AI and the law. Parker provides insights on how new AI behaviors collide with long‑standing laws, why accountability falls on companies, and what in‑house teams must prioritize as AI agents start touching core systems.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.