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In Fortis Advisors LLC v. Krafton, Inc. (Del. Ch. 2026), the Delaware Chancery Court ruled that a transcript of the gaming publisher's CEO using ChatGPT to avoid paying $250 million earnout to the developers of Subnautica 2 is evidence of bad faith. ChatGPT advised Krafton first that the earnout was noncancelable. After more prompts, it advised on a plan for Krafton to implement, which Krafton did. The court considered the AI transcripts as part of its bad faith analysis, and, in effect, the court ruled against Krafton in a way that Krafton tried to engineer with the chat bot to avoid. The case, in a way, is not about bad legal advice from AI. The issue is what happens when bad decisions based on AI output end up in court.

In a recent federal court case, a man named Heapner was under a big government investigation. He wanted to get his thoughts organized for his lawyer. Without telling his attorney, he typed his secret legal strategies and confidential details into an AI chatbot named Claude. Later, the FBI searched his house and took his devices. The government prosecutors found his AI chat logs and wanted to use them as evidence in court. Heapner’s lawyers tried to stop them. They argued that these chats should be protected by "attorney-client privilege"—the rule that keeps your talks with your lawyer a secret. But the judge said no. The judge ruled that because Heapner was talking to an AI platform and not a real lawyer, the secret was broken. AI is considered a "third party." Once you share a secret with a third party, you lose your right to keep it private. The prosecution got to see his entire strategy.

Tag: ai governance

Use Case #2 – A CEO Asked an AI Whether to Break His Contract. A Court Used the Transcript Against Him: Foris v. Krafton

Use Case: The Hidden Dangers of AI Chatbots for Government Leaders – U.S. v. Heapner