Artificial intelligence is no longer a futuristic concept for California businesses, it is a present reality embedded in supply chains, pricing systems, hiring tools, and client-facing platforms. And with that reality comes a rapidly expanding frontier of litigation risk that every corporate counsel, risk manager, and insurance carrier should be tracking.
At Gallagher Huie + Blum, we defend businesses facing complex commercial claims across California. Here is what your organization needs to understand about the AI-driven legal disputes taking shape right now.
The Rise of AI-Related Business Disputes
The California legislature has enacted several AI-related measures in recent years, addressing transparency, automated decision-making, chatbots, employment tools, and healthcare algorithms. Meanwhile, at the federal level, competing pressures from state AI laws and a recent federal executive actions relating to AI regulation have created significant uncertainty for businesses operating across jurisdictions. The federal regulatory posture in this area continues to evolve, and businesses should monitor developments closely.
This regulatory fragmentation means California companies face a moving compliance target, and litigation often follows in the wake of uncertainty.
Algorithmic Pricing and Antitrust Exposure
One of the most significant emerging risk areas is algorithmic pricing. California has recently enacted measures that increase scrutiny of algorithmic pricing and related business practices, and companies should monitor how those developments may affect their operations.
The key question courts are now wrestling with: when does using the same third-party pricing software as your competitors cross the line into anticompetitive coordination? Recent federal appellate decisions have begun to address questions involving pricing software, competitor coordination, and antitrust exposure. The analysis turns on the specific facts of each situation, and businesses should not assume that common software use alone insulates them from antitrust scrutiny.
For businesses, the practical takeaway is that deploying algorithmic pricing tools without prior legal review may create avoidable legal risk, particularly as the regulatory landscape continues to evolve.
AI Hiring Tools Under Fire
Companies using automated systems to screen job applicants face a different category of risk: employment discrimination claims. The high-profile Mobley v. Workday litigation illustrated how AI-based hiring tools can generate class action exposure not just for the software vendor, but for the businesses that deploy them. In August 2025, a federal court ordered Workday to produce a list of customers who had used its AI features since 2020, a development that signals discovery in these cases may be expansive and should be anticipated early.
California employers using AI hiring tools should work with counsel now to review vendor contracts for indemnification provisions, evaluate how the tools are tested for disparate impact, and ensure documentation demonstrates thoughtful, lawful implementation.
Contract Drafting for an AI-Integrated World
Perhaps the most immediately actionable area is contract review. Businesses entering agreements with AI vendors, technology licensors, or software platforms should ensure those contracts address: IP ownership and indemnification for training data claims; representations about regulatory compliance; liability allocation for AI-generated errors; and termination rights if the vendor’s practices create downstream legal exposure.
Courts across the country are beginning to interpret these provisions, and early decisions will shape what is considered standard, or inadequate, contracting practice.
Businesses that moved quickly without reviewing AI-related legal and compliance issues may face heightened risk. Defense of these cases, whether at the summary judgment stage or through trial, requires counsel who understands both the law and the technology. Our team represents businesses and their insurers in complex commercial disputes across California, including those at the intersection of emerging technology and liability.
This article is provided for general informational purposes only and reflects information available as of the publication date. Laws, regulations, agency guidance, and court decisions may change after publication, and those changes may affect the accuracy or completeness of this discussion. This article does not constitute legal advice and does not create an attorney-client relationship.
Gallagher Huie + Blum defends businesses, insurance companies, and public-sector clients in complex litigation matters. To discuss your case, contact us at 628-218-6960 or visit www.teamghb.com