It's an "honest mistake" by the AI; it's gross negligence by the lawyer, for completely failing to do his actual job and confirm what his research tools spit out.
More to the point - "Hallucination" is an awful description and doesn't mean what most people think it does. If you force a human to answer a question regardless of certainty, you'd get the exact same behavior. High-confidence answers are easy; small medium-confidence details are likely to be in the ballpark but maybe a bit off; at the bottom of the barrel, however, you're going to get responses that amount to little more than works of plausible fiction.
I'm not saying this as an AI apologist, but this is a human problem. No human would read Harry Potter and think we could easily settle all court cases IRL with liberal use of veritaserum. For a lawyer to file a motion to do so means that lawyer needs a new and exciting career in fast food preparation.