United States of America et al v. Amazon Inc et al

Filing 80

ORDER granting 79 Letter Motion for Local Rule 37.2 Conference. ENDORSEMENTPlaintiffs-Relators are directed to respond by November 19, 2024. A telephonic pre-motion conference is scheduled for November 22, 2024, at 11 am. The parties are instructed to call [phone] and enter access code 3029857# when prompted. SO ORDERED. Telephone Conference set for 11/22/2024 at 11:00 AM before Judge Edgardo Ramos.. (Signed by Judge Edgardo Ramos on 11/12/2024) (jca)

920 Fifth Avenue
Suite 3300
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James E. Howard
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November 8, 2024
By ECF
The Honorable Edgardo Ramos
United States District Judge
Thurgood Marshall United States Courthouse
40 Foley Square, Courtroom 619
New York, NY 10007
Re:

at page 4

United States ex rel. Henig v. Amazon.com, Inc., Case No. 1:19-cv-05673-ER,
Pre-Motion Conference

Dear Judge Ramos:
We write as counsel to defendants Amazon.com, Inc., Amazon Fulfillment Services, Inc., and
Amazon.com Services, LLC (collectively, Amazon) pursuant to Rule 2.A.i of Your Honor’s
Individual Practices, and Local Civil Rule 37.2, to request an informal conference in connection
with Amazon’s anticipated motion to stay discovery under Fed. R. Civ. P. 26. This stay is
necessary because Amazon’s motion to dismiss pursuant to Fed. R. Civ. P. 8(a), 9(b), and 12(b)(6)
is pending before the Court, see ECF. No. 70, but relators have nevertheless sought to commence
discovery.
Summary of Amazon’s Pending Motion to Dismiss
On October 16, 2023, the United States declined to intervene in Plaintiffs-Relators’ case under the
False Claims Act. See ECF No. 26. Plaintiffs have since twice amended their complaint, and in
their Second Amended Complaint (SAC) now allege that Amazon bears responsibility for the false
statements made on customs forms and declarations by third party entities who import, list, and
offer their products for sale in the Amazon.com store (Third-Party Sellers). Plaintiffs make their
fraud-based claim against Amazon even though these Third-Party Sellers sold goods on the
Amazon.com online store after the import process was complete and after their alleged false
statements were made.1
Given the barebones and speculative allegations in Plaintiffs’ SAC, Amazon filed its Motion to
Dismiss, along with a supporting Memorandum of Law, on May 31, 2024, see ECF Nos. 70, 71.
Amazon argued that dismissal is appropriate because:
(1) Plaintiffs failed to plead with the particularity required by Rule 9(b) how Amazon caused
Third-Party Sellers to make any false statements. In particular, Plaintiffs never alleged Amazon
controlled Third-Party Sellers, served as their importer of record, acted as their customs agent,
or directed Third-Party Sellers to make false claims. ECF No. 71 at 12–16.
(2) Plaintiffs failed to allege how Amazon avoided any obligation that it—as opposed to ThirdParty Sellers—owed to the government. Id. at 17.
(3) Plaintiffs failed to allege, as required by Rule 9(b), specific facts supporting the necessary
1

Plaintiffs originally named these Third-Party Sellers as defendants in this litigation. See ECF No.
25. Plaintiffs have since dismissed them. See ECF Nos. 37, 63.

November 8, 2024
Page 2
strong inference of fraudulent intent. Instead, they made conclusory allegations purportedly
showing an attenuated chain of knowledge regarding what hypothetical Amazon employees
might have seen when processing shipments in Amazon’s warehouses. Id at 17–20.
(4) Plaintiffs failed to allege Amazon acted with deliberate ignorance or reckless disregard:
They failed to plead any facts showing that Amazon was aware of a substantial and unjustifiable
risk that Third-Party Sellers were making false statements. Id. at 21–22.
(5) Plaintiffs failed to allege a valid conspiracy claim under the FCA because they alleged
neither an agreement between Amazon and Third-Party Sellers, nor that Amazon took any overt
act in furtherance of the alleged conspiracy. Id. at 22–23.
Plaintiffs filed their Memorandum of Law in Opposition on July 15, 2024, ECF No. 75, and
Amazon filed its Reply Memorandum on August 9, 2024. ECF No. 76.
Plaintiffs’ Discovery Requests and Amazon’s Request for Stay
Plaintiffs served Amazon with Requests for Production and Interrogatories on October 18, 2024.
In response, Amazon informed Plaintiffs’ counsel that it believed discovery should be stayed
pending this Court’s ruling on Amazon’s Motion to Dismiss. The parties met and conferred over
Zoom on October 24, 2024, regarding Amazon’s position. Plaintiffs informed Amazon that they
did not agree to stipulate to an indefinite stay of discovery. Accordingly, the parties agreed that
Amazon would request leave to file a motion for a stay. On November 7, 2024, Plaintiffs stipulated
to an extension of Amazon’s time to respond or object to discovery by 60 days, to January 17,
2024, to allow the Court to rule on Amazon’s motion to stay.
Discovery Stay Requirements
“[U]pon a showing of good cause a district court has considerable discretion to stay discovery
pursuant to Fed. R. Civ. P. 26(c).” Hong Leong Finance Ltd. (Singapore) v. Pinnacle Performance
Ltd., 297 F.R.D. 69, 72 (S.D.N.Y. 2013). “In some circumstances, a pending motion to dismiss
may constitute ‘good cause’ for a protective order staying discovery.” Id. In determining whether
to grant a stay, courts consider: (1) the breadth of discovery sought; (2) any prejudice that would
result; and (3) the strength of the motion to dismiss. Id. Here, all three factors favor a stay, as
Amazon’s motion briefing will demonstrate.
Breadth of Discovery Sought
Plaintiffs’ requests for production and interrogatories are incredibly broad, and responding to them
would impose a heavy burden on Amazon. Many of Plaintiffs’ requests for production seek “All
Documents and Communications” related to broad categories of subject matter—such as “any U.S.
Fish and Wildlife Service fees or U.S. customs duties or tariffs, charged, paid, calculated, levied
or billed in connection with any Wildlife Product and Furs … Received, stored, or distributed …
through Amazon.com.” Plaintiffs’ interrogatories are no different, requiring, for example, that
Amazon identify “all Third-Party Sellers that stored … Distributed … or sold on Amazon.com…
any Wildlife Products or goods comprised of or containing Furs imported into the United States.”
Responding to these requests would require that Amazon search for and review countless
documents related to fur sales by third party sellers dating back at least to January 1, 2012.
Consequently, the first factor weighs in favor of a stay. Lu v. Cheer Holdings, Inc., 2024 WL
1718821, at *4 (S.D.N.Y. 2024) (breadth factor favored stay where discovery requests required
defendant to identify “each communication”); Hertz Global Holdings, Inc. v. Nat. Union Fire Ins.

November 8, 2024
Page 3
Co. of Pittsburgh, 2020 WL 6642188, at *1 (S.D.N.Y. 2020) (same where discovery sought “all
documents and communications” regarding “ten broad categories of documents”).
Prejudice to Plaintiffs
Plaintiffs will suffer no prejudice if discovery is stayed. Amazon’s “motion to dismiss is fully
briefed, so any consequent stay is likely to be short-lived.” Mortgage Resolution Servicing, LLC
v. JPMorgan Chase Bank, N.A., 2016 WL 3906712, at *7 (S.D.N.Y. 2016). And this Court has
recognized that “[a] stay pending determination of a dispositive motion that potentially eliminates
the entire action will neither substantially nor unduly delay the action, should it continue.” Spencer
Trask Software and Information Servs., LLC v. RPost Intern. Ltd., 206 F.R.D. 367 (S.D.N.Y.
2002). Accordingly, the second factor also weighs in favor of a stay.
Strength of Amazon’s Motion to Dismiss
A stay is appropriate if a motion to dismiss raises “substantial arguments” for dismissal. Hong
Leong Finance, 297 F.R.D. at 72-73. A stay is appropriate here.
First, the fact that Amazon seeks dismissal under Rule 9(b) strongly supports a stay. One of the
primary purposes of Rule 9(b) is to discourage the filing of complaints as a pretext for discovery
of unknown wrongs. Wood ex rel. U.S. v. Applied Rsch. Assoc’s, 328 F. App’x 744, 748 (2d Cir.
2009). For this reason, courts routinely grant stays—and in particular, do so in False Claims Act
cases—when there is a pending motion to dismiss under Rule 9(b). See, e.g., U.S. ex rel. Modglin
v. DJO Global Inc., 2014 WL 12564275, at *2 (C.D. Cal. 2014) (collecting cases). This important
policy rationale applies here: The United States declined to intervene; Plaintiffs have since twice
amended their complaint; and they now attempt to use broad discovery to search for unknown
wrongs to buttress their inadequate pleadings.
Second, Amazon’s motion to dismiss raises multiple “substantial arguments” as to why Plaintiffs
have failed adequately to plead their claims under the False Claims Act with the particularity
required by Rule 8(a), let alone by Rule 9(b). The SAC fails to allege with particularity how
Amazon caused Third-Party Sellers to make any alleged false statements, or how Amazon had the
requisite scienter. Plaintiffs do not allege Amazon directed Third-Party Sellers to falsify customs
forms or avoid designated ports, that Amazon provided false information, or that Amazon
submitted false claims for these sellers. See ECF Nos. 71 at 12-16, 76 at 5-8.
Plaintiffs’ attenuated theory that Amazon somehow caused Third-Party Sellers to submit false
claims by making its fulfillment services generally available has also already been rejected by the
D.C. Circuit. See Amazon Servs. LLC v. U.S. Dep’t. of Agric., 109 F.4th 573, 579-80 (D.C. Cir.
2024). Moreover, neither Plaintiffs’ circumstantial evidence of Amazon’s supposed knowledge,
nor its generalized allegations of Amazon’s supposed motive and intent, suffice to plead scienter.
ECF Nos. 71 at 17-22, 76 at 1-5. Likewise, Plaintiffs’ failure to plead an underlying violation of
the False Claims Act dooms their conspiracy claim, as does their failure to allege that Amazon
ever entered to an agreement with Third-Party Sellers to submit false claims or took any overt act
in furtherance of the alleged conspiracy. ECF Nos. 71 at 22-24, 76 at 10.
Accordingly, we request a pre-motion conference in anticipation of our expected Motion to Stay
Discovery. We are grateful for the Court’s attention to this matter.

November 8, 2024
Page 4
Respectfully submitted,
Davis Wright Tremaine LLP
/s/ James Howard
James E. Howard
David Gossett
Sarah Anne Baugh
Erwin Reschke
cc:

Counsel of record (via ECF)

Plaintiffs-Relators are directed to respond by November 19, 2024. A telephonic premotion conference is scheduled for November 22, 2024, at 11 am. The parties are
instructed to call [phone] and enter access code 3029857# when prompted.
SO ORDERED.

Edgardo Ramos, U.S.D.J.
Dated: November 12, 2024
New York, New York