Amazon Wins Dismissal With Prejudice of Securities Class Action

Paul, Weiss achieved a significant victory for Amazon.com, Inc. and several current and former executives, including Executive Chairman Jeff Bezos and CEO Andrew Jassy, when the U.S. District Court for the Western District of Washington granted Amazon’s second motion to dismiss, with prejudice, a putative securities class action over its relationship with third-party sellers and the pace of growth in Amazon’s fulfillment distribution network.

The plaintiffs brought securities fraud claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 based on two separate alleged frauds. The plaintiffs claimed that the defendants made misrepresentations about Amazon’s alleged anticompetitive practices vis-à-vis third-party sellers, and about anticipated demand for items in Amazon’s store and fulfillment capacity expansion.

After U.S. District Judge John Chun granted Amazon’s first motion to dismiss in December 2023 for failure to plead a strong inference of scienter, or knowledge of wrongdoing, the plaintiffs amended their complaint, attempting to add allegations about the defendants’ motive to deceive shareholders. The additional allegations largely concerned executive stock sales, incentive compensation awards and allegations copied from a pending FTC lawsuit against Amazon. In moving to dismiss the operative complaint, Amazon argued that the plaintiffs still failed to adequately plead scienter. The court agreed, holding that the stock sales were not suspicious in timing or quantity, long-term incentive compensation is routine, and the FTC allegations were not sufficiently paired with the alleged misstatements and thus did not show that the defendants knowingly made false statements. Litigation partner Audra Soloway argued the motion.

In addition to Audra, the Paul, Weiss team included litigation partners Daniel Kramer, Martha Goodman and Alison Benedon and counsel Daniel Sinnreich.