By Frank G. Runyeon

Law360, New York (June 1, 2021, 5:36 PM EDT) -- Amazon's claim that the New York attorney general sued it over COVID-19 worker protections in bad faith drew skepticism Tuesday from a Brooklyn federal judge, who suggested the case may be moot as the pandemic fades.

During remote arguments, U.S. District Judge Brian M. Cogan told counsel for Amazon he faced an "uphill battle" to convince him that Attorney General Letitia James had brought her action in bad faith. At the same time, the judge questioned whether both sides were "caught up in the past" and asked them to resolve their dispute, as the worst of the COVID-19 emergency had passed.

In its papers, Amazon has claimed "significant evidence that the [Office of the Attorney General] launched its investigation and brought its case in a 'bad faith' effort to harass Amazon" — specifically claiming the office prejudged its own investigation — ignored contradictory facts, applied a double standard, disregarded "clear legal limits on its authority" and "engaged in a pattern of conduct designed to damage Amazon."

But when Amazon counsel Jason C. Schwartz offered to catalog the specific allegations of bad faith against James on Tuesday, Judge Cogan cut him off.

"No, I think I've seen what you've alleged," the judge said. "So, I understand what's there. I'm not entirely convinced" the facts behind those allegations, even if undisputed and true, "add up to what I believe is intended to be a pretty narrow exception" to a principle that federal courts abstain from interfering in a state court matter, such as the attorney general's case against Amazon, and "constitute bad faith."

"You can certainly give it a try," the judge added, saying he had not made up his mind. "But I do believe on that issue you may have a little bit of an uphill battle. Just telling you that."

Counsel for the attorney general, Fiona J. Kaye, piled on.

"The bad faith exception does not apply here," Kaye said, denying the factual claims and noting the company had never challenged the validity of the Office of the Attorney General's subpoenas during its investigation. "It's pretty incredible the accusations that Amazon is making when the attorney general was trying to protect and is trying to protect New Yorkers during an ongoing pandemic."

Citing one of Judge Cogan's own 2018 decisions, Kaye said Amazon had failed to demonstrate it should be among the rare cases where a federal court can intervene.

Amazon first filed suit in February, claiming James' office was usurping federal oversight authority in attempting to regulate Amazon's efforts to protect its workers amid the COVID-19 public health crisis. Moreover, the company claims James' demand that the company disgorge profits it made during the pandemic was improper.

Days later, James filed suit in New York state court alleging Amazon had violated state labor law and whistleblower protections for its treatment of employees at its facilities in Staten Island and Queens. Workers had previously filed their own actions claiming Amazon didn't do enough to protect workers and had fired a worker who raised the alarm. Amazon has claimed worker protection complaints are the purview of the Occupational Safety and Health Administration or the National Labor Relations Board.

Judge Cogan ruled in Amazon's favor in November as he dismissed a lawsuit by Staten Island workers, agreeing it was OSHA's job to regulate worker protections. The workers have appealed. 

Near the end of the arguments Tuesday, the judge pushed the parties to settle both cases, given the decline in COVID-19 positivity rates.

"Is there any chance at all that events in the world have made the dispute between these two parties moot?" Judge Cogan asked. "The fact of the matter is New York has practically recovered from COVID. I'm not sure what the state court would do for the attorney general in terms of requiring safety measures."

Faye pushed back, arguing the "pandemic is ongoing" with "hundreds of new COVID cases in New York every day. People continue to die from it." But Judge Cogan noted the numbers are down markedly from several months ago, according to "really helpful" public email updates from Gov. Andrew Cuomo's office.

"The masks are gone, the restaurants are open and the safety measures that we all felt very strongly about six months ago just don't seem necessary," Judge Cogan said. "I guess all I'm saying is both parties ought to consider whether this fight that you started — both of you on good grounds on both sides, I'm sure — is something that ought to go away in both the state court and the federal court."

Any restrictions that the state court decides to place on Amazon, the judge said, "are just a pale shadow of what they would have been a few months ago — if anything."

"I'm just urging the parties to talk about that," the judge said.

Judge Cogan set a briefing schedule for the motions stretching into July and wished the parties well.

"Have a nice summer. Look forward to your papers," the judge said.

Amazon is represented by Jason C. Schwartz, Lucas C. Townsend, Zainab Ahmad and Mylan L. Denerstein of Gibson Dunn & Crutcher LLP.

The attorney general is represented in-house by Fiona J. Kaye, Roya Aghanori, Elizabeth Koo, Seth Kupferberg, Daniela L. Nogueira and Jeremy Pfetsch.

The case is Amazon.com Inc. v. Attorney General Letitia James, case number 1:21-cv-00767, in the U.S. District Court for the Eastern District of New York.

--Additional reporting by Lauren Berg. Editing by Janice Carter Brown.

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