Steven A. Sugarman, et al., Appellants,

This opinion is nonprecedential except as provided by
Minn. R. Civ. App. P. 136.01, subd. 1(c).

STATE OF MINNESOTA
IN COURT OF APPEALS
A22-0659

Steven A. Sugarman, et al.,
Appellants,

vs.

Muddy Waters Capital, LLC, et al.,
Respondents,

Jason Galanis,
Defendant,

Castalian Partners, LLC., et al.,
Respondents,

David Q. Mathews, et al.,
Respondents.

Filed November 14, 2022
Reversed and remanded
Connolly, Judge

Hennepin County District Court
File No. 27-CV-21-11850

Heather L. Marx, Cozen O’Connor, Minneapolis, Minnesota; and

Jeremy E. Deutsch (pro hac vice), Cozen O’Connor, New York, New York (for appellants)

John M. Baker, Faris A. Rashid, Anna M. Tobin, Greene Espel PLLP, Minneapolis,
Minnesota (for respondents)

Ambika Kumar (pro hac vice), Davis Wright Tremaine LLP, Seattle, Washington (for
respondents Muddy Waters Capital, LLC, et al.)

2
David F. Standa (pro hac vice), Greenspoon Marder LLP, Chicago, Illinois (for
respondents Castalian Partners, LLC., et al.)

Evangeline A.Z. Burbridge (pro hac vice ), Lewis & Llewellyn LLP, San Francisco, CA
(for respondents David Q. Mathews, et al.)

Considered and decided by Connolly, Presiding Judge; Chief Judge Segal; and
Johnson, Judge; .
NONPRECEDENTIAL OPINION
CONNOLLY, Judge
Appellants challenge the dismissal of their defamation and related claims under the
doctrine of forum non conveniens, arguing that the district court erred by failing to
(1) analyze the adequacy prong of the forum-non-conveniens analysis, (2) afford appellants
the proper presumption in favor of their chosen forum, and (3) safeguard appellants’
procedural rights in dismissing the case. Because the district court failed to properly
analyze the adequacy prong of the forum-non-conveniens analysis and failed to properly
apply the presumption in favor of appellants’ chosen forum, we reverse and remand.
FACTS
Appellant Steven A. Sugarman is a California businessman and the former chairman
of the board, president, and chief executive officer of Banc of California (BAC).
1 He is
also the managing member of appellant COR Capital, LLC, and appellant COR Advisors,
LLC, both of which are Delaware limited-liability companies that are headquartered and
registered to do business in California.

1 Sugarman resigned from BAC in October 2017.
3
The respondents in this case are (1) Castalian Partners Value Fund, LP (Value
Fund), a Delaware limited partnership with its principal place of business in Excelsior,
Minnesota; (2) Castalian Partners, LLC (Castilian Partners), a Minnesota limited liability
company with its principal place of business at the same address as Value Fund; (3) James
Gibson, a Minnesota resident and the manager of Castalian Partners and the executive
officer of Value Fund; (4) Muddy Waters Capital, LLC, Muddy Waters Research LLC,
MLAF LP, and MWCP, LLC (collec tively, the Muddy Waters entities), all of which are
entities formed under the laws of Delaware with their principal places of business in
California; (5) Carson Block, a California resident and founder and managing member of
the Muddy Waters entities; (6) David Q. Mathews, a resident of Texas; and (7) QKM, LLC,
a limited liability corporation with its principal place of business in Texas.
In September 2021, appellants brought this action against respondents and
defendant Jason Galanis, who was convicted of felony fraud and is currently incarcerated
in California. 2 The complaint alleged that federal authorities, in connection with their
investigation of Galanis’s fraud scheme, interviewed Sugarman while he was still
employed at BAC. According to the complaint, Sugarman provided federal authorities
with information detailing criminal activity of Galanis. Appellants alleged that Galanis
reacted by joining respondents together in a conspiracy to attack appellants through
anonymous blog posts and tweets between October 2016, and October 2018, and that “[f]or
some members of the conspiracy,” respondents and Galanis sought to “defame . . .

2 Galanis defaulted in district court and is not a party in this appeal.
4
Sugarman in order to profit from the resultant damage caused to the stock price of [BAC],”
and “for others, the conspiracy was advanced in a malicious attempt to destroy . . .
Sugarman’s reputation as revenge for his cooperation with the United States Government
in criminal prosecution of now-convicted fraudsters.” Appellants ’ complaint sought
damages for defamation, civil conspiracy to defame, aiding and abetting defamation, and
violation of the Minnesota Unfair and Deceptive Trade Practices Act. Additionally, the
complaint sought injunctive relief.
After the events alleged in appellants’ complaint, but before they filed this action in
Minnesota, several suits involving appellants and respondents were filed in California,
some of which are still pending. One such lawsuit was filed by appellants against
respondents and Galanis in the United States District Court for the Northern District of
California on July 24, 2019, asserting common-law causes of action and causes of action
for RICO violations. Respondents sought to transfer the case to the United States District
Court for the Central District of California, dismiss the RICO causes of action, and strike
the complaint. The federal court denied the motion to transfer venue, and granted, with
leave to replead, the motion to dismiss the RICO causes of action. Appellants later
amended their complaint, and respondents renewed their motions to transfer venue and to
dismiss. The federal court subsequently granted the motion to transfer venue to the Central
District of California, dismissed the RICO claims, and declined to exercise supplemental
jurisdiction of the common-law claims.
Several months later, appellants filed this action in Minnesota. Respondents moved
to dismiss for forum non conveniens and moved to strike and dismiss based on arguments
5
related to Minnesota and California defamation law and anti-SLAPP statutes.3 The district
court concluded that “California is a more convenient forum for this case to be heard than
Minnesota” and, therefore, granted respondents’ motion to dismiss for forum non
conveniens, “conditioned on the availability of an alternative forum in California.” The
district court also concluded that respondents’ “Motion to Strike and Dismiss is therefore
moot.” This appeal follows.
DECISION
Appellants challenge the district court’s decision to grant respondents’ motion to
dismiss for forum non conveniens. Forum non conveniens is an equitable doctrine whereby
a court may, in its discretion, “decline jurisdiction over transitory causes of action brought
by nonresident citizens or noncitizens of this state when it fairly appears that it would be
more equitable to have the case tried in another available court of competent jurisdiction.”
Hague v. Allstate Ins. Co., 289 N.W.2d 43, 45 (Minn. 1978). A forum-non-conveniens
determination “is committed to the sound discretion of the [district] court,” to which
substantial deference is given. Piper Aircraft Co. v. Reyno, 454 U.S. 235, 257 (1981); see
Bergquist v. Medtronic, Inc., 379 N.W.2d 508, 511-12 (Minn. 1986). We will not reverse
a forum non conveniens dismissal by the district court unless there has been an abuse of
discretion. Paulownia Plantations de Panama Corp. v. Rajamannan, 793 N.W.2d 128,
133 (Minn. 2009). “ A district court abuses its discretion in the context of forum non

3 “Typically, anti-SLAPP statutes protect the exercise of two types of public participation
rights: the right to free speech and the right to petition the government.” Leiendecker v.
Asian Women United of Minn., 848 N.W.2d 224, 228 (Minn. 2014).
6
conveniens when the court makes an erroneous legal conclusion or a clearly erroneous
factual conclusion.” Id.
“The first step in a forum non conveniens analysis is for the district court to establish
the existence of an available and adequate forum. A forum is ‘available’ when the foreign
court has jurisdiction over the case and the parties.” Id. at 133-34 (citations omitted).
Conversely, the “adequacy” consideration “encompasses whether the party has an effective
remedy in the alternative forum.” Id. at 134; Piper, 454 U.S. at 254 n.22 (stating that, in
rare circumstances, the other forum may not be an adequate alternative, such as where the
forum does not permit litigation of the dispute).
If an adequate alternative forum is available, the second step in a forum-non-
conveniens analysis requires the district court to weigh the private- and-public-interest
factors of both forums. Paulownia, 793 N.W.2d at 137. The private-interest factors are:
(1) the relative ease of access to sources of proof; (2)
availability of compulsory process for attendance of unwilling,
and the cost of obtaining attendance of willing, witnesses; (3)
possibility of view of premises, if view would be appropriate
to the action; and (4) all other practical problems that make trial
of a case easy, expeditious, and inexpensive.

Id. at 137 (quotation omitted). The public-interest factors are:
(1) the administrative difficulties flowing from court
congestion; (2) the local interest in having localized
controversies decided at home; (3) the interest in having the
trial of a diversity case in a forum that is familiar with the law
that must govern the action; (4) the avoidance of unnecessary
problems in conflict of laws, or in the application of foreign
law; and (5) the unfairness of burdening citizens in an unrelated
forum with jury duty.

7
Id. (quotation omitted). There is a strong presumption in favor of the plaintiff’s choice of
forum, id., and a court must weigh the private- and public-interest factors of each forum to
determine whether the presumption has been successfully rebutted. Bergquist, 379 N.W.2d
at 511. A dismissal of an action on grounds of forum non conveniens must be on conditions
that protect a plaintiff’s Minnesota procedural rights, which includes statutes of limitations.
Kennecott Holdings Corp. v. Lib. Mut. Ins. Co., 578 N.W.2d 358, 361-62 (Minn. 1998)
(“[W]e hold that a dismissal based on forum non conveniens must be conditioned on the
preservation of the benefits of those laws as were applicable in Minnesota. Procedural
rights of a party should not yield to convenience.”).
Appellants argue that the district court committed reversible error by failing to
properly (I) consider the adequacy step of the forum-non- conveniens analysis; (II) afford
appellants with the strong presumption in favor of their choice of forum, to which they are
entitled; and (III) condition dismissal of appellants’ action on an available alternative
forum in California.
I. The district court failed to properly consider whether California is an adequate
forum.

The district court determined that “California is an adequate alternative forum for
the case—that is, California has jurisdiction over the parties and subject matter.” But
appellants contend that “[m]issing from” the district court’s order “is any actual analysis
of whether California is an adequate forum for purposes of transfer after dismissal pursuant
to forum non conveniens.” Appellants contend that the district court “committed reversible
8
error in conflating ‘availability’ . . . with ‘adequacy’ . . . and then completely failing to
perform any analysis as to the ‘adequacy’ of California as a transferee forum.”
Respondents argue that appellants have forfeited this argument because they failed
to provide the district court any reason to conclude that California offers them no effective
remedy. Instead, respondents argue that appellants “conceded [that] California offers an
effective remedy by filing there, twice.” We disagree.
When opposing a plaintiff’s choice of forum, it is the defendant who has the burden
of proof. Ansello v. Wisconsin Cent., Ltd., 900 N.W.2d 167, 174 (Minn. 2017). Here,
respondents are employing the wrong legal standard because respondents, as the moving
parties, bear the burden in their forum-non -conveniens motion. See id. Moreover,
respondents cite no caselaw supporting their argument that appellants have forfeited their
argument as to adequacy by previously filing a similar action in another state. We therefore
conclude that appellants’ adequacy argument is properly before us.
Turning now to the merits of appellants’ argument, we again recognize that
“‘adequacy’ encompasses whether the party has an effective remedy in the alternative
forum.” Paulownia, 793 N.W.2d at 134. An alternative forum is generally adequate if
“the forum permits litigation of the subject matter of the dispute.” Bank of Credit & Com.
Int’l (Overseas) Ltd. v. State Bank of Pak., 273 F.3d 241, 246 (2nd Cir. 2001) (quotation
omitted). Differences in substantive law between forums are irrelevant, unless “the remedy
provided by the alternative forum is so clearly inadequate or unsatisfactory that it is no
remedy at all.” Bergquist, 379 N.W.2d at 512 (quotation omitted); see State Bank of Pak.,
9
273 F.3d at 246 (stating that an adequate forum does not exist if a statute of limitations bars
the bringing of a case in that forum).
In Paulownia, the plaintiff invested in the defendant’s plan to commercially grow
trees in Panama. 793 N.W.2d at 131. After the tree plantations failed, the plaintiff brought
suit in Minnesota, where the defendant resides and where the plaintiff wired the majority
of its investment money. Id. at 130-31. The district court subsequently granted the
defendant’s motion to dismiss for forum non conveniens on the condition that Panama
would accept jurisdiction of the case. Id. at 133. On appeal before the supreme court, the
plaintiff argued that Panama is an inadequate forum because it is corrupt and because
Panama’s procedural rules are inadequate. Id. at 136. The supreme court stated that the
“district court evaluated the limited information supplied to the court and concluded that
Panama did not present the ‘rare circumstance’ of an inadequate alternative forum.” Id. at
137. Thus, the supreme court held that the district court did not abuse its discretion in
finding Panama to be an adequate alternative forum. Id.
Appellants argue that “Paulownia recognizes the issuance of a conditional dismissal
order must come only after the [district] court has engaged” in an analysis of the relevant
issues of foreign law and the district court concludes that the alternative forum is adequate.
Appellants argue that, because the district court “did no such analysis,” the “condition”
contained in the district court’s order is inadequate under Paulownia.
Respondents argue that the district court “did assess” the adequacy prong and, based
on the lengthy history of litigation between the parties, “reached the obvious conclusion
that California is adequate.” Indeed, the district court specifically recognized that “there
10
have been similar (with many—if not all —the same Parties) cases ongoing [in California]
for quite some time.” But the district court’s order fails to address any alleged differences
in substantive law between Minnesota and California. And, although the district court’s
memorandum of law analyzes the availability prong of the forum-non-conveniens analysis,
the district court failed to analyze the adequacy prong. Instead, the district court confused
“availability” with “adequacy” by stating that “California is an adequate alternative
forum,” but then stating: “that is, California has jurisdiction over the parties and subject
matter.” See Paulownia, 793 N.W.2d at 133 -34 (stating that a forum is “available” when
a foreign court has jurisdiction over the case, whereas the “adequacy” consideration
“encompasses whether the party has an effective remedy in the alternative forum”).
Without any analysis of the adequacy prong, there is uncertainty as to whether appellants
have an effective remedy in California. Therefore, we reverse and remand for the district
court to address the adequacy prong of the forum-non-conveniens analysis.
II. The district court failed to afford appellants the strong presumption in favor
of their chosen forum.

Appellants also contend that, in considering the private and public interest factors,
the district court erroneously failed to afford appellants’ choice of Minnesota as the forum
for litigation the strong presumption to which it was entitled. Indeed, there is generally “a
strong presumption . . . in favor of the plaintiff’s choice of forum.” Paulownia, 793 N.W.2d
at 137. “[B]ut that presumption applies with less than maximum force when the plaintiff
is foreign.” Id. (quotation omitted). As the supreme court recognized: “The difference
makes sense. It is reasonable to assume that the plaintiff’s home forum is convenient when
11
the home forum has been chosen. When the plaintiff is foreign and has not chosen the
home forum, the assumption of convenience is less reasonable.” Id.
Referencing Paulownia, the district court concluded that “the strong presumption in
favor of [appellants’] choice of forum applies with less force here because [appellants’]
have not filed in their home forum.” Appellants contend that this conclusion is erroneous
because it is based on a “faulty interpretation” of Paulownia. Specifically, appellants argue
that the supreme court in Kennecott Holdings, made “very clear” that the “holding
concerning a lowered presumption applie[s] only to plaintiffs not from the United States[,]
and that plaintiffs from the United States[,] but residing in states other than Minnesota[,]
were entitled to the same strong presumption as Minnesota-resident plaintiffs.” We agree.
In Kennecott Holdings, the supreme court stated:
The Insurance Companies claim that the holding
in Piper and adopted by this court in Bergquist applies to
Kennecott, a group of Delaware corporations, on the theory
that a nonresident of Minnesota is foreign for purposes of
the Piper rule: that is, a nonresident of Minnesota has a lesser
presumption of appropriateness as to the selection of its forum
than a resident of Minnesota. We disagree. The plaintiffs
in Piper and Bergquist were from foreign nations, not different
states among the United States. Although those cases held that
a foreign plaintiff’s choice of forum deserves less deference,
we construe the reference to “foreign” to be in the context of
nationality, not state residency. In Bergquist, when we
adopted the rule in Piper with respect to a foreign national
plaintiff, we stated: Why should the United States taxpayers,
or taxpayers of Minnesota in the present case, be presumed to
pay for the costs of trial for a plaintiff who is a citizen of a
foreign nation; who has a remedy in his own country; and
whose defendant consents to being sued in the foreign country?
Furthermore, we drew a distinction between citizens of
different states and foreign nationals, a distinction that clearly
makes sense in a time when our state courts frequently
12
entertain jurisdiction over United States nationals but
nonresidents of Minnesota. To accord less deference to the
choice of forum of a United States citizen because the plaintiff
is not a resident of Minnesota simply defies fairness and logic.
Therefore we conclude that Kennecott is entitled to the same
strong presumption in favor of its choice of Minnesota as its
forum as would a Minnesota resident.

578 N.W.2d at 361 (quotations and citations omitted).
A proper construction of the holding in Kennecott Holdings dictates that, because
appellants are United States citizens, they are entitled to the same strong presumption in
favor of their choice of Minnesota as their forum as a Minnesota resident. See id.
Respondents, however, largely ignore the Kennecott Holdings decision and argue instead
that the district court’s consideration of the public-and-private-interest factors supports the
district court’s decision to grant their motion for forum non conveniens.
To support their position, respondents cite Paulucci v. Nelson, No. A16-0043
(Minn. App. Aug. 8, 2016), a nonprecedential opinion. In that case, Florida residents
brought suit in Minnesota against a Florida resident and a Minnesota resident. Paulucci,
2016 WL 4162868, at *1-2. On appeal from the dist rict court’s dismissal for forum non
conveniens, the plaintiffs argued that the district court erred by not applying a presumption
in favor of their choice of forum. Id. at *4. In affirming the district court, this court
recognized that “the presumption is not determinative because it ‘may be rebutted if the
defendants can show that public and private interest factors favor another forum.’” Id.
(quoting C.H. Robinson Worldwide, Inc. v. FLS Transp., Inc., 772 N.W.2d 528, 539 (Minn.
App. 2009)). This court then concluded:
13
The district court considered various factors and concluded
that they favored the Florida forum, thereby implying that the
presumption was rebutted. [The plaintiffs] do not cite any
caselaw for the proposition that the absence of any mention of
the presumption is, by itself, reversible error. Thus, the district
court did not err simply because its conclusion is contrary to
the presumption that the plaintiff’s choice of forum generally
is favored.

Id.
We are not bound by Paulucci because it is a nonprecedential opinion. See Minn.
R. Civ. App. P. 136.01(c) (“Nonprecedential opinions . . . are not binding authority . . . .”).
Moreover, Paulucci is distinguishable because, in that case, there was no mention of the
presumption, but here, the district court specifically stated that “the strong presumption in
favor of [appellants’] choice of forum applies with less force here.” This is the wrong
standard under Kennecott Holdings. And finally, because forum non conveniens is an
equitable doctrine, the proper presumption must be applied in weighing the public-and -
private-interest factors of both forums. Accordingly, we reverse and remand for the district
court to apply the proper presumption when considering whether that presumption was
rebutted by the public-and-private-interest factors. See C.H. Robinson, 772 N.W.2d at 539
(stating that the strong presumption in favor of the plaintiff’s choice of forum is not
determinative because it “may be rebutted if the defendants can show that the public and
private interest factors favor another forum”).
Because we reverse and remand for the district court to address the adequacy prong
of the forum-non-conveniens analysis and to apply the proper presumption in weighing the
public-and-private-interest factors, we need not address appellants’ argument that the
14
district court erred by failing to properly condition dismissal of appellants’ action on an
available alternative forum in California. But we note that, if, on remand, the district court
again determines that Minnesota is an inconvenient forum and dismisses the case, it must
do so on the condition that California is an available alternative forum after addressing the
applicable statutes of limitations in California and Minnesota, as well as both states’ anti-
SLAPP laws.
Reversed and remanded.