In an ongoing dispute over a $14 million Securities and Exchange Commission whistleblower award, a federal judge in Pennsylvania has denied attempts to transfer a related defamation suit to New York federal court after concluding that the plaintiff's choice of venue was "paramount." Last week, U.S. District Judge Michael M. Baylson of the Eastern District of Pennsylvania denied defendant Kevin Barnes' motion to transfer well-known activist short seller Carson Block's defamation suit to the U.S. District Court for the Southern District of New York. The suit accuses Barnes, a former business associate of Block's, of making various defamatory comments to media outlets regarding Block's alleged unwillingness to share a $14 million whistleblower award he received after his company, Muddy Waters, investigated a Chinese company. Barnes moved to transfer the case to the Southern District of New York, where his related breach of partnership action against Block and Muddy Waters is pending. Barnes argued the cases were substantially similar and that the action should be transferred to New York. Block countered that traditional "private interest" factors under the change of venue statute weighed against transfer. The court agreed with Block, shooting down Barnes' argument after concluding the cases weren't "truly duplicative" of each other. "On balance, the private interest factors weigh against transfer because plaintiff's choice of forum is paramount, and the remaining factors do not overcome this assumption," Baylson said. The case, Block v. Barnes, comes after Barnes became involved with Block's company, Muddy Waters, which "prepares freely available reports that expose fraud, financial inaccuracies, and other forms of corporate malfeasance, primarily focusing on China-based companies listed on North American stock exchanges." In 2011, Barnes sought to assist Muddy Waters on an investigation into Focus Media, a Chinese digital media and advertising company. The parties entered into an independent-contractor agreement that said that Barnes wasn't an employee, Baylson said. According to Block, Barnes played a minor role in the investigation as one of six onsite investigators. In 2015, Focus Media was fined $55.6 million by the SEC after the agency had investigated the same misconduct that Muddy Waters' reports exposed. Following the fine, Block prepared an SEC whistleblower award. He alleged that Barnes reached out and offered to "quarterback" a submission on behalf of Muddy Waters. Block claimed he declined Barnes's offer, but that Barnes still submitted his own whistleblower application. In 2022, the SEC awarded Block $14 million for his efforts, while denying Barnes' competing application. Following the award, Barnes sued Block and Muddy Waters in the Supreme Court of the State of New York for breach of partnership, unjust enrichment, and constructive trust. Block and Muddy Waters removed the action to the Southern District of New York, where it is still pending. Block alleged that Barnes and his counsel repeatedly contacted him demanding money, and engaged in a campaign to defame him, using various media outlets to accuse him of withholding profits the parties had agreed to share. Block initially filed a defamation suit in the U.S. District Court for the Western District of Texas in August 2022, where he resides. That suit was dismissed in July 2023 for lack of personal jurisdiction, and Block filed the present suit in June 2023. Barnes moved to transfer in September 2023, which Block opposed, claiming that Barnes lives near Philadelphia, that neither of them lives in New York, and that the location of witnesses and documents, as well as the convenience of parties, favors Philadelphia. The court sided with Block, concluding that various private interest factors, including the plaintiff's choice of venue, weighed against the transfer. "Here, Block had a legitimate, rational reason to file outside of his 'home turf' because the Western District of Texas did not have personal jurisdiction over Barnes," Baylson said. "Thus, Barnes's burden is not lessened, and Block's choice of forum remains the paramount consideration."

John S. Summers of Hangley Aronchick Segal & Pudlin, in Philadelphia, represented Block. Arlene Fickler of Dilworth Paxson, in Philadelphia, represented Barnes. Neither immediately responded to requests for comment.