Order to Show Cause Regarding Subject Matter Jurisdiction v. Cyberlux Corporation

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

ATLANTIC WAVE HOLDINGS, LLC; et. al.,

Case No .: 3:24-cv-00482-RBM-VET

Plaintiffs,

ORDER TO SHOW CAUSE REGARDING SUBJECT MATTER JURISDICTION

V.

CYBERLUX CORPORATION,

Defendant.

On March 5, 2024, Plaintiffs Atlantic Wave Holdings, LLC and Secure Community, LLC (collectively, "Plaintiffs") filed an Application for Entry of Judgment on Sister-State Judgment in the Superior Court of California, County of San Diego ("San Diego Superior Court") pursuant to California's Sister State Money Judgments Act, Cal. Code Civ. Proc. § 1710.10 et seq. (the "Application"). (Doc. 1-5 at 2.) The same day, the San Diego Superior Court entered judgment against Defendant in the amount of $1,149,866.85 (the "California Sister State Judgment"). (Doc. 1-9 at 2.) On March 11, 2024, Defendant Cyberlux Corporation ("Defendant") removed the action to this Court ("Notice of Removal"). (Doc. 1.) On April 10, 2024, Defendant filed a Motion to Vacate the Sister State Judgment ("Motion to Vacate") (Doc. 9), which is still pending before the Court.

Invoking its inherent power to raise the issue of subject matter jurisdiction sua sponte, and for the reasons discussed below, the Court ORDERS DEFENDANT TO

SHOW CAUSE as to how the constitutional requirement of standing is satisfied and why this action should not be remanded for lack of subject matter jurisdiction

"Federal courts are courts of limited jurisdiction." Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377 (1994). In civil cases, federal courts have subject matter jurisdiction over only those cases where either diversity jurisdiction or federal question jurisdiction exist. See Peralta v. Hispanic Bus., Inc., 419 F.3d 1064, 1068-69 (9th Cir. 2005). Because its jurisdiction is limited, "[a] federal court is presumed to lack jurisdiction in a particular case unless the contrary affirmatively appears." Stock West, Inc. v. Confederated Tribes, 873 F.2d 1221, 1225 (9th Cir. 1989).

Courts "have an independent obligation to determine whether subject-matter jurisdiction exists, even in the absence of a challenge from any party." Arbaugh v. Y&H Corp., 546 U.S. 500, 514 (2006). "[S]ubject-matter jurisdiction, because it involves a court's power to hear a case, can never be forfeited or waived." United States v. Cotton, 535 U.S. 625, 630 (2002). A district court may remand a case to state court sua sponte if it determines that jurisdiction is lacking. 28 U.S.C. § 1447(c); see Fed. R. Civ. P. 12(h)(3) ("If the court determines at any time that it lacks subject matter jurisdiction, the court must dismiss the action.").

Article III of the United States Constitution confers on federal courts that the "judicial power of the United States" to adjudicate cases and controversies. U.S. Const., art. III, § 2. "One element of the case-or-controversy requirement' is that plaintiffs 'must establish that they have standing to sue." Clapper v. Amnesty Int'l USA, 568 U.S. 398, 408 (2013) (quoting Raines v. Byrd, 521 U.S. 811, 818 (1997)).

The irreducible constitutional minimum of Article III standing contains three elements. First, the plaintiff must have suffered an "injury in fact" that is "concrete and particularized" and "actual or imminent." Second, there must be a causal connection between the injury and the conduct complained of,

such that the injury is fairly traceable to the action challenged. "Third, it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision."

Renee v. Duncan, 686 F.3d 1002, 1012 (9th Cir.2012) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)) (internal quotation marks, brackets, and citations omitted). "The party invoking federal jurisdiction bears the burden of establishing these elements." Lujan, 504 U.S. at 561. A suit brought by a party without Article III standing is not a "case or controversy," and a federal court thereby lacks subject matter jurisdiction over the suit. Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 93-95 (1998).

Standing to sue is a doctrine that "limits the category of litigants empowered to maintain a lawsuit in federal court to seek redress for a legal wrong." Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016), as revised (May 24, 2016) (citations omitted). When standing is challenged "[a]t the pleading stage, general factual allegations of injury resulting from the defendant's conduct may suffice .... " Lujan, 504 U.S. at 561.

The circumstances surrounding removal in this case are unique, as Plaintiffs did not file a lawsuit against Defendant in San Diego Superior Court but instead sought to register a Virginia state court judgment in California pursuant to California's Sister State Money Judgments Act, Cal. Code Civ. Proc. § 1710.10 et seq. (the "Act"). Based on its review of the Notice of Removal and the Application, the Court finds that Defendant's assertions insufficiently allege a case or controversy exists. Specifically, the Court has doubts as to whether Plaintiffs have asserted any injuries caused by Defendant's alleged conduct and redressable by a federal court to confer Article III standing.

Plaintiffs did not file a complaint or any similar pleading in San Diego Superior Court. Rather, Plaintiffs filed the Application seeking to register and enforce the Virginia Judgment pursuant to the Act. "The registration procedure established by the [Act] is designed to allow parties to avoid the normal trappings of an original action, e.g., the necessity for pleadings." WV 23 Jumpstart, LLC v. Mynarcik, 85 Cal. App. 5th 596, 605 (2022) (quoting Casey v. Hill, 79 Cal.App.5th 937, 959-960 (2022)).

For purposes of establishing Plaintiffs' standing to sue, it is not apparent on the face of the Application that Plaintiffs effectively commenced a lawsuit against Defendant to obtain relief for a legal wrong. Indeed, Plaintiffs do not plead any causes of action against Defendant. Nor does the Application contain any allegations of Defendant's unlawful conduct giving rise to such claims.

Accordingly, the Court ORDERS DEFENDANT TO SHOW CAUSE why this action should not be remanded for lack of jurisdictional standing.

As the party invoking federal jurisdiction, Defendant asserts subject matter jurisdiction based solely on diversity of citizenship (see Doc. 1 18) and bears the burden of establishing its existence. Lujan, 504 U.S. at 561. Pursuant to 28 U.S.C. §1332(a), federal courts have "original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between [ ] citizens of different States .... " (emphasis added); see, e.g., Caterpillar Inc. v. Lewis, 519 U.S. 61, 67-68 (1996). The citizenship of each plaintiff must be diverse from the citizenship of each defendant. Caterpillar Inc., 519 U.S. at 68. Further, the amount in controversy must exceed "the sum or value of $75,000, exclusive of interest and costs." 28 U.S.C. § 1332(a).

In its Notice of Removal, Defendant asserts that Plaintiffs are both "Virginia limited liability company[ies] and its members are not residents of Nevada or North Carolina." (Doc. 1 11 13-14 (citations omitted).) Defendant states that "Plaintiffs' Application seeks $1,149,866.85 in money damages pursuant to a Sister-State Judgment from the Commonwealth of Virginia." (Id. at | 10.) Notwithstanding these assertions, the Court is not convinced the Application constitutes a "civil action" or that the amount is "in controversy" as required under Section 1332(a).

California state courts have previously determined that filing an application pursuant to Section 1710.20 of the Act is generally considered a "special proceeding," not a civil action. Conseco Marketing, LLC v. IFA & Ins. Services, Inc., 221 Cal. App. 4th 831, 838

Additionally, because Plaintiffs do not assert any actionable claims for damages against Defendant, and Plaintiffs were already awarded the damages Defendant relies on to establish the jurisdictional requirement, it is unclear whether the amount entered on the California Sister State Judgment is "in controversy."

Thus, the Court is not certain that it has jurisdiction over the present case. The Court therefore ORDERS DEFENDANT TO SHOW CAUSE why this action should not be remanded for lack of subject matter jurisdiction.

Based on the foregoing, the Court ORDERS DEFENDANT TO SHOW CAUSE as to why this action should not be remanded for lack of subject matter jurisdiction and for failure to allege standing under Article III.

Defendant's response alleging proper subject matter jurisdiction shall be filed on or before March 4, 2025. If Plaintiffs dispute any assertions, they may file a reply on or before March 11, 2025. A hearing on the order to show cause shall be held on March 14, 2025, at 1:30 p.m. The Court may choose to vacate the hearing date and issue a ruling on the parties' briefs only.

IT IS SO ORDERED.

DATE: February 27, 2025

Bath Bermudy Mantenga

HON. RUTH BERMUDEZ MONTENEGRO UNITED STATES DISTRICT JUDGE