Order to Show Cause re Subject Matter Jurisdiction (doc. No. 33)

HAHN LOESER & PARKS LLP Gabe P. Wright (SBN 208647) One America Plaza 600 W. Broadway, Suite 1500 San Diego, CA 92101 Telephone: 619.810.4300 Facsimile: 619.810.4301 gwright@hahnlaw.com

THOMPSON COBURN LLP JEFFREY N. BROWN (SBN 105520) jbrown@thompsoncoburn.com 10100 Santa Monica Blvd., Suite 500 Los Angeles, California 90067 Tel: 310.282.2500 / Fax: 310.282.2501

EDWARD W. GRAY, JR. (SBN 80966) egray@thompsoncoburn.com 1909 K Street, NW Suite 600 Washington, D.C. 20006 Tel: 202.585.6967 / Fax: 202.585.6969

ALLEN CHESSON & GRIMES DOUGLAS GRIMES (pro hac vice application pending) dgrimes@allenchesson.com 505 N. Church Street Charlotte, NC 28202 Tel: 704.755.6012

Attorneys for Defendant CYBERLUX CORPORATION

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

ATLANTIC WAVE HOLDINGS, LLC, a Virginia limited liability company; and SECURE COMMUNITY, LLC, a Virginia limited Liability company,

Plaintiffs, V.

CYBERLUX CORPORATION, a Nevada Corporation;

Defendant.

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

DEFENDANT CYBERLUX CORPORATION'S RESPONSE TO ORDER TO SHOW CAUSE RE SUBJECT MATTER JURISDICTION (DOC. NO. 33)

Dist. Judge: Ruth Bermudez Montenegro

NO ORAL ARGUMENT UNLESS ORDERED BY THE COURT

CYBERLUX CORPORATION'S RESPONSE TO ORDER TO SHOW CAUSE RE SUBJECT MATTER JURISDICTION

Defendant Cyberlux Corporation ("Cyberlux") submits this Response to Order to Show Cause Regarding Subject Matter Jurisdiction as directed by the Court in its February 27, 2025, Order ("Order"). (Doc. No. 33.)

As the Court is aware, there are numerous proceedings between Plaintiffs Atlantic Wave Holdings, LLC and Secure Community, LLC ("Plaintiffs"), and Cyberlux. This action is Plaintiffs' second attempt to enforce their Virginia judgment in California.

Their prior attempt commenced on December 13, 2023, when Plaintiffs filed a Complaint in San Diego Superior Court, which was subsequently removed to this Court on January 30, 2024, captioned Atlantic Wave Holdings, LLC v. Cyberlux Corporation (Case No. 3:34-cv-00196-RBM-VET) ("AW I'').

In AW I, Plaintiffs sought enforcement of their Virginia judgment through judicial foreclosure, injunctive relief, and appointment of a receiver. (Doc. No. 9-2, 1 2, Ex. A (AW I Complaint).) After removal, Cyberlux filed an Amended Counterclaim against Plaintiffs asserting, inter alia, that Plaintiffs are prohibited from enforcing the Virginia judgment because it was entered pursuant to a settlement agreement with a payment plan with which Cyberlux is complying. (See Doc. No. 9- 1, at 6:23-9:25.) Instead of litigating AW I in this Court, Plaintiffs filed a Motion to Dismiss without prejudice for "the preservation of counts for future inclusion in collection actions." (AW I Doc. No. 12.)

In AW I, on July 1, 2024, the Court ordered the parties to show cause why Defendants' Amended Counterclaims should not be dismissed under the doctrine of forum non convenience for litigation in Virginia pursuant to the parties' settlement agreement. (AW I Doc. No. 31.) On July 10, 2024, the Court stayed AW I to give Defendants an opportunity to file their claims in Virginia. (Id., No. 34.) This Court then dismissed AW I without prejudice. (Id., No. 35.) The parties are, therefore, currently engaged in litigation regarding the judgment and settlement agreement in

Virginia pursuant to the terms of the settlement agreement.1 Cyberlux should not be denied the right to have its claims regarding the judgment and settlement agreement adjudicated in Virginia as suggested by the Court in AW I before Atlantic Wave can attempt to domesticate and pursue the judgment in California.

Well before the dismissal of AW I, on March 5, 2024, Plaintiffs initiated a second attempt to enforce their judgment in California by availing themselves of the procedures pursuant to section 1710.252 of the California Code of Civil Procedure ("Application"). (Doc. No. 1-9.) These procedures are only available if there is not already an action based on the judgment pending in the state. Civ. Proc. Code § 1710.55(b). Despite AW I still pending, Plaintiffs filed a petition falsely asserting, under oath, that "no action based on the sister state judgment is currently pending in any court in this state." (Doc No. 1-5, § 9.)

Plaintiffs claim in their petition that Cyberlux owes $1,149,866.85. In doing so, they omit any reference to the fact that the judgment balance is to be paid pursuant to a payment plan set out in the parties' settlement agreement. Cyberlux, therefore, returned the dispute to this Court with a timely removal based on diversity jurisdiction so that it may contest Plaintiffs' right to domesticate and enforce the judgment, which violates the settlement agreement. (Doc. No. 1.)

The parties subsequently fully briefed Cyberlux's motion to vacate the judgment ("Motion"). In that briefing, Cyberlux disputes Plaintiffs' right to domesticate and enforce the judgment. Cyberlux also argues Plaintiffs failed to comply with the SSMJA. (Doc No. 9-1, at 5:20-11:2.) Moreover, because Cyberlux is afforded the same defenses in responding to the petition as though Plaintiffs had filed a complaint, it also argues that the judgment should be vacated because it is not final and unconditional, and was procured with fraud, including, but not limited to, Plaintiffs' intentional omission of the settlement agreement and its payment terms despite its incorporation in the consent judgment. (Id., at 5:26-9:25.) The Application and Motion, therefore, embody a dispute between the parties valued at over $1 million.

The Court's Order seeks briefing on two jurisdictional doctrines: (1) whether the Constitutional requirement of Article III standing is satisfied with a case and controversy (id. 2-4); and (2) whether diversity jurisdiction exists (id. 4-5). This brief prioritizes the discussion of diversity jurisdiction because the existence of the required "civil action" demonstrates a case and controversy for the purpose of Article III standing.

Cyberlux pled subject matter jurisdiction based on diversity of citizenship. (Doc. No. 1). Cyberlux, therefore, has the burden of showing this is a "civil action 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 . ... " 28 U.S.C. § :unselected: 1332(a).

The Court questions only whether this is a "civil action" and whether the amount "in controversy" is sufficient. As discussed below, the dispute satisfies both requirements.3

"Federal and not state law determines whether the state court action is a 'civil action' within the meaning of the diversity jurisdiction statute ... and also whether it is a 'civil action' within the meaning of the removal statute." Quinn v. Book Named "Sixty Erotic Drawings From Juliette", 316 F. Supp. 289, 292 (D. Mass. 1970) (internal citations omitted); see also Stoll v. Hawkeye Cas. Co. of Des Moines, Iowa, 185 F.2d 96, 99 (8th Cir. 1950) ("The question whether a civil action is removable and has been properly removed is one for the consideration of the federal court and is not controlled by State law.")

The federal removal statute - 28 U.S. Code § 1441 - uses the term "civil action," which was used as a substitute for "suit of a civil nature." See Reviser's Notes relative to Sec. 1441 in Title 28 U.S.C.A; Stoll, 185 F.2d at 98 ("The term 'civil action' was used in Sec. 1441 as a substitute for 'suit of a civil nature.""). "The generally accepted definition of the term 'suit' is that of Chief Justice Marshall in

West v. City of Charleston." Stoll, 185 F.2d at 98. In analyzing whether jurisdiction was present, Chief Justice Marshall observed:

The term is certainly a very comprehensive one and is understood to apply to any proceeding in a court of justice, by which an individual pursues that remedy in a court of justice, which the law affords him. The modes of proceeding may be various, but if a right is litigated between parties in a court of justice, the proceeding by which the decision of the court is sought, is a suit.

Weston v. City Council of Charleston, 27 U.S. 449, 464, 7 L. Ed. 481 (1829) (emphasis added); see, also, Gaines v. Fuentes, 92 U.S. 10, 19-20, 23 L.Ed. 524 (1875); Boom Co. v. Patterson, 98 U.S. 403, 407, 25 L.Ed. 206 (1878); Upshur County v. Rich, 135 U.S. 467, 474, 10 S.Ct. 651, 34 L.Ed. 196; (1890) Federal Housing Administration v. Burr, 309 U.S. 242, 245-247, 60 S.Ct. 488, 84 L.Ed. 724 (1940).

The District of Maryland confronted a virtually identical scenario when it held that an action to enforce a foreign judgment was removable as a "civil action." Weiner v. Blue Cross of Maryland, Inc. 730 F. Supp. 674 (D. Md. 1990). The court's analysis and reasoning are instructive and sound.

In Weiner, the Weiners secured a judgment in Florida state court that they sought to enforce in Maryland state court. 730 F. Supp., at 676. As with the current matter, the Weiners did not seek to add a new debtor and did not file a complaint. Id. Instead, like the current matter, they utilized the simplified procedures afforded by the state's Uniform Enforcement of Foreign Judgments Act ("UEFJA"), permitting them to file the Florida judgment in Maryland state court. Id., at 677. Similar to this case, Defendants removed and the Weiners moved to remand, contending that the proceeding was not a "civil action," but instead an ancillary proceeding to the Florida action. Id., at 676.

The Weiner court observed that, prior to the enactment of the UEFJA, "the procedure to enforce the judgment of one jurisdiction in another required the filing of a new suit in the second jurisdiction to enforce the judgment of the first." Weiner, 730 F. Supp. at 676. "The suit on the judgment was an independent action . .. and thus removable under 28 U.S.C. § 1441." Id. (internal citations omitted). The court held that the streamlined procedures afforded by Maryland's adoption of the UEFJA does not alter the removability of the dispute because it does not alter the parties' rights and defenses as follows:

While the Uniform Enforcement Act eliminates the need for filing of a complaint and following other procedures, it does not purport to alter any substantive rights or defenses that otherwise would be available either to the judgment creditor or the judgment debtor if suit were filed to enforce that foreign judgment. Since the judgment debtor would be entitled to remove to federal court an independent action to enforce a judgment that satisfied the provisions of 28 U.S.C. § 1441, the adoption by a state of an act merely to streamline the procedure should not alter the right of removal which was created by Congress. To conclude otherwise allows for the impermissible possibility that state procedural enactments alter federal policy on a state-by-state basis. See, e.g., Grubbs v. General Electric Credit Corp., 405 U.S. 699, 705, 92 S.Ct. 1344, 1348, 31 L.Ed.2d 612 (1972) (removal statute should have "uniform nationwide application"). See also Colonial Bank & Trust Co. v. Cahill, 424 F.Supp. 1200, 1203 (N.D.Ill.1976) (creation of new remedy in lieu of judicial proceeding does not preclude removal jurisdiction).

Moreover, to conclude that the removability of an enforcement action is dependent upon whether a complaint or a copy of the judgment is filed celebrates form over substance and confers the option of removability on the plaintiff when Congress intended that option to be exercised by the defendant. See 28 U.S.C. § 1441.

Weiner, 730 F. Supp. at 677-78 (emphasis added). The court "conclude[d] that when the holder of a judgment seeks its enforcement in another state, the initiation of that proceeding, by whatever form established by the state, is a civil action as used in 28 U.S.C. § 1441." Id. at 678.

/// /// /// ///

In the present case, California's characterization of procedures pursuant to the SSMJA as ancillary is not relevant.4 Indeed, "the adoption by a state of an act merely to streamline the procedure should not alter the right of removal which was created by Congress." Weiner, 730 F. Supp., at 677.

As with the UEFJA in Weiner, California's SSMJA does not alter the rights and defenses of the parties. E.g., Washoe Develop. Co. v. Guaranty Fed. Bank (1996) 47 Cal.App.4th 1518, 1521-1522. "A judgment entered pursuant to [the SSMJA] may be vacated on any ground which would be a defense to an action in this state on the sister state judgment . ... " Civ. Proc. Code § 1710.40(a). Ultimately, it is federal, not state, law that dictates whether a dispute is a "civil action." Quinn, 316 F. Supp. at 292.

After AW I was properly removed to this Court, Plaintiffs blatantly utilized the SSMJA to forum shop their way back into state court. Their petition presents the same civil action as before in a streamlined package. This state procedure does not alter the reality that this is a "civil action" pursuant to 28 U.S.C. § 1332(a). To hold otherwise would permit California plaintiffs to choose whether to present identical disputes as removable civil actions or non-removable ancillary proceedings.

The Court questions whether the amount stated in the judgment is in controversy because it was already awarded, and Plaintiffs assert no actionable claims for damages. (Order 5:8-11.) The amount stated in the judgment is in controversy as

is Plaintiffs' claimed right to enforce the judgment.

Plaintiffs' judgment is worthless in California. "[I]t can only be enforced in this state by an action or special proceeding." Civ. Proc. Code § 1913(a). Plaintiffs initially pursued an "action" in AW I, and there was no question that there was a sufficient amount in controversy. Plaintiffs' repackaged dispute in the form of an application does not diminish the amount in controversy.

Plaintiffs' SSMJA filing does not automatically entitle them to enforce their judgment in California as though it was already awarded. For example, no sister-state judgment may be entered if there is already a pending action based on the sister-state judgment in California. Civ. Proc. Code § 1710.55(b). Cyberlux has claimed there was already a pending action. [Doc. No. 9-1, at 6:5-19.] Moreover, as mentioned, the judgment may be vacated on any ground which would be a defense to an action in this state on the sister state judgment. Id., § 1710.40. This includes when the judgment is not final and unconditional or when it was obtained by extrinsic fraud. See comment to Cal. Civ. Proc. Code § 1710.40; Casey v. Hill (2022) 79 Cal.App.5th 937, 976. Cyberlux has raised, and articulated, both of these grounds in its prior briefing to the Court. (Doc. No. 9-1, at 6:23-10:18.)

In its Motion, Cyberlux has disputed Plaintiffs' right to domesticate the judgment and has raised grounds to vacate the judgment. (Doc. No. 9-1.) If Cyberlux prevails, the judgment will remain worthless in California. If it does not, Plaintiffs may be entitled to take over $1 million of Cyberlux's California property. This is a controversy, and the amount satisfies the diversity jurisdictional requirement.

In questioning Article III standing, the Court observes that this removal is "unique" because Plaintiffs did not file a complaint and instead sought to domesticate their judgment pursuant to the SSMJA. (Order, at 3:14-15.) Based on review of the Notice of Removal and Application, the Court doubts whether Plaintiffs have asserted "injuries caused by Defendants' alleged conduct and redressable by a federal court . .

.. " (Id., at 3:19-21.)

Again, Plaintiffs have merely repackaged their AW I action, which was commenced with a complaint, as a petition. This change in procedure has no impact on Constitutional Article III standing. Indeed, in Weiner, there was no question of standing despite the absence of a complaint and utilization of similar streamlined procedure.

Plaintiffs' petition seeks redress for alleged economic injuries, which support the Article III injury in fact requirement. E.g. Village of Arlington Heights v. Metropolitan Housing develop. Corp. (1977) 429 U.S. 252. Indeed, as with many breach of contract cases, Plaintiffs claim Cyberlux is required to pay them to satisfy an obligation. (Doc. No. 1-9.) Stated another way, Plaintiffs claim Cyberlux has injured them by refusing to satisfy its financial obligation.

The relief Plaintiffs seek will redress the alleged injury, as required by Article III. Lujan v. Defenders of Wildlife (1992) 504 US 55, 559-560. Indeed, Plaintiffs seek the right to levy and take Cyberlux's California property to satisfy their sister-state judgment. They can only do that if a court domesticates the judgment. Civ. Proc. Code § 1913(a). Because diversity jurisdiction exists, this Court has the authority to rule on Cyberlux's pending Motion and grant or deny Plaintiffs the right to enforce their sister-state judgment in California.

This dispute was presented as a complaint in AW I and there was no question that Plaintiffs had standing. Whether presented as a petition or complaint, this dispute satisfies the case and controversy requirement of Article III.

III III /// /// /// ///

When the Court looks to federal law as opposed to state procedures and state law, and examines the dispute that was previously presented in the form of a complaint and answer in AW I as well as the full briefing in this case, it is clear that Article III standing exists and diversity jurisdiction is appropriate. Cyberlux asks the Court to proceed with considering its pending Motion to Vacate.

DATED: March 4, 2025

HAHN LOESER & PARKS LLP

By: /s/ Gabe P. Wright Gabe P. Wright Attorneys for Defendant CYBERLUX CORPORATION

PROOF OF SERVICE [FRCP 5(B)]

STATE OF CALIFORNIA, COUNTY OF SAN DIEGO

I am employed in the County of San Diego, State of California. I am over the age of 18 years and am not a party to the within action; my business address is 600 W. Broadway, Suite 1500, San Diego, CA 92101. My electronic service address is vvalle@hahnlaw.com.

On March 4, 2025, I served the following document(s) described as:

on the interested parties in this action as follows:

:selected: BY ELECTRONIC MAIL: A copy of the foregoing document was electronically filed using the CM/ECF system which will send a notice of electronic filing to all CM/ECF participants listed below:

David M. Keithly, SBN 292101 Sara Ross, SBN 346153 Mortenson Taggart Adams LLP 300 Spectrum Center Drive, Ste. 1200 Irvine, CA 92618 Email: dkeithly@mortensontaggart.com sross@mortensontaggart.com

Attorneys for Plaintiffs Atlantic Wave Holdings, LLC Secure Community, LLC

:selected: BY ELECTRONIC MAIL: I caused the documents to be transmitted by electronic mail to the party(s) identified on the below service list using the e-mail address(es) shown. I did not receive, within a reasonable time after transmission, any electronic message or other indication that the transmission(s) were unsuccessful.

James K. Sadigh, SBN 140199 9777 Wilshire Blvd., Suite 400 Beverly Hills, CA 90212 Email: jamessadigh@aol.com Attorneys for Plaintiffs Atlantic Wave Holdings, LLC Secure Community, LLC

I declare that I am employed in the office of a member of the bar of the court at whose direction the service was made.

Executed on March 4, 2025, at San Diego, California.

Vincent J. Valle Hoffe/4