ISA Plus, LLC v. Prehired, LLC

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 ISA PLUS, LLC, Case No.: 3:22-cv-01211-JAH-JLB

12 Plaintiff, ORDER: 13 (1) DENYING DEFENDANT’S MOTION TO VACATE DEFAULT 14 JUDGMENT; 15 v. (2) DENYING DEFENDANT’S 16 MOTION TO DISMISS; AND, 17 PREHIRED, LLC; JOSHUA K. JORDAN, (3) DENYING DEFENDANT’S 18 Defendants. REQUEST FOR SANCTIONS. 19 [ECF No. 95] 20 21 INTRODUCTION 22 Pending before the Court is Defendant Joshua K. Jordan’s (hereinafter, “Jordan”) 23 Motion to Dismiss for Lack of Subject-Matter Jurisdiction and Motion to Vacate Default 24 Judgment, as well as a request for sanctions. ECF No. 95 (“Motion” or “Mot.”). Plaintiff 25 ISA Plus, LLC (“Plaintiff”) filed a Response in Opposition. ECF No. 97 (“Opposition” or 26 “Opp’n”). Jordan subsequently filed a Reply. ECF No. 98 (“Reply”). The Court issued 27 an order vacating the hearing on Jordan’s motions pursuant to Civil Local Rule 7.1.d.1. 28 ECF No. 99. On June 12, 2025, the Court issued an order requesting supplemental briefing 1 to determine whether the services contract attached to Jordan’s motions is governed by 2 California contract law. ECF No. 100. Jordan responded by filing supplemental briefing, 3 (ECF No. 101), as did Plaintiff, (ECF No. 102).1 Upon careful review of the parties’ 4 briefing and the relevant law, the Court hereby DENIES Jordan’s Motion to Vacate 5 Default Judgment, DENIES Jordan’s Motion to Dismiss, and DENIES Jordan’s request 6 for sanctions. 7 BACKGROUND 8 On January 2, 2020, more than two years before this case was removed to federal 9 court, Jordan (as CEO of Prehired, LLC) signed a services contract with Santhosh 10 Sukumar. ECF No. 95-3 (“Jordan Decl.”) ¶ 3. This agreement dictated Sukumar would 11 provide marketing services to Prehired, LLC (hereinafter, “Prehired”), in exchange for two 12 forms of compensation: (1) a monthly revenue share of 5%, and (2) a Simple Agreement 13 for Future Equity (“SAFE”), which would allow Sukumar to earn future equity in Prehired 14 upon the event of a future sale. ECF No. 95-1 (“SAFE”) at 1.2 15 16

17 1 The Court ordered supplemental briefing to provide the Court with “information it 18 needs . . . to determine the applicable law governing the SAFE contract.” ECF No. 100 at 19 3. Jordan filed a nine-page response on matters substantially broader than the scope of the Court’s order. See ECF No. 101. Plaintiff objects to the substantive briefings on the merits 20 of this case contained in Jordan’s supplemental briefing, which are not responsive to which 21 state’s law governs the SAFE and reach well-beyond the scope of the Court’s order for supplemental briefing, including: 22 (i) Section III, including all subparts thereto, of Defendant Joshua Jordan’s 23 Supplemental Brief in Response to Court Order; (ii) Paragraphs 4, 5, 6, 7, and 8 of Santosh Sukumar’s Supplemental Declaration; and 24 (iii) Joshua Jordan’s Supplemental Declaration in its entirety. 25 ECF No. 102 at 2. This Court agrees with Plaintiff. The Court also finds Section IV, and the first two sentences of Section V, of Jordan’s supplemental briefing are beyond the scope 26 of the Court’s order. As such, Sections III and IV, and the first two sentences of Section 27 V, are STRICKEN and will not be considered in deciding the merits of Jordan’s motion. 2 Unless otherwise stated, page numbers referenced herein refer to page numbers 28 1 On July 1, 2022, Plaintiff filed this case in San Diego County Superior Court against 2 Jordan and Prehired (collectively, “Defendants”), alleging claims of intentional 3 misrepresentation, negligent misrepresentation, concealment, breach of contract, and 4 breach of the implied covenant of good faith and fair dealing. ECF No. 1-2 (“Complaint”). 5 However, Defendants removed the case to this Court on August 8, 2022, based on diversity 6 jurisdiction. ECF No. 1 (“Removal”). In the Notice of Removal, Defendants represented 7 to the Court and opposing counsel: “Prehired, LLC is a single member LLC whose sole 8 member, Joshua Jordan is a resident of the State of South Carolina.” Removal at 3. This 9 representation was made on August 18, 2022. Based on Defendants’ representation in the 10 Notice of Removal, there was no objection to subject-matter jurisdiction by Plaintiff or the 11 Court. Indeed, Prehired’s “initial operating agreement, drafted by counsel, designated 12 [Jordan] as the ‘sole member’ and ‘sole owner’” of Prehired. ECF No. 95-3 (“Jordan 13 Decl.”) ¶ 16. 14 On March 22, 2023, the Court granted a motion to withdraw submitted by 15 Defendants’ counsel. Neither Jordan nor Prehired found new representation, and Jordan 16 continued his defense of the case pro se. Prehired, on the other hand, could not proceed 17 without representation as a corporate entity. See Rowland v. California Men’s Colony, 18 United II Men’s Advisory Council, 506 U.S. 194, 201-02 (1993). Therefore, after Prehired 19 failed to secure counsel, Plaintiff requested an entry of default against Prehired on June 6, 20 2023, and the Court directed the Clerk of Court to enter default on June 22, 2023. ECF 21 No. 32. Subsequently, a Default Judgment was entered in favor of Plaintiff against 22 Prehired in the amount of $2,643,068.09. ECF Nos. 90, 91. 23 Presently, nearly three years after this case was removed to federal court, and after 24 summary judgment and default judgment against Prehired, Jordan moves to dismiss this 25 case for lack of subject matter jurisdiction claiming Sukumar, Prehired’s “1099 contractor” 26 hired to provide marketing services, is an additional member of Prehired and destroys 27 complete diversity. See generally Mot. According to Sukumar, Sukumar is “and was a 28 citizen and resident of the state of California before the filing of the Complaint on July 1, 1 2022.” ECF No. 95-2 (“Sukumar Decl.”) ¶ 4. Plaintiff is also a citizen of California. 2 Opp’n at 2. In addition to moving for dismissal, Jordan moves the Court to vacate the 3 default judgment against Prehired and impose sanctions against Plaintiff for failing to 4 disclose the alleged jurisdictional defect. 5 DISCUSSION 6 I. Motion to Vacate Default Judgment 7 As a threshold issue, Plaintiff claims Jordan does not have standing to move this 8 Court to set aside the Default Judgment against Prehired. Opp’n at 8-9. Jordan is 9 proceeding pro se and is representing himself in this matter. Mot. at 1. However, Jordan 10 claims Prehired “assigned all its rights, titles, and interests in any and all claims related to 11 [Plaintiff] . . . to Jordan personally,” thereby granting Jordan “standing to pursue claims 12 not only in his individual capacity but also as the assignee of Prehired’s claims.” Id. at 3. 13 “It has been law for the better part of two centuries . . . that a corporation may appear 14 in the federal courts only through licensed counsel.” Rowland, 506 U.S. at 201-02. 15 Jordan’s attempt to perform the role of an attorney and circumvent this requirement is 16 neither original nor persuasive. Other district courts within the Ninth Circuit have rejected 17 this form of legal gamesmanship. See In re Kermit Douglas Brooms, 2010 WL 785930, at 18 *1 (N.D. Cal. Mar. 5, 2010) (“litigants may not circumvent” the rules requiring entities to 19 be represented by counsel “through a purported assignment of claims”); Kraft v. Chevron 20 Corp., 2021 WL 5882626, at *2 (D. Ariz. Dec. 10, 2021) (“[p]laintiff is not the first pro se 21 plaintiff to have tried” to represent an entity after an assignment of claims). Indeed, other 22 circuits have taken the same approach. See, e.g., Pridgen v. Anderson, 113 F.3d 391, 393 23 (2d Cir. 1997) (a pro se litigant “may not assert pro se a claim that has been assigned to the 24 litigant by a corporation”); Palazzo v. Gulf Oil Corp., 764 F.2d 1381, 1385 (11th Cir. 1985) 25 (“[w]e see no reason to permit any evasion of the general rule [requiring entities to have 26 licensed counsel] by the simple expedient of the assignment of corporate claims to the pro 27 se plaintiff”). 28 1 The Court finds Jordan lacks standing to move this Court to vacate the default 2 judgment entered against Prehired. See Flir Systems, Inc. v. Motionless Keyboard Co., 3 2011 WL 2011482, at *1 (D. Or. May 23, 2011) (noting a pro se co-defendant cannot make 4 any move to dismiss for lack of jurisdiction on a corporate co-defendant’s behalf). 5 Accordingly, Jordan’s Motion to Vacate Default Judgment is DENIED. The Court next 6 turns to Jordan’s Motion to Dismiss. 7 II. Motion to Dismiss for Lack of Subject Matter Jurisdiction 8 A. Legal Standard 9 Under Federal Rule of Civil Procedure 12(b)(1), a defendant may seek to dismiss a 10 complaint for lack of subject-matter jurisdiction. See Gould v. Mut. Life Ins. Co. v. New 11 York, 790 F.2d 769, 774 (9th Cir. 1986). “Subject-matter jurisdiction cannot be forfeited 12 or waived and should be considered when fairly in doubt.” Ashcroft v. Iqbal, 556 U.S. 662, 13 671 (2009). “If the court determines at any time that it lacks subject-matter jurisdiction, 14 the court must dismiss the action.” Fed. R. Civ. P. 12(h)(3) (emphasis added). As such, 15 the Court cannot reach the merits of any dispute until it confirms its own subject-matter 16 jurisdiction. See Steel Co. v. Citizens for a Better Environ., 523 U.S. 83, 95 (1998). The 17 challenger may either: (1) attack subject matter jurisdiction based on the insufficiency of 18 the allegations contained in the complaint, or (2) present extrinsic evidence demonstrating 19 the court lacks subject-matter jurisdiction. Safe Air for Everyone v. Meyer, 373 F.3d 1035, 20 1039 (9th Cir. 2004). “Once the moving party has converted the motion to dismiss into a 21 factual motion by presenting affidavits or other evidence properly brought before the court, 22 the party opposing the motion must furnish affidavits or other evidence necessary to satisfy 23 its burden of establishing subject matter jurisdiction.” Mecinas v. Hobbs, 30 F.4th 890, 24 896 (9th Cir. 2022) (internal quotations and citations omitted). 25 B. Discussion 26 The original Defendants, including Jordan, removed this case to Federal court under 27 diversity jurisdiction. See Removal at 1. Jordan now asks the Court to dismiss the entire 28 action for lack of subject-matter jurisdiction, arguing there is not complete diversity among 1 the parties. Mot. at 2. In support, Jordan submits an affidavit from Sukumar in which 2 Sukumar declares he “had accrued 1.25% equity in the SAFE with Prehired” as of January 3 2, 2021. Sukumar Decl. ¶ 7. Furthermore, Sukumar declares he is a citizen of California. 4 Id. ¶ 4. Thus, Jordan contends Prehired is a citizen of California, which would destroy 5 complete diversity because Plaintiff is also a citizen of California. Mot. at 2. 6 District courts have subject-matter jurisdiction over “all civil actions where the 7 matter in controversy exceeds the sum or value of $75,000, exclusive of interests and costs, 8 and is between … citizens of different States.” 28 U.S.C. § 1332(a). Complete diversity 9 of citizenship is required to satisfy diversity jurisdiction. Lincoln Property Co. v. Roche, 10 546 U.S. 81, 89 (2005). Meaning, no plaintiff may be a citizen of the same state as any 11 defendant. Id. Complete diversity must exist both when the case is filed and removed to 12 federal court. Strotek Corp. v. Air Trasnp. Ass’n of Am., 300 F.3d 1129, 1132 (9th Cir. 13 2002). 14 To determine an individual’s state of citizenship, district courts must look to the 15 individual’s domicile, not simply the individual’s residence. King v. Great Am. Chicken 16 Corp., 903 F.3d 875, 879 (9th Cir. 2018). An individual’s domicile is their “permanent 17 home, where she resides with the intention to remain or to which she intends to return.” 18 Kanter v. Warner-Lambert Co., 265 F.3d 853, 857-58 (9th Cir. 2001). When a party to the 19 litigation is a limited liability company (“LLC”), the court must consider the citizenship of 20 all the LLC’s members, regardless of how great the difference in equity or control. See 21 Carden v. Arkoma Associates, 494 U.S. 185, 195-96 (1990); see also Johnson v. Columbia 22 Properties Anchorage, LP, 437 F.3d 894, 902 (9th Cir. 2006) (holding “LLCs have the 23 citizenship of all of their owners/members”). 24 1. Whether the Services Contract Between Prehired and Sukumar Made 25 Sukumar a Member of Prehired 26 The Court is unpersuaded by Jordan’s argument that he and Sukumar intended for 27 the SAFE agreement to make Sukumar a member of Prehired. ECF No. 101 at 9. First, 28 this argument contradicts Jordan’s own Notice of Removal, which states Jordan is the sole 1 member of Prehired. Removal at 3. Second, it contradicts the plain text of the services 2 contract between Prehired and Sukumar, which describes Sukumar as a “service provider” 3 and “1099 contractor.” SAFE at 1. Third, it contradicts Prehired’s “initial operating 4 agreement, which designated [Jordan] as the ‘sole member’ and ‘sole owner’” of Prehired. 5 Jordan Decl. ¶ 16. It is clear to the Court that it is in Jordan and Sukumar’s best interests 6 to claim they intended Sukumar to be a member of Prehired because—if the Court does 7 not have subject matter jurisdiction over this case—the $2,643,068 judgment against 8 Prehired may be void. However, the Court need not take Jordan and Sukumar’s 9 undisclosed intentions at face value. 10 It is a “settled principle” in California that “undisclosed intentions of the parties are 11 . . . immaterial,” and “outward manifestation[s]” are “controlling.” Quader-King A.G. v. 12 Nebenzal, 35 Cal.2d 287, 302 (1950). The “undisclosed intentions” of Jordan and Sukumar 13 to make Sukumar a member of Prehired through the declarations submitted, as first alleged 14 at this late stage of the litigation, are neither controlling nor convincing. Rather, the Court 15 finds the outward manifestations of the parties (through Jordan’s Notice of Removal, the 16 plain language of the contract, and Prehired’s operating agreement) clearly demonstrate it 17 was not the mutual intent of the parties to make Sukumar a “member” of Prehired when 18 the services contract was executed. 19 2. Whether Sukumar Had an Equity Interest in Prehired at the Time of 20 Filing and Removal 21 In support of his contention that Sukumar owned equity in Prehired at the time of 22 removal, Jordan submits the services contract between Prehired and Sukumar, which 23 contains a Simple Agreement for Future Equity (“SAFE”) provision. SAFE at 1. Jordan 24 argues—under the SAFE—Sukumar held equity in Prehired at the time of removal, making 25 him a member of Prehired for purposes of determining citizenship. Mot. at 8. Plaintiff, on 26 the other hand, argues the SAFE provides Sukumar with a “future interest in a percentage 27 of the sale proceeds,” which never vested. Opp’n at 6. Plaintiff further explains that an 28 1 unvested interest in future equity does not make Sukumar a “member” of Prehired for 2 diversity purposes. Id. 3 Both Parties agree the SAFE is governed by California law. See generally ECF Nos. 4 101, 102. “The fundamental rules of contract interpretation are based on the premise that 5 the interpretation of a contract must give effect to the mutual intention of the parties.” 6 Freeman v. Allstate Life Ins. Co., 253 F.3d 533, 536 (9th Cir. 2001). “The proper 7 interpretation of a contract is disputable if the contract is susceptible of more than one 8 reasonable interpretation, that is, if the contract is ambiguous.” Fremont Indemnity Co. v. 9 Fremont General Corp., 148 Cal.App.4th 97, 114 (2007). “[W]hether a contract is 10 ambiguous is a question of law.” Jones-Hamilton Co. v. Beazer Materials & Services, Inc., 11 973 F.2d 688, 692 (9th Cir. 1992). The ambiguity may be facial, or it may be latently 12 revealed by extrinsic evidence. Fremont, 148 Cal.App.4th at 114. The interpreting court 13 “must first consider extrinsic evidence offered to prove the parties’ mutual intention.” Id. 14 The “mere fact that a word or phrase in a [contract] may have multiple meanings does not 15 create an ambiguity.” Palmer v. Truck Ins. Exchange, 21 Cal.4th 1109, 1117 (1999). 16 “Ambiguity cannot be based on a strained instead of reasonable interpretation” of the 17 language of the contract. McKee v. State Farm Fire & Cas. Co., 145 Cal.App.3d 772, 775- 18 76 (1983). 19 If the language is ambiguous, the court must interpret it “in the sense in which the 20 promisor believed, at the time of making it, that the promisee understood it.” Bank of the 21 W. v. Super. Ct., 2 Cal.4th 1254, 1264-65 (1992). Generally, “words of a contract are to 22 be understood in their ordinary and popular sense.” Cal. Civ. Code § 1644; see Hal Roach 23 Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1549 (9th Cir. 1989) 24 (“[c]ontract terms are to be given their ordinary meaning, and when the terms of a contract 25 are clear, the intent of the parties must be ascertained from the contract itself”). 26 Additionally, words used in a “technical sense” should be interpreted “as usually 27 understood by persons in the profession or business to which they relate, unless clearly 28 used in a different sense.” Id. §§ 1644-45. 1 There is no question, if Sukumar had equity in Prehired at the time of removal, 2 Sukumar would be considered a member of Prehired for purposes of determining 3 Prehired’s citizenship. See Johnson, 437 F.3d at 902 (“LLCs have the citizenship of all of 4 their owners/members”). Therefore, the heart of the dispute before the Court is whether 5 the SAFE gave Sukumar equity in Prehired before July 1, 2022, when this case was 6 originally filed. 7 The Court first looks to the terms of the contract itself. See Hal Roach Studios, Inc., 8 896 F.2d at 1549. The SAFE reads: 9 In the event of a sale or acquisition (as defined as more than fifty percent (50%) of the company being purchased) of Prehired, LLC, the Service 10 Provider [Sukumar] will receive a percentage of proceeds in the sale. 11 Starting from the signed Date below, for every year the Service Provider 12 continues to provide satisfactory service to the Company, the Service 13 Provider will earn 1.25% Equity in the SAFE, up to a total of five percent (5%) over a period of 4 years. In the event of a sale before the next 4 14 years, the Service Provider will receive five percent (5%) percent [sic] 15 of proceeds in the sale. 16 SAFE at 1 (emphasis added). The terms of the contract, applying the ordinary meaning of 17 the words therein, impose two conditions that must be met before Sukumar can receive 18 equity in Prehired: (1) satisfactory service, and (2) the sale or purchase of more than 50% 19 of the value of Prehired. Until those two conditions are met, Sukumar does not posses any 20 equity in Prehired that can be sold or traded under the plain language of the SAFE. This 21 reading is consistent with how Simple Agreements for Future Equity are understood in the 22 world of business and investing. In 2017, the United States Securities and Exchange 23 Commission published an online article for investors considering SAFEs, which warns: 24 The most important thing to realize about SAFEs is that you are not 25 getting an equity stake in return. SAFEs are not common stock. Common stock represents an ownership stake in a company and entitles 26 you to certain rights under state corporate law and federal securities law. 27 A SAFE, on the other hand, is an agreement to provide you a future equity stake based on the amount you invest if—and only if—a 28 1 in the company in which you are investing. Instead, the terms of the SAFE have to be met in order for you to receive your equity stake. 2 3 Investor Bulletin: Be Cautious of SAFEs in Crowdfunding, U.S. Securities and Exchange 4 Commission (May 9, 2017), https://www.investor.gov/introduction-investing/general- 5 resources/news-alert/alerts-bulletins/investor-bulletins-52 (last visited Aug. 13, 2025). 6 Thus, it is commonly understood SAFE agreements provide the ability to obtain 7 equity only upon the condition of some future event. See LifeVoxel Virginia SPV, LLC v. 8 LifeVoxel.AI, Inc., 622 F.Supp.3d 935, 941 n.1 (S.D. Cal. 2022) (“SAFE Notes . . . will 9 convert into equity upon the occurrence of a future ‘conversion’ event specified in the 10 SAFE Note”); see also CU*Answers, Inc. v. G2Link, LLC, 2019 WL 8163864, at *2 (E.D. 11 Pa. Dec. 5, 2019) (“SAFEs provide purchasers the ability to acquire an equity interest at 12 some point in the future”). Furthermore, “SAFE investors are entitled to future equity in 13 the company only if certain triggering events occur, such as . . . an M&A [mergers and 14 acquisitions] transaction.” Simple Agreements for Future Equity (SAFEs), BDO USA, 15 https://www.bdo.com/insights/industries/asset-management/simple-agreements-for-future 16 -equity-safes (last visited Aug. 13, 2025). 17 Here, the “triggering event” required for Sukumar to realize any equity in Prehired 18 is a sale or acquisition in which more than fifty percent of Prehired is “purchased.” SAFE 19 at 1 (emphasis added). Furthermore, the SAFE explicitly states Sukumar will receive up 20 to five percent of Prehired “[i]n the event of a sale.” Id. (emphasis added). If no such 21 triggering event occurred before this case was removed, Sukumar did not possess equity in 22 Prehired. Jordan does not allege any such triggering event occurred in either his Motion 23 or his Reply. Therefore, Sukumar did not possess equity in Prehired at the time the case 24 was filed and removed. As a result, Sukumar was not a member of the LLC, and Sukumar’s 25 citizenship need not be considered for purposes of determining diversity jurisdiction. 26 Accordingly, Jordan’s Motion to Dismiss is DENIED. 27 /// 28 /// 1 III. Request for Sanctions 2 Jordan requests the Court impose “severe sanctions” against Plaintiff for 3 “perpetrating fraud upon the court.” Mot. at 16. Specifically, Jordan requests $463,500 in 4 legal fees and costs as compensation for the three years he spent litigating this case in 5 federal court. Id. at 24. Jordan also asks the Court to refer Plaintiff’s counsel to 6 “appropriate disciplinary authorities.” Id. at 25. Jordan claims these extreme measures are 7 warranted because Plaintiff obtained a copy of the services contract between Prehired and 8 Sukumar on March 31, 2023, as part of discovery. Id. at 9. Jordan argues Plaintiff should 9 have recognized the contract defeated diversity jurisdiction, but instead, Plaintiff moved 10 for default judgment in violation of “counsel’s affirmative duty of candor toward the 11 tribunal.” Id. at 10. 12 It is clear in light of the Court’s denials of Jordan’s motions that Jordan’s request for 13 sanctions be likewise DENIED. However, Jordan’s request is concerning to the Court for 14 purposes of maintaining civility amongst the parties and litigants moving forward in this 15 lawsuit. See CivLR 2.1. It appears the irony of the request for sanctions is lost on Jordan. 16 In fact, it was Jordan who removed this case to federal court in the first place; it was Jordan 17 who claimed to be the sole owner of Prehired in his Notice of Removal; and, it was Jordan 18 who possessed the services contract with Sukumar all along. Yet, Jordan then chose to 19 request extreme sanctions against Plaintiff and opposing counsel for not catching his own 20 alleged mistake or intentional error. The Court reminds Jordan it is his duty as a litigant, 21 pro se or not, to be familiar with the Local Rules, which instruct litigants to “seek sanctions 22 sparingly, and not to obtain a tactical advantage or for any other purpose.” CivLR 2.1.a.3.j. 23 The Court does not look favorably upon unprofessional and unsubstantiated or frivolous 24 requests for sanctions. 25 /// 26 /// 27 /// 28 /// l CONCLUSION 2 Accordingly, IT IS HEREBY ORDERED: 3 1. Jordan’s Motion to Vacate Default Judgment is DENIED; 4 2. Jordan’s Motion to Dismiss is DENIED; 5 3. Jordan’s Request for Sanctions is DENIED. 6 IT IS SO ORDERED. 7 || DATED: September 18, 2025

10 JOHN A. HOUSTON UNITED STATES DISTRICT JUDGE 1] 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28