Cyberlux Corp (CYBL)

[Bobsmith2]

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Richmond Division
HII MISSION TECHNOLOGIES CORP.
Interpleader Plaintiff,
v.
CYBERLUX CORPORATION, et. al.
Defendants.
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Case No.: 3:25-cv-00483
MEMORANDUM IN SUPPORT OF CYBERLUX CORPORATION'S
MOTION FOR SUMMARY JUDGMENT REGARDING THE DISPUTED FUNDS
I. INTRODUCTION
Defendant Cyberlux Corporation (Cyberlux) respectfully submits this memorandum in
support of its motion for summary judgment regarding the Disputed Funds. Cyberlux recognizes
that it occupies an unusual posture in this proceeding, a debtor moving for summary judgment in
an interpleader action. But Cyberlux's position is not unusual when viewed in the proper light.
Cyberlux is not merely a passive debtor awaiting distribution. It is the party that invested more
than $4 million of its own capital to perform a government defense contract, the party whose
accounts receivable constitute the very res before this Court, and a party with a direct and
cognizable entitlement to the Disputed Funds.
Had HII Mission Technologies Corp. (HII) simply paid Cyberlux in the ordinary course
upon completion of its contractual obligations, as the Subcontract and Modification No. 4
contemplated, Cyberlux would have managed its creditor obligations itself, paid its secured
creditors, satisfied its debts, and continued operating its defense technology business without the
intervention of this Court. Instead, HII elected to interplead approximately $23,736,937.56 into
this Court, stripping Cyberlux of its ability to manage its financial obligations and exposing it to
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the compounding harm of accumulating interest, fees, and penalties that grow with each passing
month.
Cyberlux files this brief to bring before the Court three central propositions. First, the Court
should exercise its equitable authority to limit the interest that secured creditors may claim against
the Disputed Funds to the amounts accrued as of the filing and service of the interpleader action
on or about June 24, 2025. The interpleader froze Cyberlux's ability to pay its debts; the creditors
should not be permitted to profit from that freeze through the relentless accumulation of interest
against a finite res that Cyberlux can no longer access. Second, because the Disputed Funds
originated exclusively from a United States Government defense contract for the manufacture and
deployment of unmanned aerial systems, only those creditors whose claims bear a direct nexus to
that contract performance should be entitled to participate in the distribution. Claims arising
outside the scope of that government contract work should not deplete a res generated by, and
intended for, defense manufacturing purposes. Third, Cyberlux is entitled to recover from the
Disputed Funds its initial capital investment of at least $4 million, funds Cyberlux expended in
direct performance of the HII Subcontract, and should not be punished because HII chose to
interplead rather than pay in the ordinary course.
II. STATEMENT OF UNDISPUTED MATERIAL FACTS
1. HII and Cyberlux entered into Subcontract No. P000043846 in August 2023, subsequently
modified by Modification No. 4, effective February 26, 2025 (Mod. 4). Under the Subcontract,
Cyberlux was to design, manufacture, and deliver unmanned aerial systems (drones) and related
defense technologies to support United States Department of Defense operations.
2. HII received a total of $25,769,369.03 from the United States Government in connection
with the terminated Subcontract.
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3. HII interpleaded $23,736,937.56 into this Court pursuant to 28 U.S.C. § 1335. The
interpleader action was filed on or about June 24, 2025.1
4. Cyberlux invested more than $4 million of its own capital in direct performance of its
obligations under the HII Subcontract, with the expectation that it would be paid in the ordinary
course upon completion of its obligations.
5. The following parties have asserted claims against the Disputed Funds, with total secured
claims of approximately $24,280,797.01, which exceeds the available fund:
• Legalist SPV III, LP: $13,650,513.94 total ($10,996,543.10 principal; $2,653,970.84
interest), with a priority date of April 1, 2024, and approximately $1,999,676.16 in fees
and interest accrued since the interpleader was filed.
• WeShield / Roman Investments / MAS USA / Sinensky (collectively, the Assure
Global Claimants): $5,007,138.41 total ($3,739,461.10 principal; $1,267,677.31 interest),
with a priority date of October 23, 2025, representing a 43% increase over the original
Cyberlux settlement amount.
• ANPC: $3,087,878.86 total ($2,830,050.00 principal; $257,828.86 interest), with a priority
date of December 30, 2024 (equitable) or September 24, 2025 (lien).
• TAG (Thin Air Gear): $1,385,489.46 total ($450,000 principal; $935,489.46 interest),
with a priority date of August 29, 2025, based on treble damages agreed to by the Texas
Receiver.
• United States (IRS): $1,149,776.34, with priority dates spanning 2011-2024.
6. Atlantic Wave Holdings, LLC and Secure Community, LLC assert claims of approximately
1 The First Amended Interpleader Complaint was filed and served on or about August 4, 2025.
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$6,025,000 but have already received or positioned themselves to receive substantial recoveries
through a Fairfax County garnishment order ($1,444,543.11) and a Texas receivership
($3,083,639.75).
7. Fairwinds Technologies asserts a claim of $2,348,542 but holds no secured interest in the
Disputed Funds.
8. Cyberlux is a U.S.-based defense technology company that designs, manufactures, and
deploys mission-critical technologies, including unmanned aerial systems, tactical
communications platforms, and advanced defense solutions for the Department of Defense and
allied partners. Cyberlux has an order backlog of approximately $17 million and a pending U.S.
CECOM order for $8.8 million that it cannot fulfill due to the capital restrictions caused by the
interpleader.
9. Since the interpleader was filed, Cyberlux has been unable to secure capital through
traditional financing, has been forced into predatory payday-loan financing at interest rates
approaching 100%, has lost critical government orders, and its share price has declined by
approximately 52%.
III. LEGAL STANDARD
Summary judgment is appropriate when there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). In the second stage
of an interpleader action, the Court adjudicates the competing claims to the interpleaded fund. At
this stage, any party with a cognizable interest in the fund, including the debtor whose receivables
constitute the res, may move for summary judgment on its entitlement and the relative priority of
competing claims. See generally Commerce Funding Corp. v. Southern Financial Bank, 80 F.
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Supp. 2d 582, (E.D. Va. 1999); Sun Life Assurance Co. v. Bew, 530 F. Supp. 2d 773 (E.D. Va.
2007).
Once funds are deposited into the registry of the Court, the Court exercises broad equitable
discretion over the distribution of the interpleaded res. See generally Sanders v. Armour Fertilizer
Works, 292 U.S. 190 (1934). This equitable authority extends to limiting the accrual of interest
against the fund, determining priority among competing claimants, and fashioning an appropriate
distribution that accounts for the nature and origin of the funds. The Court's equitable power is at
its apex in interpleader proceedings, where the very purpose of the action is to prevent inequitable
results. See generally State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523 (1967).
IV. ARGUMENT
A. Cyberlux Has a Direct Entitlement to the Disputed Funds
Cyberlux is not a bystander in this proceeding. The Disputed Funds are derived entirely
from Cyberlux's performance of a government defense contract. The $23,736,937.56 interpleaded
by HII represents payments HII received from the United States Government for work that
Cyberlux performed, specifically, the design, manufacture, and delivery of unmanned aerial
systems and related defense technologies. Cyberlux invested more than $4 million of its own
capital in performing this contract, and those funds would have been recovered through ordinary
payment had HII not elected to interplead.
Cyberlux's entitlement is therefore not derivative or speculative. It is the primary
entitlement: these funds exist because Cyberlux performed. Under the Subcontract and Mod. 4,
HII was required to pay Cyberlux upon receipt of payment from the Government. HII concedes it
received $25,769,369.03 from the Government. Cyberlux is the beneficial owner of the funds in
every practical and equitable sense, and the creditors asserting claims against the res are, at bottom,
asserting claims against money earned by Cyberlux's labor and investment.
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The Court should recognize Cyberlux's claim to recover at minimum $4,786,814.62
representing its direct capital investment in contract performance, reduced by Cyberlux's
willingness to compromise to $2,450,000 in the interest of achieving a global resolution. This
recovery is essential not only as a matter of equity but as a matter of practical necessity: Cyberlux
requires this capital to execute its existing $26 million backlog pipeline, which will generate
approximately $17 million in cash flow that Cyberlux can use to satisfy its remaining unsecured
creditors in the ordinary course of business.
B. The Court Should Limit Interest Accrual to the Date of the Interpleader Filing
The single most consequential equitable issue before this Court is whether secured
creditors should be permitted to continue accruing interest, fees, and penalties against the Disputed
Funds after those funds were interpleaded and removed from Cyberlux's control. Cyberlux
respectfully submits that they should not.
1. The Equitable Basis for Limiting Interest.
Once funds are withheld and threatened to be deposited into the registry of the Court
through the mechanism of filing an interpleader action, the debtor loses all ability to use, invest,
or apply those funds to reduce its obligations. The interpleader, in effect, freezes the debtor's
financial position while simultaneously allowing creditors' claims to continue growing. This
creates an inherently inequitable dynamic: Cyberlux is deprived of the very funds it needs to pay
its creditors, yet those same creditors are permitted to charge ever-increasing interest on debts that
Cyberlux cannot satisfy precisely because the funds are being held by HII who petitioned and
ultimately succeeded in locking those funds in this Court's registry.
The Court's equitable authority to limit interest in interpleader proceedings is well
established. Courts have long recognized that when a fund is interpleaded, the equitable
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considerations shift. The debtor has surrendered control of the funds; the creditors' risk of nonpayment is substantially mitigated by the existence of the Court-supervised fund; and the continued
accrual of interest against a finite res serves only to diminish the pool available for equitable
distribution, to the detriment of all parties, including the debtor.
2. The Interest Accumulation Since August 2025 Has Been Staggering.
The record demonstrates the magnitude of the problem. Since the interpleader was filed on
or about June 24, 2025, Legalist alone has accrued over $1,999,676.16 in additional fees and
interest. The Assure Global Claimants (WeShield, Roman Investments, MAS USA, and Sinensky)
have increased their claimed amount by approximately 43% over the original settlement amount.
Thin Air Gear's claimed interest of $935,489.46 on a $450,000 principal, more than double the
underlying debt, is based on treble damages agreed to by a Texas Receiver whose authority and
legitimacy are in serious question. In total, the interest and fees claimed since the interpleader was
filed amount to millions of dollars that, if allowed, will consume the fund and leave Cyberlux with
nothing.
3. Cyberlux Should Not Be Punished for HII's Decision to Interplead.
Critically, HII's decision to file the interpleader was not Cyberlux's choice. HII chose to
interplead rather than pay Cyberlux in the ordinary course. Had HII honored its contractual
obligations, Cyberlux would have received payment, satisfied its secured creditors, and managed
its remaining obligations through its business operations. Instead, Cyberlux has been deprived of
access to its own earnings for approximately twenty months, during which time its creditors' claims
have ballooned, its financing options have collapsed, and its business operations have been
severely impaired.
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The record makes clear what drove HII to interplead rather than pay Cyberlux: the
aggressive, multi-jurisdictional collection campaign waged by Atlantic Wave Holdings, LLC.
HII's own Complaint details how Atlantic Wave systematically weaponized the courts to seize
Cyberlux's receivables before they could be paid in the ordinary course. On March 11, 2025,
Atlantic Wave served HII with a Garnishment Summons in the Circuit Court of Fairfax County
(Case No. CL25-3413), seeking to garnish any monies owed to Cyberlux based on a June 28, 2023
Richmond Circuit Court judgment. The total balance claimed on the Garnishment Summons was
$1,444,543.11 as of March 7, 2025. On July 18, 2025, the Fairfax Circuit Court held a hearing on
the Garnishment Summons and Atlantic Wave's Motion for Entry of an Order of Payment, and on
July 22, 2025, the Fairfax Circuit Court entered an order directing HII to interplead $1,444,543.11
into the Fairfax Circuit Court within 30 days.
But Atlantic Wave was not content with the Virginia garnishment. It simultaneously
pursued a second front in Texas, domesticating its judgment in the 129th Judicial District Court
for Harris County and commencing Cause No. 2024-48085. On May 22, 2025, the Texas court
appointed Robert W. Berleth as a limited Receiver for Cyberlux with authority to collect on the
general debt, pursuant to Tex. Prac. & Rem. Code § 31.002. The Receiver came into possession
of $3,083,639.75, which amount was intended to satisfy the same judgment Atlantic Wave was
simultaneously seeking to enforce through the Virginia garnishment. Atlantic Wave was thus
pursuing the same judgment in two states at the same time, seeking full recovery from each.
On July 17, 2025, the Receiver sent a formal levy demand letter directly to HII, demanding
that HII immediately seize and forward to the Receiver's offices any funds held for the benefit of
or payable to Cyberlux, even though the Texas Court of Appeals had already stayed the
receivership order. Faced with Atlantic Wave's competing garnishment in Virginia, a receiver in
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Texas claiming the same funds, a levy demand from the Receiver, and additional creditor claims
from Legalist, the IRS, ANPC, and others, HII concluded it could not determine without peril the
payee of the Disputed Funds. HII therefore filed this interpleader action. While Cyberlux does not
excuse HII's decision to interplead rather than pay in the ordinary course, the record demonstrates
that Atlantic Wave's relentless, multi-forum collection efforts were the proximate cause of HII's
decision. It was Atlantic Wave's conduct, not Cyberlux's, that created the conflicting claims and
competing proceedings that HII cited as the basis for interpleader. Between the execution of Mod.
4 in February 2025 and July 27, 2025, HII incurred $398,945.21 in attorneys' fees arising from
creditor-related proceedings, including the engagement of Virginia counsel to respond to the
Fairfax garnishment and the engagement of Texas counsel to address subpoenas from the Receiver.
The equitable implications are significant. Atlantic Wave's aggressive tactics triggered the
very interpleader that now freezes Cyberlux's funds and allows all creditors' interest to compound.
Atlantic Wave nor the Receiver should be permitted to benefit from the consequences of their own
destructive behavior by claiming an ever-growing share of the Disputed Funds. To the contrary,
the Court should recognize that Atlantic Wave's conduct and the Receiver’s actions beyond the
bounds of the Texas Receivership authority, is the kind of vexatious, multi-forum litigation
strategy that interpleader is designed to arrest, not reward.
Allowing creditors to continue accruing interest against the Disputed Funds after the
interpleader filing would, in effect, reward the creditors for the delay that Atlantic Wave's
aggressive collection campaign caused and punish Cyberlux for circumstances entirely beyond its
control. Equity does not countenance such a result. The Court should exercise its discretion to fix
the interest accrual date at July 24, 2025, the date the interpleader action was filed and served, and
limit each creditor's recovery to principal plus interest accrued through that date.
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4. Proposed Interest Reductions.
Cyberlux proposes the following interest reductions, which represent a reasonable exercise
of the Court's equitable authority:
• Legalist: Reduction of $1,000,000 in post-interpleader interest and fees.
• Assure Global Claimants (WeShield / Roman / MAS / Sinensky): Reduction of
$600,000 in post-interpleader interest.
• TAG (Thin Air Gear): Reduction of $600,000, reflecting the elimination of treble
damages improperly agreed to by the Texas Receiver.
• United States (IRS): Reduction of $250,000 for purposes of parity with other creditors'
interest reductions.
These reductions total $2,450,000, which Cyberlux requests be returned to Cyberlux as
operating capital to fund its existing defense contract backlog and generate the cash flow necessary
to satisfy unsecured creditors in the ordinary course of business.
C. The Government Contract Origin of the Funds Requires a Nexus-Based
Distribution
The Disputed Funds are not general corporate assets. They are payments derived from a
United States Government defense contract, Subcontract No. P000043846, under which Cyberlux
manufactured and delivered unmanned aerial systems for Department of Defense operations. This
origin matters for purposes of both priority and entitlement.
1. The Nature of Government Contract Funds.
Government contract payments are subject to a distinct regulatory framework, including
the Federal Acquisition Regulation (FAR) and the Assignment of Claims Act, 41 U.S.C. § 6305.
These provisions reflect a strong federal policy that government contract funds should be used for
the purpose for which they were appropriated, in this case, the development and production of
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defense technologies. The Assignment of Claims Act narrowly limits the circumstances under
which government contract receivables may be assigned, recognizing that the Government has a
direct interest in ensuring that contract funds flow to the performing contractor and are used to
support ongoing contract performance.
2. Only Claims with Nexus to the Government Contract Should Share the Res.
Because the Disputed Funds were generated by Cyberlux's performance of a government
defense contract, equity requires that the distribution prioritize creditors whose claims arise
directly from or are connected to that contract performance. Creditors who provided financing,
materials, labor, or services in support of Cyberlux's performance of the HII Subcontract have a
direct nexus to the res and a legitimate equitable claim to share in the distribution. By contrast,
creditors whose claims arise from unrelated transactions, general commercial disputes, unsecured
lending arrangements, or judgments having nothing to do with the drone manufacturing program,
should not be permitted to deplete a fund that was generated by, and intended for, defense contract
purposes.
This is not merely a matter of equity; it is a matter of federal policy. Allowing claimants
with no connection to the government contract to strip the Disputed Funds would undermine the
very purpose for which those funds were paid, to support the domestic defense industrial base and
the production of mission-critical systems for American servicemembers.
3. Cyberlux Should Be Permitted to Manage Non-Nexus Debts
in the Ordinary Course.
For claims that do not bear a nexus to the government contract, Cyberlux should be
permitted to satisfy those obligations through its ordinary business operations rather than from the
Disputed Funds. Cyberlux has an order backlog of approximately $26 million and a pending
pipeline that will generate approximately $17 million in cash flow. If Cyberlux is permitted to
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retain a portion of the Disputed Funds as operating capital, it can execute on this backlog and
generate the revenue necessary to pay its non-nexus creditors in an orderly fashion. Draining the
res to satisfy every claimant, regardless of the claim's connection to the underlying contract, would
destroy Cyberlux's ability to operate, fulfill pending government orders, and satisfy any creditor
at all.
D. Analysis of Each Creditor's Claim, Priority, and Entitlement
In accordance with the Court's Order (ECF No. 145), Cyberlux addresses each claimant's
position, priority, and entitlement to the Disputed Funds as follows:
1. Legalist SPV III, LP.
Legalist claims a perfected security interest in Cyberlux's accounts receivable from HII
pursuant to an Instrument of Assignment and supporting agreements, with a priority date of April
1, 2024. Cyberlux acknowledges that Legalist holds the only facially perfected, secured claim to
the specific res. However, Legalist's total claim of $13,650,513.94 includes $2,653,970.84 in
interest, of which approximately $1,999,676.16 has accrued since the interpleader was filed.
Legalist provided financing to Cyberlux in connection with its operations, and to the extent that
financing supported Cyberlux's performance of the HII Subcontract, Legalist's claim bears a nexus
to the res. Nevertheless, the post-interpleader interest accrual is excessive and should be limited.
Cyberlux proposes that Legalist's recovery be reduced by $1,000,000 in post-interpleader interest,
resulting in an adjusted claim of approximately $12,650,513.94.
2. WeShield / Roman Investments / MAS USA / Michael Sinensky (the Assure
Global Claimants).
The Assure Global Claimants assert a combined claim of $5,007,138.41, consisting of
$3,739,461.10 in principal and $1,267,677.31 in interest, with a priority date of October 23, 2025.
Notably, this represents a 43% increase over the original settlement amount negotiated with
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Cyberlux. The Court should scrutinize whether these claimants' underlying transactions bear a
sufficient nexus to the government contract to warrant participation in the distribution. Moreover,
the interest claimed is disproportionate to the underlying obligations and has been inflated by the
delay caused by the interpleader. Cyberlux proposes a $600,000 reduction in claimed interest,
resulting in an adjusted claim of approximately $4,407,138.41.
3. ANPC (Advanced Navigation and Positioning Corporation).
ANPC asserts a claim of $3,087,878.86, consisting of $2,830,050.00 in principal and
$257,828.86 in interest, with a priority date of December 30, 2024 (equitable lien) or September
24, 2025 (perfected lien). ANPC's interest claim consists primarily of attorney's fees. ANPC claims
an equitable lien under North Carolina law based on a judgment it domesticated in Virginia. To
the extent ANPC's underlying claim arises from services or products related to Cyberlux's defense
technology operations, it may bear a nexus to the res. The Court should examine whether ANPC's
claimed equitable lien is properly perfected and whether the attorney's fees component is
reasonable.
4. TAG (Thin Air Gear).
Thin Air Gear's claim presents one of the most troubling examples of interest inflation in
this proceeding. TAG asserts a total claim of $1,385,489.46, of which $450,000 represents the
principal amount and $935,489.46 represents claimed interest, more than double the underlying
debt. This inflated interest figure is based on treble damages that were agreed to by the Texas
Receiver, Robert Berleth, whose authority over Cyberlux's assets is contested and whose actions
have been subject to appellate review. The treble damages were not the product of arm's-length
negotiation by Cyberlux but rather were imposed through a receivership process that Cyberlux
disputes. The Court should decline to honor treble damages agreed to by a receiver of questionable
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authority and should limit TAG's recovery to its principal amount of $450,000 plus reasonable,
non-trebled interest accrued through the date of the interpleader filing.
5. United States (Internal Revenue Service).
The IRS asserts federal tax lien claims totaling $1,149,776.34 based on three tax lien
notices filed in North Carolina spanning 2011-2024. Federal tax liens attach to all property and
rights to property of the taxpayer under 26 U.S.C. § 6321. While Cyberlux acknowledges the
priority that federal tax liens may enjoy under the Federal Tax Lien Act, the IRS liens at issue are
blanket liens against Cyberlux's property generally and were not specifically perfected against the
HII receivables. The IRS claim does not bear a direct nexus to the government contract work.
Nevertheless, in the interest of achieving parity among creditors, Cyberlux proposes a modest
$250,000 interest reduction.
6. Atlantic Wave Holdings, LLC and Secure Community, LLC.
Atlantic Wave and Secure Community should be excluded entirely from any distribution
of the Disputed Funds.
Atlantic Wave's asserted claim of approximately $6,025,000 is, in reality, an attempt at
double or triple recovery on the same underlying judgment. Atlantic Wave has already received or
positioned itself to receive substantial payments: $1,444,543.11 through a Fairfax County
garnishment order, and $3,083,639.75 through a Texas receivership. The combined recoveries
already exceed the original judgment amount. Allowing Atlantic Wave to recover again from the
Disputed Funds would constitute precisely the kind of duplicative, inequitable windfall that the
interpleader process is designed to prevent.
Moreover, Atlantic Wave's claim to the $6 million judgment is presently being adjudicated
in the Virginia Court of Appeals, and Cyberlux disputes that Atlantic Wave is entitled to any
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amount from the Disputed Funds. Atlantic Wave's claim bears no nexus to the government
contract, it arises from a separate commercial dispute entirely unrelated to Cyberlux's drone
manufacturing program. Its inclusion in the distribution would artificially inflate the deficit,
prejudice legitimate creditors, and distort the equitable allocation.
Secure Community's claim is derivative of Atlantic Wave's position and fails for the same
reasons. Secure Community has no independent, perfected claim to the Disputed Funds.
7. Fairwinds Technologies.
Fairwinds Technologies asserts a claim of $2,348,542, but holds no secured interest in the
Disputed Funds. As an unsecured creditor, Fairwinds should not share in the distribution of the
res. Cyberlux proposes to address Fairwinds' claim through a payment plan in the ordinary course
of business, outside the scope of this interpleader proceeding.
8. ARG (Intervenor).
ARG filed a motion to intervene but does not have an adjudicated claim against Cyberlux.
Without an adjudicated, secured interest in the specific res, ARG should not participate in the
distribution. As with other unsecured or unadjudicated claims, Cyberlux should be permitted to
address ARG's claim, if any, in the ordinary course.
E. Proposed Order of Priority
Based on the foregoing analysis, Cyberlux respectfully submits that the Court should
establish the following order of priority for distribution of the Disputed Funds:
First Priority: Cyberlux Corporation, recovery of $2,450,000 representing its direct
capital investment in contract performance and the aggregate interest reductions from other
creditors' claims, to be used as operating capital to execute its defense contract backlog and
generate cash flow for payment of unsecured creditors.
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Second Priority: Legalist SPV III, LP, as the only creditor with a facially perfected,
secured interest in the specific res, with an adjusted claim of approximately $12,650,513.94 (after
$1,000,000 interest reduction).
Third Priority: Assure Global Claimants (WeShield / Roman / MAS / Sinensky), with an
adjusted claim of approximately $4,407,138.41 (after $600,000 interest reduction).
Fourth Priority: ANPC, $3,087,878.86, subject to verification of the claimed equitable
lien.
Fifth Priority: TAG (Thin Air Gear), limited to principal plus reasonable interest accrued
through August 4, 2025, with treble damages disallowed, resulting in a significantly reduced claim
(estimated adjusted claim of approximately $785,489.46 after $600,000 reduction).
Sixth Priority: United States (IRS), $899,776.34 (after $250,000 reduction).
Excluded: Atlantic Wave Holdings, LLC; Secure Community, LLC; Fairwinds
Technologies; ARG; and the Texas Receiver, Robert Berleth.
F. The Effect of Government Contracting Statutes and Regulations
The Court's Order directs the parties to address the effect of government contracting
statutes or regulations on priority, entitlement, or payment due. This issue is central to Cyberlux's
position.
The Disputed Funds originated from a government defense contract under which Cyberlux
manufactured unmanned aerial systems for the United States Department of Defense. The
Assignment of Claims Act, 41 U.S.C. § 6305, strictly limits the assignment of claims against the
United States and reflects a strong federal policy that government contract funds should flow to
the performing contractor. While the Assignment of Claims Act permits certain assignments to
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financing institutions under specific conditions, it does not contemplate or authorize the wholesale
seizure of government contract funds by parties unrelated to the contract performance.
Furthermore, Cyberlux holds rated orders under the Defense Priorities and Allocations
System (DPAS), including DX-rated and DO-rated orders from General Dynamics Mission
Systems, BAE Systems, and allied foreign customers. The DPAS program, established under the
Defense Production Act of 1950, 50 U.S.C. § 4501 et seq., imposes obligations on contractors to
fulfill rated orders as the highest manufacturing priority. A distribution of the Disputed Funds that
leaves Cyberlux without the resources to fulfill these rated orders would directly contravene
federal defense procurement policy and undermine national security interests.
The Court should give significant weight to the government contract origin of these funds
and the federal policies that attach to them. This weighs in favor of both limiting the claims of
creditors whose debts are unrelated to the government contract and ensuring that Cyberlux retains
sufficient capital to continue performing its defense obligations.
V. CONCLUSION
This interpleader proceeding was not of Cyberlux's making. HII chose to interplead funds
that Cyberlux earned through its performance of a government defense contract, and that decision
has had cascading consequences, accumulating interest, lost contracts, collapsed financing, and
severe operational impairment. Cyberlux should not be made to bear the full cost of HII's unilateral
decision.
The Court should exercise its broad equitable discretion to: (1) limit all creditors' interest
accrual to the date the interpleader action was filed and served, on or about June 24, 2025 or no
later than August 4, 2025; (2) exclude from distribution those claimants whose claims bear no
nexus to the government contract or who are seeking duplicative recovery; (3) disallow the treble
Case 3:25-cv-00483-JAG Document 188 Filed 04/15/26 Page 17 of 19 PageID# 4171
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damages imposed by the Texas Receiver on the Thin Air Gear claim; (4) grant Cyberlux recovery
of $2,450,000 from the Disputed Funds to fund its defense contract backlog and enable it to satisfy
unsecured creditors in the ordinary course; and (5) establish a priority of distribution that reflects
the equitable realities of this case and the federal policies governing government contract funds.
An outcome that strips Cyberlux of all remaining resources will not create more value, it
will simply redistribute loss while increasing costs and delay. It will impair a functioning defense
technology company, jeopardize pending government orders, and ultimately reduce recoveries for
all creditors. By contrast, a measured, equitable distribution allows Cyberlux to meet its
obligations in part now, while preserving its ability to meet additional obligations in the future and
to continue supporting national defense priorities.
WHEREFORE, Defendant Cyberlux Corporation respectfully requests that this Court
grant its Motion for Summary Judgment and enter an Order: (a) limiting interest accrual on all
claims to the date of the interpleader filing; (b) excluding Atlantic Wave, Secure Community,
Fairwinds Technologies, ARG, and the Texas Receiver from the distribution of the Disputed
Funds; (c) recognizing Cyberlux's entitlement to recover $2,450,000 from the Disputed Funds; (d)
establishing the priority of distribution set forth herein; and (e) granting such other and further
relief as the Court deems just and equitable.
CERTIFICATION OF COUNSEL REGARDING VERIFICATION OF CITATIONS
Pursuant to the Court's Order, the undersigned counsel, Jimmy F. Robinson, Jr., Esq., hereby
certifies that he has personally verified every citation to authority contained in this submission,
including every quotation attributed to authority, and that all such citations and quotations are
accurate and correctly stated.