14-3677
Whitehaven S.F., LLC v. Spangler

                             UNITED STATES COURT OF APPEALS
                                 FOR THE SECOND CIRCUIT

                                       SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO
A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS
GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S
LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH
THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING
A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY
COUNSEL.

        At a stated term of the United States Court of Appeals for the Second Circuit, held at the
Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the
9th day of December, two thousand fifteen.

Present:
         ROBERT A. KATZMANN,
                     Chief Judge,
         PETER W. HALL,
         RAYMOND J. LOHIER, JR.,
                     Circuit Judges.
________________________________________________

WHITEHAVEN S.F., LLC,

             Petitioner-Appellee,

                    v.                                            No. 14-3677-cv

STEVEN SPANGLER,

             Respondent-Appellant,

HARVEY THATCHER,

         Respondent-Appellee.*
________________________________________________



       *
           The Clerk of Court is directed to amend the caption.
For Petitioner-Appellee:                           Eileen Theresa Rohan, Hudson, New York.

For Respondent-Appellant:                          Daniel Lance Wittry, Indianapolis, Indiana.

For Respondent-Appellee:                           Matthew John Mason, UAW-GM Legal
                                                   Services Plan, Detroit, Michigan.

For Amicus Curiae:                                 Holly Aiyisha Thomas, Special Counsel to the
                                                   Solicitor General, Steven C. Wu, Deputy
                                                   Solicitor General, Barbara D. Underwood,
                                                   Solicitor General of the State of New York, for
                                                   Eric T. Schneiderman, Attorney General of the
                                                   State of New York, New York, New York.


      Appeal from the United States District Court for the Southern District of New York
(Ramos, J.).

       ON CONSIDERATION WHEREOF, it is hereby ORDERED, ADJUDGED, and

DECREED that the judgment of the district court is AFFIRMED.

       Respondent-Appellant Steven Spangler appeals from a judgment of the district court

(Ramos, J.), which compelled him to arbitrate under the Federal Arbitration Act, 9 U.S.C.

§§ 1–16. We assume the parties’ familiarity with the underlying facts, procedural history, and

the issues on appeal.

       We review a decision to compel arbitration de novo. See Cap Gemini Ernst & Young,

U.S., L.L.C. v. Nackel, 

, 364 (2d Cir. 2003). The Federal Arbitration Act provides

that written arbitration clauses “shall be valid, irrevocable, and enforceable, save upon such

grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. A party to a

contract that requires arbitration may petition a district court “for an order directing that such

arbitration proceed in the manner provided for in such agreement.” 9 U.S.C. § 4. A court must

compel arbitration if it determines that a contractually valid arbitration agreement exists under


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the relevant state law and that the parties’ dispute falls within the scope of that agreement. See

. When assessing the validity of an arbitration agreement, “the general

rule is that courts ‘should apply ordinary state-law principles that govern the formation of

contracts.’” T.Co Metals, LLC v. Dempsey Pipe & Supply, Inc., 

, 344 (2d Cir. 2010)

(quoting First Options of Chi., Inc. v. Kaplan, 

, 944 (1995)).

       Spangler argues that the petition to compel arbitration should have been denied because

the arbitration provision of the 2008 contract between Whitehaven S.F., LLC and Spangler

violated the terms of an Assurance of Discontinuance that Whitehaven signed with the Attorney

General of the State of New York in the spring of 2005. See Appellant’s App. 38–48. An

Assurance of Discontinuance is a regulatory mechanism, similar to a deferred-prosecution

agreement, in which the Attorney General agrees to forego suit over, among other things,

deceptive business practices in exchange for a company’s agreement to alter its practices. See

N.Y. Gen. Bus. Law § 349; N.Y. Exec. Law § 63(15). Here, Whitehaven was one of a number of

litigation-financing companies whose practices attracted the attention of the Attorney General. In

exchange for resolving the matter without a lawsuit, Whitehaven agreed, among other provisions

in the Assurance of Discontinuance: “No contract may require mandatory arbitration to resolve

disputes under the contract.” Appellant’s App. 43. Spangler contends that this agreement bars,

by force of law or by force of contract, Whitehaven’s petition to compel him to arbitrate.

Because Spangler’s arguments turn on important questions about the powers of the Office of the

Attorney General of the State of New York, we requested its views, and received a thoughtful

amicus brief. See Amicus Brief for the Attorney General of New York, Whitehaven S.F., LLC v.

Spangler (2d Cir. Oct. 30, 2015), No. 14-3677-cv, ECF No. 152 (“Amicus Br.”).


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        The Attorney General is of the view that, for purposes of determining whether a

contractual provision violates New York public policy, the Assurance of Discontinuance does

not have the force of law because, as the district court held, it is not a part of the “constitution,

statutes or judicial records of New York.” Whitehaven S.F., LLC v. Spangler, 

, 347 (S.D.N.Y. 2014); see In re Estate of Walker, 

, 359 (1985). Spangler

relies heavily on General Motors Corp. v. Abrams, 

(2d Cir. 1990), in which we held

that a similar mechanism, the consent order of the Federal Trade Commission, could have the

“force of ‘federal law.’” 

But, as the Attorney General notes, the Federal Trade

Commission’s consent-order mechanism in Abrams related to an area where the Commission had

substantive rulemaking authority. By contrast, the New York statutes that empower the Attorney

General to enter Assurances of Discontinuance do not also provide for rulemaking authority. We

agree with the Attorney General and district court that the Assurance of Discontinuance does not

have the force of law, such that a conflicting contractual term cannot be enforced as violating

New York public policy.

        The Attorney General is of the view, however, that an Assurance of Discontinuance does

have the force of contract, in that it may have third-party beneficiaries who can rely on the

Assurance in defending against petitions to compel arbitration where the petitioner has agreed to

cease use of mandatory-arbitration terms. The Attorney General reasons that Assurances are

interpreted as contracts, see MBIA Inc. v. Fed. Ins. Co., 

, 171 (2d Cir. 2011), and

that contracts in New York may have intended third-party beneficiaries, see BAII Banking Corp.

v. UPG, Inc., 

, 696–97 (2d Cir. 1993). While government contracts, including

Assurances of Discontinuance, must satisfy a more stringent test before a court may conclude


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that they create third-party beneficiaries, a member of the public may be an intended third-party

beneficiary of a public contract, in the Attorney General’s view, where (a) the contract expressly

and primarily benefits an identified segment of the public, see Koch v. Consol. Edison Co. of

N.Y., 

, 558–59 (1984), and (b) the promisor must render its performance directly

to the third party, see Levin v. Tiber Holding Corp., 

, 249 (2d Cir. 2002).

       Although third-party beneficiaries to government contracts do not necessarily have the

right to bring suit for damages or specific enforcement, they may nevertheless rely on the

contract, in the Attorney General’s view, to defend against conduct that violates it, as Spangler

seeks to do. “Allowing third-party beneficiaries to rely on our [Assurances of Discontinuance] to

resist a signatory’s attempt to enforce prohibited contract terms helps accomplish the very

objectives that our [Assurances] provide while at the same time preventing broader interference

with the Office’s public-policy goals.” Amicus Br. 17. Accordingly, the view of the Attorney

General is that there is merit to Spangler’s argument that a respondent may defend against a

petition to compel arbitration based on a provision that violates an Assurance of Discontinuance

signed by the petitioner.

       We recognize that this conclusion could be a matter of great importance to New York

law, so we might, in the ordinary course, certify the question to the New York Court of Appeals

rather than pass upon it ourselves in the first instance, if the answer were outcome-determinative.

We need not do so here, however, because we agree with the Attorney General and Whitehaven

that Spangler is not an intended third-party beneficiary of the Assurance of Discontinuance. By

its terms, the Assurance covers “all transactions with New York consumers who enter into cash

advance transactions” with its signatories. Appellant’s App. 41 (emphasis added). Our review of


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the record shows that Spangler is a Florida resident whose transaction with Whitehaven had no

physical nexus with New York other than Whitehaven’s doing business there. We agree with the

Attorney General that the term “New York consumers” encompasses “those consumers who live

or work in New York, as well as consumers who are physically present in New York when they

enter into agreements,” Amicus Br. 6, but not a consumer like Spangler who resides in and

consumes services while located in another state. Accordingly, even if a New York consumer

could invoke the Assurance of Discontinuance, Spangler cannot do so because he is not an

intended third-party beneficiary.

       As a final matter, we endorse the Attorney General’s suggestion that the district courts in

our Circuit, when considering cases like this that invoke an Assurance of Discontinuance, invite

the participation of the Office of the Attorney General, which “would enable it to express its

views about the scope of its agreements and raise any objections it may have to a private party’s

position.” Amicus Br. 19. This is a good practice that will facilitate informed decisions.

       We have considered Spangler’s remaining arguments and find them to be without merit.

We decline to reach Respondent-Appellee Harvey Thatcher’s judicial estoppel argument, which

he did not raise in the district court. See Virgilio v. City of New York, 

, 118 (2d Cir.

2005). For the reasons stated herein, the judgment of the district court is AFFIRMED.



                                                  FOR THE COURT:
                                                  CATHERINE O’HAGAN WOLFE, CLERK




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