Whitehaven S.F., LLC v. Spangler, 633 F. App'x 544

Whitehaven S.F., LLC (petitioner) sought to compel arbitration of claims against respondent Steven Spangler under a 2008 contract; the district court granted the petition under the Federal Arbitration Act (FAA).
Spangler is a Florida resident who entered his transaction with Whitehaven outside New York; Whitehaven does business in New York and had signed a 2005 Assurance of Discontinuance with the New York Attorney General resolving alleged deceptive practices.
The Assurance of Discontinuance included the provision: “No contract may require mandatory arbitration to resolve disputes under the contract.”
Spangler argued the Assurance barred Whitehaven from enforcing a mandatory-arbitration clause either as law or as a contract-based restriction (third-party beneficiary/declaratory defense) and thus the petition to compel arbitration should be denied.
The State Attorney General submitted an amicus brief: the Assurance lacks the force of law for public-policy preemption but can operate as a contract that potentially creates third-party beneficiaries who may defend against enforcement of prohibited contractual terms.
The Second Circuit affirmed the district court, holding the Assurance is not law and Spangler is not an intended third-party beneficiary because he is not a “New York consumer.”

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Assurance of Discontinuance has the force of law and thus prevents enforcement of arbitration clauses	Whitehaven: Assurance is not law; FAA governs	Spangler: Assurance operates as law preventing arbitration enforcement	Held: Assurance is not state law; it lacks the force of law to void arbitration under NY public policy
Whether the Assurance operates as a contract creating third-party beneficiaries who can resist arbitration	Whitehaven: Even if contractual, no third-party beneficiary here	Spangler: Assurance is a contract benefiting NY consumers and he may rely on it to block arbitration	Held: Assurances can be contractual and may create third-party rights in some circumstances, but Spangler is not an intended beneficiary
Whether Spangler’s out-of-state status brings him within “New York consumers” covered by the Assurance	Whitehaven: Term limited to NY consumers; Spangler not covered	Spangler: Coverage should include him because of Whitehaven’s NY presence	Held: “New York consumers” means those who live, work, or are physically present in NY when contracting; Spangler (Florida resident) is not covered
Whether district court should have invited Attorney General participation	N/A	Attorney General urged courts to solicit its views in Assurance cases	Held: Court endorses inviting Attorney General participation as a best practice

Cap Gemini Ernst & Young, U.S., L.L.C. v. Nackel, 346 F.3d 360 (2d Cir. 2003) (standard for reviewing motions to compel arbitration under FAA)
T.Co Metals, LLC v. Dempsey Pipe & Supply, Inc., 592 F.3d 329 (2d Cir. 2010) (apply ordinary state-law contract-formation principles to arbitration agreements)
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (U.S. 1995) (deference to ordinary state-law principles on contract formation)
In re Estate of Walker, 64 N.Y.2d 354 (N.Y. 1985) (Assurance of Discontinuance not part of New York’s constitution, statutes, or judicial records for public-policy purposes)
General Motors Corp. v. Abrams, 897 F.2d 34 (2d Cir. 1990) (FTC consent orders can have force of federal law in certain contexts)
MBIA Inc. v. Fed. Ins. Co., 652 F.3d 152 (2d Cir. 2011) (government agreements interpreted as contracts)
BAII Banking Corp. v. UPG, Inc., 985 F.2d 685 (2d Cir. 1993) (New York law on third-party beneficiaries to contracts)
Koch v. Consol. Edison Co. of N.Y., 62 N.Y.2d 548 (N.Y. 1984) (public contracts may expressly benefit an identified segment of the public)
Levin v. Tiber Holding Corp., 277 F.3d 243 (2d Cir. 2002) (requirements for third-party beneficiary status under New York law)
Virgilio v. City of New York, 407 F.3d 105 (2d Cir. 2005) (issue-preservation rule; appellate court may decline arguments not raised below)