Whitehaven S.F., LLC v. Spangler
| Decision Date | 10 September 2014 |
| Docket Number | 13 Civ. 8476 (ER) |
| Parties | In the Matter of the Application of WHITEHAVEN S.F., LLC, Petitioner, v. STEVEN SPANGLER, LANCE WITTRY, ESQ., WITTRY LAW OFFICES and HARVEY THATCHER, Respondents. |
| Court | U.S. District Court — Southern District of New York |
Ramos, D.J.:
The instant dispute concerns the validity of an arbitration clause in a litigation financing agreement. Respondent Steven Spangler ("Spangler" or "Respondent Spangler") sought funding for a medical malpractice action in Indiana (the "Skyleign Spangler Litigation") after his daughter, Skyleign Spangler, was delivered stillborn in 2003. To that end, Spangler entered a loan agreement with a man named Harvey Thatcher ("Thatcher") in October 2007 and, pursuant to a separate contract (the "Finance Agreement"), obtained additional funding from Whitehaven S.F., LLC ("Whitehaven" or "Petitioner"), a legal financier, in June 2008. Among other terms, the Finance Agreement contained an arbitration clause.
The Skyleign Spangler Litigation settled in approximately 2012 or 2013. In June 2013, Spangler, deeming the litigation financing agreements that he previously entered unconscionable, filed an action in Indiana state court against Whitehaven and Thatcher, seeking to extinguish their liens and void the Finance Agreement (the "Indiana Proceeding"). Thatcher filed a counterclaim in that action, through which he seeks to recover his losses. Whitehaven, in turn, filed the instant action as a petition for a preliminary injunction and temporary restraining order.Although this Court rejected Whitehaven's initial request for injunctive relief to stay the Indiana Proceeding and compel arbitration, it directed the parties to submit further briefing on (1) the amount in controversy and (2) the enforceability of the arbitration clause in the Finance Agreement.
Presently before the Court is Whitehaven's motion to compel arbitration in accordance with the arbitration clause in the Finance Agreement. Doc. 6 ("Mem. Supp. Mot. Compel"). For the reasons discussed below, the motion is GRANTED.
Petitioner Whitehaven is a Delaware corporation with a principal place of business in New York. Mem. Supp. Mot. Compel 5. Whitehaven provides non-recourse cash advances to injured individuals who have a pending claim or lawsuit, meaning that they do not have to repay the money advanced by Whitehaven in the event that their lawsuit is "lost, dismissed or otherwise result[s] in no recovery." Id.
Respondent Spangler is a Florida resident. Id. Lance Wittry ("Wittry"), an Indiana attorney, represents Spangler. Thatcher is also an Indiana resident. Harvey Thatcher Answer and Countercl., Spangler v. Thatcher, Whitehaven S.F. LLC (Ind. Sup. Ct. Marion Cnty. 2013). Whitehaven initially named Thatcher, Wittry and his firm, the Wittry Law Offices, as Respondents in the instant action. Spangler Opp. 1, Doc. 10. As explained infra, however, Whitehaven only seeks to compel Spangler to arbitrate.
Skyleign Donae Lashel Spangler ("Skyleign") was the full-term baby daughter of Steven Spangler and Heidi Brown ("Ms. Brown"). Spangler v. Bechtel, 931 N.E.2d 387, 388-89 (Ind.Ct. App. 2010), transfer granted, opinion vacated, 940 N.E.2d 832 (Ind. 2010) and vacated, 958 N.E.2d 458 (Ind. 2011). Tragically, Skyleign was delivered stillborn on February 24, 2003. Id. at 389. On June 23, 2003, Spangler and Ms. Brown initiated the Skyleign Spangler Litigation in Indiana state court, seeking damages for negligent infliction of emotional distress against the hospital where Skyleign died, a nurse-midwife, and the nurse-midwife's employer. Id.
On October 18, 2007, Thatcher agreed to loan Spangler $55,200.00 to help finance the ongoing Skyleign Spangler Litigation (the "Promissory Note"). Thatcher Br. Ex. 1, Doc. 12. According to the terms of the Promissory Note, the loan would be interest-free until the maturity date, at which point an interest rate of eight percent per year would apply. Id. The sum owed would be due on the earlier of April 15, 2008 or seven days from the date that Spangler received a final settlement or award from the Skyleign Spangler Litigation. Per its terms, Indiana law governs construction of the Promissory Note. Id. Finally, it states:
[I]f any sum payable is not paid when due, or if [Spangler] or any other person liable upon this [Promissory Note] shall die, become insolvent, or make a general assignment for the benefit of creditors, then all the amounts owed, including all future installments, shall immediately become due and payable on demand of [Thatcher]. No delay on [Thatcher]'s part in exercising any power or right under this note shall operate as a waiver of that power or right. [Spangler] shall further pay all expenses incurred by [Thatcher], including reasonable attorney fees incurred by [Thatcher] in successfully enforcing ... this [Promissory Note].
Id. (emphasis added).
To further finance the Skyleign Spangler Litigation, Spangler entered into the Finance Agreement with Whitehaven on June 23, 2008. Mem. Supp. Mot. Compel 5. Through the Finance Agreement, Whitehaven agreed to advance $50,000.00 to Spangler. Spangler Opp. Ex.2 (Finance Agreement ¶ 5(a)). In turn, Spangler agreed that, at the conclusion of the Skyleign Spangler Litigation, "whether by settlement, judgment or otherwise," he would repay Whitehaven, and direct his attorney to pay Whitehaven, (1) an application fee of $500.00; (2) "the sum of $50,000.00 together with an application fee of $500.00 and an origination fee of $5,000 plus 4.99% per month interest, compounded monthly from the date of funding to the date of payment," from the litigation proceeds. Id. Regardless of the duration of the loan, the Finance Agreement obligated Spangler to repay Whitehaven a minimum of $85,000. Id. ¶ 5(b). The entirety of paragraph five of the Finance Agreement, the section that describes the minimum payment owed and the terms of repayment, appears in bold text on the second page. Id. ¶ 5.
The Finance Agreement sets forth the following order of priority for distribution of any proceeds from the Skyleign Spangler Litigation:
The Finance Agreement also includes the following disclaimers:
...
19. [Spangler] HAS ALSO BEEN ADVISED BY [Whitehaven] TO HAVE HIS . . . ATTORNEY IN HIS . . . CASE REVIEW THIS AGREEMENT. PLAINTIFF HAS SOUGHT AND OBTAINED THE ADVICE OF LEGAL COUNSEL PRIOR TO ENTERING THIS TRANSACTION.
20. [Spangler] acknowledges that all questions [Spangler] has had regarding the funding terms of this Agreement, including the terms of repayment, have been answered to his . . . satisfaction by [Whitehaven] and/or his . . . attorney.
21. [Spangler] acknowledges that he . . . fully understands the terms of this Agreement and entered into this Agreement of his . . . own free will.
22. PLAINTIFF HAS THE RIGHT TO EXAMINE THIS AGREEMENT AND TO CANCEL THIS AGREEMENT. PLAINTIFF MAY RETURN IT AND THE MONIES ADVANCED PURSUANT TO THIS AGREEMENT BY MAIL OR OTHER DELIVERY TO [Whitehaven] AT THE ADRESS CONTAINED IN THIS AGREEMENT WITHIN THREE (3) DAYS AFTER [Spangler] RECEIVES THEM. THIS AGREEMENT WILL BE VOID FROM THE BEGINNING IF [Spangler] RETURNS THIS AGREEMENT AND THE FULL MONIES ADVANCED TO HIM . . . WITHIN THIS THREE (3) DAY PERIOD.
Id. ¶¶ 1, 2, 8, 19-22 (emphasis in original).
Finally, and of particular significance here, the Finance Agreement contains an arbitration clause, which states:
26. Any controversy or claim arising out of or relating to this contract, including without limitation the interpretation, validity, enforceability or breach thereof, shall be settled by final, binding arbitration administered by the American Arbitration Association (hereinafter referred to as "AAA") in accordance with its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitrator shall be a practicing attorney or a retired judge licensed to practice in the State of New York. The parties also agree that the AAA Optional Rules for Emergency Measures of Protection shall apply to the proceedings. The arbitrator shall award to the prevailing party, if any, as determined by the arbitrator, all of its costs and fees. "Costs and fees" means all pre-award expenses of the arbitration ... The award shall be in writing, shall be signed by the arbitrator, and shall include a statement regarding the reasons for the disposition of any claim. Arbitration pursuant to this paragraph shall befiled and held in the New York Regional Office located in the county, city and State of New York.
Id. ¶ 26. General severability and choice of law clauses in the Finance Agreement provide that New York law controls the interpretation of its terms and the parties' rights thereunder, and that, if any of its provisions are stricken as invalid, its other clauses will remain intact. Id. ¶¶ 27-28.
On June 23, 2008, the same date...
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