Primex Intern. Corp. v. Wal-Mart Stores, Inc.

• Decision Date: 27 March 1997
• Docket Number: WAL-MART
• Citation: 89 N.Y.2d 594,657 N.Y.S.2d 385,679 N.E.2d 624
• Parties: , 679 N.E.2d 624 In the Matter of PRIMEX INTERNATIONAL CORP., Formerly Known as Primex International Trading Corporation, Appellant, v.STORES, INC., Respondent.
• Court: New York Court of Appeals Court of Appeals

Page 385

657 N.Y.S.2d 385

89 N.Y.2d 594, 679 N.E.2d 624

In the Matter of PRIMEX INTERNATIONAL CORP., Formerly Known as Primex International Trading Corporation, Appellant, v. WAL-MART STORES, INC., Respondent.

Court of Appeals of New York.

March 27, 1997.

Garfunkel, Wild & Travis, P. C., Great Neck (David A. Zarett, Roy W. Breitenbach, Joseph E. Oliva and Steven J. Chananie, of counsel), for appellant.

Leader & Berkon, New York City (Joseph G. Colao and Glen Silverstein, of counsel), for respondent.

OPINION OF THE COURT

LEVINE, Judge.

In 1988, appellant Primex International Corporation was retained, on a transaction-by-transaction basis, by respondent Wal-Mart Stores, Incorporated as a buying agent for purchases of South American manufactured consumer goods. Two years later, Wal-Mart appointed Primex as its exclusive buying agent and, on February 6, 1990, the parties executed a three-year "Service Agreement" (the 1990 Agreement) which defined their rights and obligations, the services appellant was to provide and the commission structure governing each transaction it brokered during the term of the Agreement. The 1990 Agreement contained a New York choice of law provision and gave either party the right to terminate upon six months' notice. It also included a broad arbitration clause which provided that:

"[a]ny and all disputes arising out of, under or in connection with this Agreement including, without limitation, the validity, interpretation, performance and breach thereof shall be settled by arbitration in New York City, New York, pursuant to the Rules of the American Arbitration Association in force at the time arbitration is demanded" (emphasis supplied).

In addition, the 1990 Agreement contained a general merger or integration clause which stated:

"This Agreement may not be amended, changed, modified, or altered except by a writing signed by both parties. All prior discussions, agreements, understandings or arrangements, whether oral or written, are merged herein and this document represents the entire understanding between the parties."

After the 1990 Agreement expired, the parties entered into a second "Service Agreement" (the 1993 Agreement) which controlled the parties' South American transactions over the next two years, until its stated termination date of February 6, 1995. The 1993 Agreement contained the same arbitration, New York choice of law, notice of termination, and merger provisions as the 1990 Agreement.

Upon expiration of the 1993 Agreement, a third contract containing the same arbitration, choice of law, termination and merger clauses was forwarded by Primex's attorney to Wal-Mart corporate counsel. Wal-Mart's counsel removed the arbitration clause contained in the signed draft and changed the title of the Agreement to "Buying Agency Agreement". These changes were accepted by Primex, effective February 7, 1995. Thus, as revised, the terms of the 1995 Agreement were essentially identical to the earlier Agreements, except that it did not contain any provision for the arbitration of disputes arising out of, or in connection with, that Agreement.

Four months later, Wal-Mart advised Primex that, pursuant to the six-month notice provision set forth in the 1995 Agreement, it was terminating their business relationship effective December 1. However, in early October, upon allegedly learning that Primex had been soliciting and accepting kickback payments from the South American vendors in violation of the parties' three Agreements, Wal-Mart immediately terminated appellant as its buying agent. Wal-Mart subsequently commenced an action against Primex in the Circuit Court of Benton County, Arkansas, for civil and punitive damages and an accounting, based on causes of action for fraud and breaches of the three successive written Agreements entered into between the parties in 1990, 1993, and 1995. The gravamen of the causes of action was that Primex had been covertly demanding, charging, and accepting kickbacks from certain South American vendors for placing Wal-Mart orders with those vendors "for at least eight years" and passing these payments on to Wal-Mart in the purchase prices of the merchandise. Wal-Mart specifically alleged that this conduct constituted a breach of "each and every buying agency agreement".

Upon commencement of Wal-Mart's Arkansas suit, Primex served it with a demand for arbitration, pursuant to the arbitration clauses contained in the 1990 and 1993 Agreements. When Wal-Mart rejected the demand, Primex commenced this CPLR article 75 proceeding to compel arbitration of the parties' dispute in New York and to stay the Arkansas action.

In its opposition papers, Wal-Mart asserted a counterclaim seeking to stay arbitration under CPLR 7503. The principal ground advanced by Wal-Mart in its answer was that the general merger clause contained in the 1995 Agreement--coupled with the absence of an arbitration clause--had the legal effect of impliedly superseding the 1990 and 1993 Agreements, thereby eliminating any obligation to arbitrate claims arising under the two prior Agreements.

Supreme Court rejected Primex's petition to stay the Arkansas action, concluding that the contractual language contained in the 1995 Agreement was to be given retroactive effect. The court found that the presence of a general merger clause expressed the parties' intent to operate solely under the 1995 Agreement and represented the entire understanding of the parties. Because it determined that no agreement to arbitrate existed after February 7, 1995, Supreme Court ruled that Wal-Mart could not now be deprived of its right to seek redress in a court of law. The Appellate Division affirmed, stating that it was "not imperative that the latest agreement expressly revoke the prior agreements' arbitration provisions to effectively cancel those provisions" (227 A.D.2d 219, 220, 642 N.Y.S.2d 645). We granted Primex leave to appeal, and now modify the Appellate Division's order.

The courts below correctly ruled that the issue of whether the claims in the Wal-Mart complaint are arbitrable, i.e., whether there is a clear, unequivocal and extant agreement to arbitrate the claims, is for the court and not the arbitrator to determine (see, Sisters of St. John the Baptist v. Geraghty Constructor, 67 N.Y.2d 997, 998, 502 N.Y.S.2d 997, 494 N.E.2d 102; Matter of Schlaifer v. Sedlow, 51 N.Y.2d 181, 184, 433 N.Y.S.2d 67, 412 N.E.2d 1294). Because the 1995 Agreement between the parties did not contain an arbitration clause in its final form, those courts also correctly held that, insofar as Wal-Mart's causes of action arise out of Primex's performance of that Agreement, its petition to compel arbitration of such claims should be denied. We, however, disagree with the courts below as to the arbitrability of the claims in Wal-Mart's complaint arising out of the 1990 and 1993 Agreements.

Generally, a broad arbitration clause in an agreement survives and remains enforceable for the resolution of disputes arising out of that agreement subsequent to the termination thereof and the discharge of obligations thereunder, irrespective of whether the termination and discharge resulted from the natural expiration of the term of the agreement (Nolde Bros. v. Bakery Workers, 430 U.S. 243, 251-253, 97 S.Ct. 1067, 1071-73, 51 L.Ed.2d 300), a unilateral termination under a notice of cancellation provision (Hamilton & Co. v. American Home Assur. Co., 21 A.D.2d 500, 503, 251 N.Y.S.2d 215, affd 15 N.Y.2d 595, 255 N.Y.S.2d 262, 203 N.E.2d 649) or the breach of the agreement by one of the parties (Matter of Terminal Auxiliar Maritima v. [Winkler Credit Corp.], 6 N.Y.2d 294, 298, 189 N.Y.S.2d 655, 160 N.E.2d 526; see also, Litton Fin. Print. Div. v. National Labor Relations Bd., 501 U.S. 190, 205-206, 111 S.Ct. 2215, 2224-25, 115 L.Ed.2d 177). Thus, although both the 1990 and 1993 contracts have expired, the broad arbitration clauses contained in them would be enforceable as to the allegations in the Wal-Mart complaint pertaining to the acts of Primex during the terms of the 1990 and 1993 Agreements--all of which arise out of the procurement of merchandise by Primex as Wal-Mart's agent under those Agreements. It follows that Primex's petition to compel arbitration of those claims should prevail unless, as the courts below held, the merger clause of the 1995 Agreement superseded the 1990 and 1993 contractual obligations of the parties to submit disputes arising under those Agreements to arbitration.

We conclude that the language of the merger clause was insufficient to establish any intent of the parties to revoke retroactively their contractual obligations to submit disputes arising thereunder to arbitration. Thus, we modify the order of the Appellate Division and remit to Supreme Court to determine which of...