51 N.Y.2d 936 (1980)
When a partnership dissolves and a successor partnership continues operating under the terms of the original partnership agreement, including a broad arbitration clause, the members of the successor partnership are bound by that clause, even without a new written agreement.
Summary
Tillow sought to stay arbitration of his claim against the successor law firm, arguing the original partnership agreement containing the arbitration clause dissolved when a partner withdrew. The Court of Appeals held that because the successor firm treated the original agreement as binding, the broad arbitration clause remained enforceable. This decision underscores the importance of parties’ conduct in determining the continued validity of agreements after organizational changes. It clarifies that implied consent to an agreement’s terms, particularly an arbitration clause, can be inferred from consistent behavior.
Facts
In December 1972, Tillow signed a partnership agreement with Kreindler, Relkin, Olick & Goldberg. This agreement contained a broad clause requiring arbitration of any controversies arising from the agreement. Olick withdrew from the partnership in 1974, dissolving the original partnership. The remaining partners continued operating as Kreindler, Relkin & Goldberg. No new written partnership agreement was executed. Tillow departed the firm in 1979 and subsequently sought an accounting and damages. The successor firm sought to compel arbitration based on the 1972 agreement. Tillow then sought to stay arbitration.
Procedural History
Tillow sought to stay arbitration. The Appellate Division found the members of the successor firm treated the 1972 agreement as binding and continuing in effect. The Court of Appeals affirmed the Appellate Division’s order, upholding the enforceability of the arbitration clause.
Issue(s)
Whether the arbitration clause in the original partnership agreement remained enforceable against Tillow and the successor partnership, even though the original partnership had dissolved and no new written agreement was executed.
Holding
Yes, because by treating the 1972 agreement as continuing in force after the dissolution of the original partnership, the members of the successor partnership demonstrated their intention to be governed by the agreement’s arbitration clause.
Court’s Reasoning
The court reasoned that although the original partnership dissolved upon Olick’s withdrawal in 1974, the successor firm’s conduct demonstrated an intent to be bound by the 1972 agreement, including the arbitration clause. The court noted the Appellate Division’s finding that the successor firm treated the 1972 agreement as binding and continuing in effect, a conclusion “amply supported by the record.”
The court emphasized the broad and unequivocal nature of the arbitration provision in the 1972 agreement. By continuing to operate under the terms of the agreement, the successor firm implicitly consented to its provisions, including the arbitration clause. The court cited Matter of Levin-Townsend Computer Corp. v Holland, 29 AD2d 925 and Alpert v Bannon, 40 AD2d 988, supporting the principle that conduct can demonstrate an intention to be governed by an agreement’s arbitration clause.
The court concluded that “[s]ince the parties agreed to arbitration, it follows that all further issues concerning plaintiff’s claim are for the arbitrator to resolve.” This highlights the strong presumption in favor of arbitration when a valid agreement to arbitrate exists.