Primex International Corp. v. Wal-Mart Stores, Inc., 89 N.Y.2d 594 (1997)
A general merger clause in a subsequent contract does not automatically nullify an arbitration agreement in a prior contract, especially when the subsequent agreement does not explicitly revoke the arbitration provision of the prior agreement and the claims arise under the prior agreement.
Summary
Primex, a buying agent for Wal-Mart, sought to compel arbitration in New York regarding a dispute. Wal-Mart argued that a later agreement without an arbitration clause superseded prior agreements that included one. The New York Court of Appeals held that the arbitration clauses in the earlier agreements remained enforceable for disputes arising under those agreements, even though a subsequent agreement contained a general merger clause and lacked an arbitration provision. The court reasoned that the merger clause did not demonstrate a clear intent to retroactively revoke the arbitration obligations of the earlier contracts.
Facts
Primex acted as a buying agent for Wal-Mart, with their relationship governed by three successive service agreements in 1990, 1993, and 1995. The 1990 and 1993 agreements contained arbitration clauses and New York choice of law provisions. The 1995 agreement, however, omitted the arbitration clause, although it retained a general merger clause stating it represented the entire understanding between the parties. Wal-Mart terminated the relationship with Primex and filed suit in Arkansas, alleging Primex accepted kickbacks from vendors during the entire term of the business relationship, including under the 1990 and 1993 agreements. Primex then demanded arbitration in New York based on the arbitration clauses in the 1990 and 1993 agreements.
Procedural History
Wal-Mart sued Primex in Arkansas. Primex sought to compel arbitration in New York and stay the Arkansas action. The Supreme Court denied Primex’s petition, holding the 1995 agreement’s merger clause retroactively superseded the prior agreements. The Appellate Division affirmed. The New York Court of Appeals granted Primex leave to appeal.
Issue(s)
Whether a general merger clause in a subsequent contract, which does not contain an arbitration clause, supersedes and nullifies the arbitration agreements contained in prior contracts between the same parties, such that disputes arising under the prior contracts are no longer subject to arbitration.
Holding
No, because the language of the merger clause was insufficient to establish any intent of the parties to retroactively revoke their contractual obligations to submit disputes arising under the prior agreements to arbitration.
Court’s Reasoning
The Court of Appeals reasoned that a general merger clause aims to apply the parol evidence rule, preventing extrinsic evidence from altering the terms of a completely integrated writing. Enforcing the arbitration clauses in the 1990 and 1993 agreements doesn’t violate this principle because it doesn’t vary, contradict, or supplement the 1995 agreement. The 1995 agreement lacked an arbitration clause, indicating an intent to allow judicial resolution for claims arising under it, leaving the arbitration provisions of prior agreements intact for disputes originating under those agreements. The court quoted Champlin Ref. Co. v. Gasoline Prods. Co., 29 F.2d 331 (regarding a similar merger clause), emphasizing that such clauses are intended to “buttress rights accruing under the royalty contract—to cut off defenses otherwise open,” but not to destroy other contracts. The Court also pointed out Wal-Mart’s inconsistent position, as they were suing for breach of the prior agreements in Arkansas while simultaneously arguing those agreements were cancelled. “[I]n point of fact, the appellant does not regard the contract as having been ‘cancelled’ in any real sense, since it is actually suing for its breach in the action now stayed. If the contract had been so ‘cancelled,’ then neither party would have a claim under it, and [appellant’s] lawsuit would be ripe for dismissal” (Matter of Terminal Auxiliar Maritima [Winkler Credit Corp.], 6 NY2d at 298). The court emphasized that, absent a clear indication to abandon arbitration rights, the presumption is that the parties intended the arbitration forum to survive termination of the agreement as to disputes arising under it.