Opinion ID: 718267
Heading Depth: 3
Heading Rank: 1

Heading: Statutory and Other Authority to Bind the Partnership

Text: 20 Stratton Oakmont contends that the district court asked and answered the wrong question. The issue, in the view of Stratton Oakmont, is not whether the partnership agreed to arbitrate, but whether either partner did. Stratton Oakmont emphasizes that Serven's agreement was to arbitrate all disputes with Stratton Oakmont, not just disputes involving the account he was opening. According to Stratton Oakmont, Serven's agreement requires arbitration of the partnership claims because a partnership is not an entity, but rather an association of individuals with a defined business relationship. Thus, whether the partnership as an entity entered into an agreement, it asserts, is irrelevant. 21 Stratton Oakmont's argument is without merit. In the first place, it flies in the face of one of the provisions of the Uniform Partnership Act, as adopted by Washington: Wash. Rev.Code § 25.04.090(2) provides that [a]n act of a partner which is not apparently for the carrying on of the business of the partnership in the usual way does not bind the partnership unless authorized by the other partners. In addition, Stratton Oakmont's argument overlooks the fact that partnerships have characteristics as entities as well as those of aggregations of individuals under the Uniform Partnership Act (UPA), although the UPA generally adopted the aggregate theory of partnerships. See generally J. William Callison, Partnership Law and Practice § 3.01, at 3-6 (1992) (Even if the UPA appears on its face to adopt an aggregate approach to partnerships, a close examination of the UPA demonstrates a preponderance of entity-type characteristics: partnerships can hold title to property; partners do not have individual rights to possess and use partnership property, and are required to account to the partnership for profits arising from their individual use of partnership property; partners are agents of the partnership and can contractually bind it; partners have financial relationships with the partnership; and, the partnership business can continue after dissolution, albeit technically in a new partnership.). 2 Indeed, the State of Washington has recognized that [u]nder both the common law and the Uniform Partnership Act, partnerships are treated both as aggregates of individuals and entities distinct from the people involved in the partnership. State v. Birch, 36 Wash.App. 405, 675 P.2d 246, 248 (1984). 22 We conclude, therefore, that the district court properly inquired whether Wagner/Serven as a partnership was bound to the arbitration agreement that Serven individually signed. We also conclude that the district court answered the question correctly. 3 There is no evidence that Wagner expressly authorized Serven to bind the partnership to arbitration. Nor is there sufficient evidence of statutory or apparent authority. When Serven opened his individual account and signed the agreement, his act was not apparently for the carrying on of the business of the partnership in the usual way. See Wash. Rev.Code. § 25.04.090(2). At the time Serven signed the agreement, the partnership did not even exist! 4 23 The district court also did not err in finding that the partnership had not ratified Serven's individual agreement to arbitrate. Wagner/Serven opened its own account and did not in any way adopt, benefit from, or endorse Serven's arbitration agreement on his individual account. See Partnership Law and Practice, supra, § 8.18, at 8-20 (Generally, an act [becomes ratified] if the partners elect to treat an unauthorized act as though it were authorized, or if the partners conduct themselves as though there were such an election.). Because the partnership is not obligated by the arbitration agreement, we affirm the district court's holding that no arbitration agreement exists between Wagner/Serven and Stratton Oakmont. 5