Respondents first argue that Federal Rule of Civil Procedure 17(b), captioned "Capacity to Sue or be Sued," prevents O & Y Landmark from bringing this petition before the court.
The rule dictates that as a partnership, petitioner's "capacity to sue or be sued shall be determined by the law of the state in which the district court is held," Fed.R.Civ.P. 17(b). Respondents' view is that because the law of the District of Columbia does not permit a partnership to bring an action in its own name, O & Y Landmark's petition is fatally defective and should be dismissed. Respt's Mem. in Opp. at 9. Respondents cite two cases for this: Affie, Inc. v. Nurel Enterprises, Inc., 607 F. Supp. 220, 221 (D.D.C. 1984), and Day v. Avery, 179 U.S. App. D.C. 63, 548 F.2d 1018, 1022 (D.C.Cir. 1976), cert. denied, 431 U.S. 908, 97 S. Ct. 1706, 52 L. Ed. 2d 394 (1977).
This argument is correct as far as it goes. But, as O & Y Landmark points out, Rule 17(b) goes farther. After the language quoted above, the rule adds a critical qualification: " except (1) that a partnership or other unincorporated association, which has no such capacity by the law of such state, may sue or be sued in its common name for the purpose of enforcing for or against it a substantive right existing under the Constitution or laws of the United States . . . ." (Emphasis added.)
The court has previously quoted Moses H. Cone Memorial Hosp. v. Mercury Const., 460 U.S. 1, 25 n. 32, 74 L. Ed. 2d 765, 103 S. Ct. 927 (1983): "The Arbitration Act is something of an anomaly in the field of federal-court jurisdiction. It creates a body of substantive federal law establishing and regulating the duty to honor an agreement to arbitrate, yet it does not create any independent federal-question jurisdiction under 28 U.S.C. § 1331 (1976 ed. Supp. V) or otherwise." (Emphasis added.)
Additionally, one of respondents' own cases undermines their argument. The Day court stated that Rule 17(b)'s term "'substantive rights' has been interpreted to embrace every manner of claim for relief -- whether constitutional . . . [or] statutory, e.g., Petrol Shipping Corp. v. Kingdom of Greece, 2 Cir. 360 F.2d 103, cert. denied, 385 U.S. 931, 87 S. Ct. 291, 17 L. Ed. 2d 213 (1966) . . . (suit to compel arbitration under Federal Arbitration Act)." Day, 548 F.2d at 1022 n. 11. Thus, this circuit specifically recognizes that Section 4 of the Federal Arbitration Act creates a substantive federal right for purposes of Rule 17(b) (1). On this authority, the court rules that O & Y Landmark may bring this petition in its own name. Respondents' first objection fails.
Respondents' second and substantive objection to the petition also is unavailing. The Nordheimers and Feldman contend that they have never entered in a personal capacity into a "written agreement for arbitration." Respondents argue that unless they have, they may not be compelled to arbitrate under 9 U.S.C. § 4. According to respondents, the only agreement they have entered into in an individual capacity is the guaranty of NF Associates' performance of the Woodlake Joint Venture. That guaranty having no arbitration clause, respondents contend that there is no written agreement to arbitrate
to serve as the basis for compelling them as individuals to participate in the arbitration.
In response, petitioner contends that the guaranty itself may be read as an agreement to arbitrate. In support, O & Y Landmark cites: Compania Espanola de Petroleos, S.A. v. Nereus Shipping, S.A., 527 F.2d 966 (2d Cir. 1975), cert. denied, 426 U.S. 936, 96 S. Ct. 2650, 49 L. Ed. 2d 387 (1976), and Antco Shipping Co., Ltd. v. Sidermar S. p. A., 417 F. Supp. 207 (S.D.N.Y. 1976).
Both cases dealt with shipping contracts containing arbitration clauses. In both instances, a third party had executed a written guaranty for the performance of one of the contracting parties. Although neither guaranty contained a specific clause agreeing to arbitrate, both courts held that the guaranty bound the guarantor to fulfil the agreement to arbitrate written into the underlying contract. In essence, the two courts viewed the guaranty as incorporating the contract's agreement to arbitrate. The Nereus court felt that "although the guaranty does not explicitly restate the specific obligations" of the underlying contract whose performance had been guaranteed, "such iteration [is] unnecessary in view of the broad language of the guaranty." Nereus, 527 F.2d at 973.
In Nereus, the guarantor undertook that upon the guaranteed party's "default in payment or performance of its obligations under the [contract], we will perform the balance of the contract and assume the rights and obligations of [the guaranteed party] on the same terms and conditions as contained in the [contract]." Id. at 969-70. The Nereus court stated that:
"whether a guarantor is bound by an arbitration clause contained in the original contract necessarily turns on the language chosen by the parties in the guaranty. We are aided in our construction of the language here by prior decisions which make clear that where an arbitration clause is applicable by its own terms to all disputes and is not limited to those arising between the [the original parties to the underlying contract], the agreement to arbitrate binds 'not only the original parties, but also all those who subsequently consent to be bound by the terms of the contract.'"
Id. at 973. (Citations omitted.).