Totem Marine Tug & Barge v. North American Towing

Totem Marine Tug & Barge, Inc. (Totem) (plaintiff) entered an agreement to charter a vessel owned by North American Towing, Inc. (North American) (defendant). In the charter agreement, the parties incorporated the rules of the American Arbitration Association to govern their disputes. The vessel was delivered to Totem in Louisiana and was supposed to be returned to North American at the end of the charter term at a mutually agreed-upon port. The vessel was intended to tow a barge for several months around the North American continental coastline. Totem terminated the charter early due to excessive repairs needed by the vessel, which resulted in delays. North American considered Totem in breach of contract and requested arbitration to resolve the dispute. Upon request, North American provided an itemized statement of its claim. The itemized list did not include damages for charter hire, that is, the contract amount for using the vessel between Totem’s early termination date and the end date of the charter term. At the arbitration proceeding, the arbitration panel awarded charter-hire damages to North American in addition to its claimed damages, stating that North American erred in excluding charter-hire damages from its claims list. However, because North American did not calculate the charter-hire damages for its claims list, the panel needed information to determine the proper award amount. The panel independently contacted North American for an estimate but failed to notify Totem or give Totem the opportunity to produce its own estimate. North American applied to have a federal district court confirm the award, and Totem moved to have the award vacated or modified. Totem claimed that the arbitration panel exceeded its authority by adding unclaimed charter-hire damages and committed prejudicial misconduct by engaging in ex parte communications. The district court confirmed the award, and Totem appealed.