Totem Marine Tug & Barge, Inc. v. NO. AMER. TOW., INC., Civ. A. No. 76-2601.

• Decision Date: 31 March 1977
• Docket Number: Civ. A. No. 76-2601.
• Citation: 429 F. Supp. 452
• Parties: TOTEM MARINE TUG & BARGE, INC. v. NORTH AMERICAN TOWING, INC.
• Court: U.S. District Court — Eastern District of Louisiana

429 F. Supp. 452

TOTEM MARINE TUG & BARGE, INC. v. NORTH AMERICAN TOWING, INC.

Civ. A. No. 76-2601.

United States District Court, E. D. Louisiana.

March 31, 1977.

Joseph V. Ferguson, II, New Orleans, La., Roy Morrow Bell, Miller, Boyko & Bell, San Diego, Cal., for plaintiff.

Jerald P. Block, Thibodaux, La., for defendant.

SCHWARTZ, District Judge.

On a former day this matter came before the Court on the motion of Totem Marine Tug & Barge, Inc. to vacate or modify an arbitration award arising out of a time charter agreement (9 U.S.C. § 10 and § 11) and the application of North American Towing, Inc. for confirmation of the arbitrators' award (9 U.S.C. § 9). Now after due consideration of the arguments and memoranda of counsel, the record and the law, the Court makes the following findings of fact and conclusions of law.

To the extent that any of the following findings of fact constitute conclusions of law they are adopted as such, and to the extent that the conclusions of law constitute findings of fact, they are adopted as such.

In the instant proceeding, Totem seeks vacation or modification of the arbitration award on two principal bases: first, that the majority arbitrators exceeded the scope of their authority in expanding the issues submitted to them to include the question of charter hire; and second, that the arbitrators erroneously considered evidence which was not before them during the hearing but which was obtained through counsel for North American following adjournment of the hearings.

The role of the Court in a proceeding such as this one is severely limited. Office of Supply, Government of Republic of Korea v. New York Navigation Co., 469 F.2d 377 (2nd Cir. 1972); Amicizia Societa Navegazione v. Chilean Nitrate and Iodine and Sales Corp., 274 F.2d 805 (2nd Cir.), cert. den'd, 363 U.S. 843, 80 S.Ct. 1612, 4 L.Ed.2d 1727 (1960); Fukaya Trading Co., S. A. v. Eastern Marine Corp., 322 F.Supp. 278 (E.D.La., 1971). There exists a presumption in favor of the arbitration award and the courts have great hesitancy upsetting such an award. Karppinen v. Karl Kiefer Mach. Co., 187 F.2d 32 (2nd Cir. 1951); General Construction Co. v. Hering Realty Co., 201 F.Supp. 487 (E.D.S.C., 1962); Sociedad Armadora Aristomenis Pan. v. Tri-Coast SS Co., 184 F.Supp. 738 (S.D.N.Y., 1960); Gramling v. Food Machinery and Chemical Corp., 151 F.Supp. 853 (W.D.S.C., 1957); Application of States Marine Corp. of Delaware, 127 F.Supp. 943 (S.D.N.Y., 1954). The role of the Court under Title 9 is limited to ascertaining whether or not there exists one of the specific grounds for vacation or modification of an award set out therein. Bell Aerospace Co., Division of Textron, Inc. v. Local 516, International Union, et al., 500 F.2d 921 (2nd Cir., 1974); Fukaya Trading Co. v. Eastern Marine Corp., supra. The burden in such inquiry rests with the party seeking to vacate the award. American Almond Products Co. v. Consolidated Pecan Sales Co., 144 F.2d 448 (2nd Cir., 1944); Application of States Marine Corp. of Delaware, supra.

FACTS

In June 1975, the parties to this litigation and the arbitration giving rise to it entered into a time charter agreement whereby Totem Marine Tug & Barge, Inc. chartered the M/V KIRT CHOUEST, owned by North American Towing, Inc. The term of the charter was six months. According to the terms of the charter party the vessel was to be delivered to the charterer at Galliano, Louisiana (paragraph III). At the expiration of the term of the charter the vessel was to be redelivered to the owner at Galliano or "other port mutually agreed upon" (paragraph VI). At paragraph XXIV of the charter party it is provided that, "any controversies or claims between Owner and Charterer arising out of or relating to any provision of the Time Charter Agreement" shall be submitted for arbitration.

On the same day that the charter agreement was entered into by the parties, a guaranty agreement was also executed. The guaranty was given by Richard Stair, individually, and Pacific, Inc., an Alaska corporation as guarantors for and on behalf of Totem and provided in pertinent part:

Guarantors hereby guarantee to NORTH AMERICAN TOWING, INC., that they will indemnify and secure NORTH AMERICAN TOWING, INC., in the event of a breach or failure to perform by TOTEM of the term of the attached time charter agreement.

Additionally, guarantors hereby guarantee to NORTH AMERICAN TOWING, INC., the sum of $1,840.00 per day plus fuel to be paid to offset the cost of transporting the vessel from the location at the termination of the charter to the delivery port in Galliano, Louisiana. Said amount is not to exceed $45,000.00.

During the period of the charter the M/V KIRT CHOUEST was to tow a loaded material barge, the Marine Flasher, from Houston through the Panama Canal and into the Pacific, first to Los Angeles and then up the coast to Seattle, the final destination being Anchorage, Alaska. On October 19, 1975, Mr. Stair, the principal officer of Pacific, Inc. and Totem notified North American that the charter was terminated as of that date, it being the position of Totem that North American had failed to perform in conformity with the charter agreement. North American did not concur in this conclusion and subsequently requested arbitration of the dispute. North American's demand for arbitration, dated December 16, 1975, was directed to Totem and also to the guarantors Richard Stair and Pacific, Inc. The nature of the dispute listed thereon was stated to be "breach of contract" and the amount claimed, $74,713.63 (subsequently amended to a total of $87,047.82). Upon being advised of the demand for arbitration, counsel representing Totem and the guarantors, by letter of December 31, 1975, requested a clarification of the claim of North American. In response to the direction of the Arbitration Board that the claim be clarified, counsel for North American by letter of February 4, 1976, submitted an itemized statement of claim, item number one of such statement being "Specified contract amount for returning vessel _ _ _ _ $45,000.00". The other fourteen enumerated items included fuel and lube oil for the vessel's return trip, agents fees, and miscellaneous invoices from various dates throughout the charter period.

Totem responded to the claims of North American by asserting a counterclaim in the amount of $29,016.15; by claiming that the KIRT CHOUEST was not fit for the purposes of the charter party; and by taking the position that redelivery had been mutually agreed upon by the parties in Anchorage where the vessel performed work subsequent to the termination of the charter. Additionally respondents Stair and Pacific, Inc., the guarantors, filed a motion to dismiss for lack of jurisdiction for the reason that the guaranty agreement was not encompassed by the arbitration provision of the charter party.

North American took the position that the vessel adequately performed under the charter agreement, that there was no mutual termination or agreement for redelivery in Anchorage, and that the fact that the vessel performed some jobs subsequent to termination resulted from the desire of the vessel owner to mitigate damages. North American further urged that the guaranty agreement was part and parcel of the charter agreement and annexed to it and therefore arbitrable under the charter party's arbitration clause.

Each party named its arbitrator in accordance with their agreement and a neutral arbitrator was named by the American Arbitration Association. The panel conducted hearings in New Orleans, Louisiana, on May 4, 5 and 6, 1976. Position papers were submitted by the parties and oral argument was held on June 7, 1976. The hearings were not transcribed with the parties consent in the interest of reducing costs.

A majority of the arbitrators, composed of the neutral arbitrator and the arbitrator appointed by North American held in a lengthy opinion that Totem breached the charter agreement and failed to perform the term of the time charter. They found that "North American erroneously asked only for its return expenses (plus some miscellaneous accounting items) in damages. The proper measure of North American's damages was the balance of the charter hire due, less the earnings of the vessel during that period", plus miscellaneous other expenses claimed set off by the amount of the counterclaim found due and owing by North American to Totem. The majority decision resulted in a net award of $74,568.08 to North American.

The arbitrator appointed by Totem did not concur in the majority result, except as hereinafter noted. He filed a minority opinion finding that the charter was canceled by Totem for cause and that there was redelivery of the vessel in Anchorage. The minority arbitrator took the position that the majority had impermissibly expanded the scope of the arbitration by means of an award to North American based upon charter hire, the question of redelivery being the sole question at issue.

All the arbitrators were unanimous in their decision that the guaranty agreement was not subject to arbitration and that respondents Stair and Pacific, Inc. should therefore be dismissed.

DID THE MAJORITY ARBITRATORS EXCEED THE SCOPE OF THE MATTER SUBMITTED IN THEIR AWARD OF DAMAGES TO NORTH AMERICAN BASED UPON CHARTER HIRE

It is clear from the demand for arbitration submitted by North American that the subject of the arbitration was to be "breach of contract" and it is equally clear, both from the named respondents and from the itemization of damages filed, that it was contemplated by North American that the guaranty agreement formed part of the "contract" which was to be arbitrated. North American named Mr. Stair and Pacific, Inc. as respondents along with Totem and itemized their claim upon request from respondents to include the "contract amount" for returning the vessel, which amount was the maximum amount provided by the guaranty agreement.

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