## Facts

- Totem Marine Tug & Barge, Inc. entered a six-month time charter (June 19, 1975) for North American Towing, Inc.’s vessel, the M/V *KIRT CHOUEST*.
- The charter contemplated towing a loaded barge from Houston via the Panama Canal to multiple West Coast ports and ultimately Anchorage, Alaska, with redelivery to occur at Galliano, Louisiana, or another mutually agreed port.
- Totem terminated the charter on October 19, 1975, asserting excessive repairs and delays attributable to the vessel.
- North American demanded arbitration, asserting Totem breached; Totem counterclaimed that the vessel was unfit and that redelivery at Anchorage had been mutually agreed.
- In arbitration, North American submitted an itemized damages claim whose largest component sought a specified amount for returning the vessel ($45,000), and it did not request damages measured as unpaid charter hire through the end of the term.
- The arbitration panel nevertheless awarded damages based on unpaid charter hire from October 19 to December 19, offset by the vessel’s earnings during that period, plus miscellaneous items, totaling $74,568.08.
- After the hearing closed, the arbitrators disagreed on the vessel’s earnings figures; an arbitrator obtained earnings information through an ex parte contact with North American’s counsel, without notice to Totem.
- The district court confirmed the award; Totem appealed.

## Issues

1. Whether the arbitrators exceeded their powers under the Federal Arbitration Act by awarding charter-hire damages that were not requested or submitted for decision.
2. Whether ex parte fact-gathering by an arbitrator about a key damages component constituted misconduct that materially prejudiced Totem and required vacatur under the Federal Arbitration Act.

## Decision

- The Fifth Circuit reversed the judgment confirming the award.
- The court held the arbitrators exceeded their powers by awarding charter-hire damages not presented in North American’s claim and not within the parties’ submission.
- The court held the ex parte communication to obtain earnings figures, used in the damages calculation, was misconduct that materially prejudiced Totem.
- The court directed vacatur of the arbitration award.

## Legal Principles

- Arbitrators’ authority is limited to the issues and forms of relief the parties submit; an award resolving a matter outside the submission exceeds arbitral powers under the Federal Arbitration Act.
- A court may vacate an award where arbitrators obtain or rely on material evidence through ex parte communications without notice and an opportunity for the opposing party to respond, resulting in material prejudice.
- Arbitral damages determinations must be grounded in the record developed through procedures that afford both parties a fair hearing.

## Conclusion

The Fifth Circuit vacated the arbitration award because the panel awarded an unsubmitted measure of damages and relied on ex parte-obtained earnings information, exceeding statutory limits on arbitral authority and denying Totem a fair opportunity to contest a central component of the award.


Totem Marine Tug & Barge, Inc. v. North American Towing, Inc., 607 F.2d 649 (5th Cir. 1979)