Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co.

Facts

In June 1975, Totem entered into a contract with Alyeska to transport pipeline construction materials from Houston, Texas to a port in southern Alaska with some stops on the west coast. This was Totem’s first contract and it chartered a barge and ocean-going tug for the job. Totem’s initial costs of operations were covered by a loan from Richard Stair and Pacific, Inc. Pursuant to the contract, Totem was to complete its duties by August 17, 1975, however, Totem encountered a number of problems along the way. First, the amount of materials it was supposed to transport from Texas was approximately 5,000 more tons than represented by Alyeska. Totem had to remodel the barge and loading took 30 days rather than 3 days. This delay was also exacerbated by Alyeska’s delay in assuring Totem it would pay the additional expenses. After departing, it became clear the vessels were traveling slowly due to the extra tonnage. Totem chartered a second tug, but advised it not to pass through the Panama Canal until an amendment was executed by Alyeska agreeing to cover the costs. The amendment was finally executed on August 21, 1975, but the the second tug was delayed in passing through the Canal and the vessels then encountered the tail of a hurricane. When the vessels finally arrived on the west coast, Alyeska ordered Totem to pull into a port at Long Beach, California and Alyeska began off-loading the barge without Totem’s consent.

Alyeska terminated the contract with Totem on September 14, 1975 and, thereafter, refused to pay the outstanding invoices of some $260,000-$300,000. Totem’s creditors began demanding payment and Totem was facing bankruptcy without immediate payment from Alyeska. Totem’s attorney advised Alyeska of Totem’s financial straits and after some negotiations Totem received an offer from Alyeska for $97,500. A settlement and release agreement was signed on November 6, 1975.