Arbitration Provision in Salvage Contract Binding

A vessel owner, Farnsworth, brought action against a towboat company, seeking a preliminary injunction to prevent the towboat company from enforcing the arbitration clause in their salvage contract and a declaration that the salvage contract was unenforceable because the vessel owner entered into it under duress. The U.S. District Court for the District of Massachusetts denied a motion for injunctive relief, stayed the case pending arbitration, and later confirmed the arbitration award to the towboat company.  Farnsworth appealed to the U.S. First Circuit.

On the evening of July 28, 2012, Farnsworth was anchoring his boat, the M/Y AURORA, in the Weepecket Island anchorage in Buzzards Bay. The boat’s depth sounder malfunctioned and Farnsworth inadvertently allowed the vessel to drift aground. Farnsworth requested a tow over his marine radio, and TNS’s vessel, the NORTHPOINT, responded to his call. Farnsworth also made contact with the Coast Guard, which instructed him that if he had any problems, he should “make the appropriate hail” and the Coast Guard would assist.

On appeal, the court found that the merits at issue in this case turned on whether the contract which ensued was a towage or a salvage contract because under maritime law, towage is compensated at a contract rate, whereas a salvor is entitled to an equitable award equal to a portion of the value of the salvaged property.  The parties differed significantly over whether Farnsworth’s vessel required towage or salvage, and their versions of the facts reflected the wide gap, though Farnsworth did sign a “salvage contract,” the terms of which he subsequently disputed and claimed he was coerced into signing.  Subsequently, while Farnsworth threatened litigation and denied the towboat company’s salvage claim, the towboat company invoiced Farnswroth for payment of the company’s estimate of a fair salvage award given the value of the salvaged property and principles of salvage law. Farnsworth did not pay the invoice, and the towboat company demanded arbitration.

While arbitration was pending, Farnsworth filed his action in federal court.  On appeal, the court found no proper basis on which to refuse to confirm the arbitration panel’s award, writing that “Farnsworth’s belated attempt to press his duress claim in another forum by advancing allegations that he should have made when he sought to enjoin the arbitration provided no reason not to confirm.”  Accordingly, the district court’s judgment was affirmed.

Farnsworth v. Towboat Nantucket Sound, Inc.