Bangor Gas Company, LLC v. H.Q. Energy Services (US) Inc.
695 F.3d 181
1st Cir.2012Background
- Bangor Gas Co. (Bangor) and HQUS arbitrated a dispute over Lateral costs and heater fuel costs arising from a Bucksport Pipeline arrangement.
- The Bucksport Pipeline was meant to deliver HQUS gas from the Maritimes Pipeline to a single customer facility, with Bangor paying Maritimes for the Lateral use.
- HQUS learned six years after operation that the Lateral existed and was not directly connected to the Maritimes Pipeline, leading to dispute over who should pay the Lateral costs.
- A FERC-induced shipper-must-have-title rule and related capacity-release regulations informed the parties’ positions and the panel’s approach to the remedy.
- Arbitration was largely favorable to HQUS; Bangor moved to vacate the award under FAA, while HQUS moved to confirm the award; the district court denied Bangor’s vacatur request and confirmed the award.
- The First Circuit reviews FAA vacatur de novo but gives highly deferential review to arbitration awards.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether manifest-disregard of the law supports vacating the award. | Bangor argues the panel ignored FERC law and the Agreement. | HQUS contends the panel reasonably interpreted the contract and applicable law. | Not established; manifest-disregard not shown to warrant vacatur. |
| Whether the panel correctly allocated Lateral costs. | Bangor contends the Agreement does not require HQUS to pay for Lateral use. | HQUS contends the panel’s construction and remedies align with the contract and FERC policy. | Panel’s Lateral-cost remedy reasonable and within its arbitral authority. |
| Whether the retroactive heater fuel costs could be imposed. | Bangor argues retroactivity invalid under the Agreement’s no-compromise clause. | HQUS supported forward-looking allocation and limited retroactivity. | Panel’s forward-looking heating-cost allocation upheld; no retroactive liability imposed. |
| Whether consideration of certain attachments amounted to misconduct. | Bangor claims panel considered improperly submitted documents. | HQUS maintains documents were part of the record or properly considered. | No misconduct affecting outcome; even if assumed, not prejudicial under FAA. |
| Whether FERC letters triggered a refund obligation. | Bangor asserts staff letters compelled HQUS to refund past reimbursements. | Letters were non-binding staff views; only FERC orders bind the agency. | Non-binding letters do not compel refunds; no vacatur based on them. |
Key Cases Cited
- Bull HN Info. Sys., Inc. v. Hutson, 229 F.3d 321 (1st Cir. 2000) (extremely deferential review of arbitration awards under FAA)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (U.S. 2006) (FAA grounds are exclusive for vacatur; strong deference to arbitration autonomy)
- McCarthy v. CitiGroup Global Mkts. Inc., 463 F.3d 87 (1st Cir. 2006) (manifest disregard limited and not applicable here)
- Wonderland Greyhound Park, Inc. v. Autotote Sys., Inc., 274 F.3d 34 (1st Cir. 2001) (manifest disregard retained focus on contract language or law actually recognized)
- Gupta v. Cisco Sys., Inc., 274 F.3d 1 (1st Cir. 2001) (limits of manifest disregard with contract interpretation)
- Hall Street Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576 (U.S. 2008) (FAA exclusive grounds for expedited vacatur; limits on court review)
- Ramos-Santiago v. United Parcel Serv., 524 F.3d 120 (1st Cir. 2008) (discusses manifest disregard in the First Circuit context)
- Advent, Inc. v. McCarthy, 914 F.2d 6 (1st Cir. 1990) (arbitration awards review standards; deference to arbitrators)
- Johnson v. New Jersey, 384 U.S. 719 (1966) (retroactivity principles informing arbitration and law)