First Circuit Posits that Ordering a Violation of Regs may be grounds for vacatur

In Bangor Gas Company, LLC v. H.Q. Energy Services (U.S.) Inc., __ F.3d __, 2012 WL 4373685 (1st Cir. Sept. 26, 2012), an owner of a pipeline argued that an arbitration award required the parties to violate FERC regulations. Without clarifying its position on manifest disregard, the First Circuit upheld the award but stated that ordering a violation of law likely would lead to vacatur:

“we will assume (arguendo but with some confidence) that an arbitration would be vulnerable to the extent that it directed one or both of the parties clearly to violate” a rule or regulation of an administrative agency.

In this case, the Court found no regulation specifically prohibiting the conduct ordered by the award despite an agency staff opinion to that effect.

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