In Sullivan v. Feldman [1], the United States Court of Appeals for the Fifth Circuit had to decide whether inconsistent awards may be all confirmed when the parties’ arbitration agreement granted broad powers to the arbitrators limiting the judicial oversight over their disputes. The Fifth Circuit found that they must be confirmed. This is because inconsistency is not grounds for vacatur under the Federal Arbitration Act (“FAA”).

Parties’ agreements

The case concerned two Louisiana doctors and their related entities (“Doctors”), who, by way of an Engagement Letter of October 22, 2015 (“EL”), entered into an agreement with two of the Defendants (“Feldman Parties”). The EL included, as an attachment, the Capstone Service Agreement (“CSA”) naming as parties three further entities (“Capstone Parties”). The Doctors signed the CSA. The purpose of these agreements was to participate in an insurance arrangement pooling the Doctors’ risks.

The EL included an arbitration clause that provided that either party may submit the dispute to any neutral arbitrator for final resolution in an arbitration proceeding to be concluded within four months. The arbitration was to be conducted pursuant to the Rules of the American Arbitration Association (“AAA”) and Texas Law before a sole arbitrator, but the AAA was not to administer the arbitration. In case the arbitration was not concluded within the agreed four months, any party had the right to “file another written demand for arbitration of the dispute with another” arbitrator. In such instances, the “prior arbitrator” was to be “immediately divested of jurisdiction”.

At the same time, according to the parties’ agreement, the arbitrator had the “exclusive ability to rule on all aspects of the arbitrator’s appointment.” Furthermore, the parties agreed that the arbitrator shall be the only person to decide on issues of arbitrability, “divest[ing] the courts of all powers in disputes involving the parties, except to compel arbitration and confirm, vacate or enforce the award.”

The CSA incorporated this arbitration agreement in full. 

Arbitration proceedings 

The dispute arose when the Doctors alleged that: (1) the Feldman Parties did not disclose their use of the insurance pool, and (2) the Feldman and Capstone Parties refused to wind down the arrangement contrary to the parties’ agreement, despite a judgment of the US Tax Court holding that the arrangement was not a bona fide insurance company. 

Following that, between May and December 2020, both the Doctors and the Feldman and Capstone Parties initiated nine arbitration proceedings to resolve overlapping aspects of their dispute. 

On March 22, 2021, the District Court for the Southern District of Texas enjoined the parties from initiating further arbitrations until awards in the pending proceedings have been issued.

Out of the initiated nine arbitrations: 

• one was stayed;
• one ended with the arbitrator deciding their jurisdiction expired due to the elapse of the four-month time limit;
• two arbitrations were still pending with the final awards not issued; and
• one arbitration was concluded with a final award but neither party moved to confirm or vacate it. 

The remaining four arbitrations (arbitrated by Judge Baker, Mr. Kutcher, Mr. Glass, and Judge Jones) held a joint evidentiary hearing and ended with final awards, in principle in favor of the Doctors. The arbitrators found that the actions of the Feldman and Capstone Parties were in breach of fiduciary duties [2], amounted to malpractice [3], and resulted in the conversion of the Doctors’ funds [4].

However, each arbitrator awarded a different amount, ranging from USD 1.4 million in total (including fees and costs [5]) to more than USD 88.6 million [6]. The awards also differed as to their merits, with one arbitrator proceeding with a class arbitration [7]—an approach explicitly rejected by another arbitrator in his final award [8]. Another difference was that one of the awards held that the President of one of the Capstone Parties (Jeff Carlson) was individually liable [9], while the other three awards dismissed these individual claims [10].

Furthermore, all these awards had been issued after the expiry of the contractual four-month deadline for the issuance of the award. 

Following the issuance of the awards, the parties filed motions and cross-motions with the United States District Court for the Southern District of Texas to either vacate [11] or confirm the awards [12].

District Court proceedings

On December 19, 2022, the District Court denied all motions to vacate any of the awards and confirmed the Glasser and Jones Awards [13].

The District Court reasoned that:

• The parties’ arbitration agreement did not foreclose multiple, separate arbitrations from proceeding at the same time. The wording of the arbitration clause only required that a “dispute” be heard before “a single arbitrator”.
• The Feldman and Capstone Parties argued that the four-month time limit foreseen in the parties’ arbitration agreement excluded the jurisdiction of all arbitrators except Mr. Glasser. The court did not find this convincing as the timeline of events showed that the appointment of Mr. Glasser would have been premature if the parties had indeed intended to observe the four-month time limit.
• At the same time, all four arbitrators decided that the four-month provision was unconscionable and, thus, invalid, as it did not comply with due process requirements. Furthermore, the expiry of the four-month periods was a result of the intentional action of the Feldman and Capstone Parties who delayed unfavorable proceedings. The court decided it had no authority to challenge these conclusions. This is because the arbitration agreement granted the exclusive authority to resolve all disputes to the formation and enforceability of the arbitration agreement to the arbitrators.
• There were no grounds under the FAA that would allow to vacate the awards in this case. In particular, inconsistency among awards is not a basis to vacate an award under the FAA. In light of the parties’ agreement, only arbitrators have been authorized to decide whether and when an earlier arbitral award had a preclusive effect. As such, arbitration is the only proper forum to untangle this situation.
•  As there are no grounds to vacate the awards, the court must grant the motions to confirm.

Following that, the Doctors moved to confirm the Baker and Kutcher Awards, which the court did on January 11, 2023 (Baker Award) and March 7, 2023 (Kutcher Awards) [14]. On March 7, 2023, the court also issued a partial final judgment [15], in which it ordered the Feldman and Capstone Parties to pay the amount awarded in the Jones Award plus interest.

The District Court also upheld its order prohibiting further arbitrations between the parties.

The Feldman and Capstone Parties and Carlson appealed.

Fifth Circuit proceedings

On March 11, 2025, the Fifth Circuit affirmed the confirmation of the Glasser, Baker, Kutcher, and Jones Awards, but reversed the latter in part—with respect to Carlson. The court further vacated and remanded the District Court’s order staying further arbitrations between the parties. 

The Fifth Circuit reasoned that:

• The binding precedents required the court to leave the questions of arbitrability to arbitration when the parties decided to vest these powers in the arbitrators. And this is what the parties had chosen in this case. The court was bound by the express wording of the arbitration agreement in which the parties “divest[ed] the courts of all powers in disputes involving the parties, except to compel arbitration and confirm, vacate or enforce the award.”
• The parties agreed to incorporate in their arbitration agreement the AAA arbitration rules which explicitly grant the arbitrator the right to determine whether the arbitration agreement permits class arbitration. This was sufficient to grant the arbitrator, and not the court, the right to decide whether class arbitration was allowed under the parties’ arbitration agreement. This conclusion was dictated by the Court’s binding precedent (in particular Work v. Intertek [16]), which the court reluctantly accepted. As such, the courts had no right to review the decision in the Jones Award to allow class arbitration.
• The four-month deadline included in the arbitration agreement was a jurisdictional issue in light of the wording of that agreement. As such, this was a matter to be decided by the arbitrator and the court could not upend the arbitrators’ decisions. Similarly, the validity of multiple simultaneous arbitrations did not constitute a gateway issue and was a matter reserved for the arbitrators to decide. 
• The FAA grounds for vacatur of arbitral awards are exclusive and inconsistency among awards is not one of them. However, the District Court’s decision to reflect in the judgment only the Jones Award (the largest award) rendered the other confirmed awards meaningless. 
• While the court may not be equipped to untangle this mess created by the parties’ multiple arbitrations, an arbitrator might be (although whether this is an appropriate way to salvage the situation was an issue beyond the scope of the appeal). The District Court erred in upholding its order prohibiting parties from initiating new arbitrations. The order should have been lifted, as its purpose (to allow pending arbitrations to conclude) has been achieved.
• As for the award against Carlson, he was never a signatory of the EL or the CSA. Further, the direct-benefit estoppel cannot be applied to bind Carlson to the arbitration agreement. The fact that he intervened in earlier two arbitrations to exonerate himself, rather than claim benefit from the EL, could not result in him being estopped from claiming he is not a party to the arbitration agreement. As such, he could not have been bound by the arbitration agreement. Hence, the award with respect to his individual liability required vacating.

Takeaways

There are five key takeaways from Sullivan v. Feldman:

• Firstly, the Fifth Circuit reaffirmed that grounds for vacatur under the FAA are exclusive. As inconsistency among awards is not foreseen in the FAA as a reason to vacate an award, even substantial differences between awards will not be enough to vacate them. This approach reinforces the principle of finality of arbitral awards.
• Secondly, if the parties’ agreement delegates nearly all authority to the arbitrators, the courts in the Fifth Circuit will respect this delegation, if unambiguous. Parties should be aware that this will limit the judicial oversight over their case. While this may lead to more efficiency, the risk is that if the arbitrator gets it wrong, parties will not have a chance to get a second review of the delegated issues.
• Thirdly, like all contracts, the terms of arbitration agreements may be reviewed for validity under doctrines such as unconscionability. When drafting their arbitration agreements, parties should ensure that the terms will be enforceable. 
• Fourth, parties choosing ad hoc arbitration and drafting complex arbitration agreements must consider the consequences of their choices. The discussed case is an extreme illustration of what may go wrong if parties have a poorly worded arbitration clause, which excludes any institutional oversight and limits the court’s powers. Some of the issues, such as inconsistency of the awards, might have been avoided if additional supervision of the arbitral institution was present.
• Fifth, one of the legally significant aspects of the case is the Fifth Circuit’s reluctant reaffirmation of its prior decision in Work—which here has led the court to the conclusion that incorporating the AAA Rules amounts to a “clear and unmistakable” delegation to arbitrators of the authority to decide whether class arbitration is permitted. While several circuits (including the Second [17], Tenth [18], and Eleventh [19] Circuits) accept the delegation-by-incorporation approach, others (including the Third [20], Sixth [21], and Eight [22] Circuits) reject it as insufficient. The Fifth Circuit candidly described Work as “questionable” and “inadvertently” placing the circuit on the “far side of a circuit split,” suggesting it might not align with the Supreme Court decision in Lamps Plus [23]. Yet, it felt bound by Work. These comments included in the opinion of the Fifth Circuit suggest that the court deciding Sullivan v. Feldman might have felt that the issue should be reheard en banc or even referred to the Supreme Court. It remains to be seen whether the appellants will seek further review of the case.

In sum, this case underscores the importance of intentional arbitration clause drafting. Every element—from how arbitrators are appointed, to how parallel disputes are handled, to which rules are incorporated—can drastically alter outcomes. Arbitration users should ensure that their agreements reflect both their substantive and procedural expectations or risk having unforeseen obstacles to their arbitration.

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[1] Sullivan v. Feldman, No. 23-20140 (5th Cir. 2025).

[2] Breach found by all arbitrators (Baker, Kutcher, Glasser and Jones) in their respective awards.

[3] Breach found by arbitrators Baker, Glasser, and Jones in their respective awards.

[4] Breach found by arbitrators Baker, Glasser, and Jones in their respective awards.

[5] Glasser Award.

[6] Jones Award.

[7] Jones Award. 

[8] Glasser Award.

[9] Jones Award. 

[10] Baker, Kutcher, and Glasser Awards. 

[11] The Feldman and Capstone Parties filed motions to vacate the Baker, Kutcher, and Jones Awards. The Doctors filed a motion to vacate the Glasser Award. Carlson filed motions to vacate the Kutcher and Jones Awards. 

[12] The Feldman and Capstone Parties together with Carlson sought to confirm the Glasser Award. The Doctors initially sought to confirm only the Jones Award, but later requested the confirmation of the Baker and Kutcher Awards . 

[13] Sullivan v. Feldman, Civil Action H-20-2236 (S.D. Tex. Dec. 19, 2022).

[14] Sullivan v. Feldman, Civil Action H-20-2236 (S.D. Tex. Mar. 7, 2023).

[15] Sullivan v. Feldman, Civil Action H-20-2236 (S.D. Tex. Mar. 7, 2023).

[16] Work v. Intertek Res. Sols., 102 F.4th 769 (5th Cir. 2024).

[17] Wells Fargo Advisors, LLC v. Sappington, 884 F.3d 392 (2d Cir. 2018).

[18] Dish Network L.L.C. v. Ray, 900 F.3d 1240 (10th Cir. 2018).

[19] Spirit Airlines, Inc. v. Maizes, 899 F.3d 1230 (11th Cir. 2018).

[20] Chesapeake Appalachia, L.L.C. v. Scout Petroleum, L.L.C., 809 F.3d 746 (3d Cir. 2016).

[21] Reed Elsevier, Inc. v. Crockett, 734 F.3d 594 (6th Cir. 2013).

[22] Catamaran Corp. v. Towncrest Pharm., 864 F.3d 966 (8th Cir. 2017).

[23] Lamps Plus, Inc. v. Varela, 587 U.S. 176, 139 S. Ct. 1407 (2019).