Despite its promise, arbitration is not always cheaper and faster than litigation, especially when class arbitration is involved. In Sullivan v. Feldman, the Fifth Circuit encountered what it called “the Bleak House of arbitration.”[1] The case involved nine overlapping proceedings over five years before nine different arbitrators, leading to four inconsistent awards.[2] There was even an attempt, after the appeal was filed, to initiate a tenth arbitration.[3] Two of the awards reached different results on class arbitration: one allowed class arbitration, while the other did not.[4] Constrained by the parties’ arbitration agreement and broad delegation clause, the court affirmed the confirmation of all four awards.[5] On March 11, the Fifth Circuit ordered the U.S. District Court for the Southern District of Texas, on remand, to stay the litigation while the parties initiate an eleventh arbitration to reconcile the conflicting awards.[6]
Sullivan is part of a larger split, percolating through the circuit courts, on whether incorporation of the rules of the American Arbitration Association (AAA) into an arbitration agreement means that the parties intended to delegate class arbitrability issues to the arbitrator. In its March ruling, the Fifth Circuit panel “reluctantly” concluded that the issue was delegated to the arbitrators under circuit precedent, and affirmed the contrary awards.[7] On June 25, the U.S. Supreme Court granted the defendants an extension of time to file a petition for certiorari on this issue.[8] As of this writing, the defendants have not filed any petition for certiorari. The litigation in the district court is currently stayed, per a June 24 order.[9]
Sullivan also stands as a reminder that broad delegations of power to arbitrators may prevent courts from correcting even serious errors when arbitrators go astray. Here, the parties’ arbitration agreement provided for arbitration before a “single” arbitrator, to be resolved within four months. Nevertheless, the case has been going on for five years and as of this writing is now before its eleventh arbitrator.[10]
Background
Doctors Scott Sullivan and Frank Dellacroce, owners of various medical entities in New Orleans, engaged Stewart Feldman and his law firm to help “mitigate financial risk and save taxes.”[11] The investment plan “fell apart” after the doctors learned that the U.S. Tax Court had deemed a risk pool in the arrangement not to be a “bona fide insurance company.”[12] The ensuing dispute led to nine separate, overlapping arbitrations, culminating in a single hearing before the “final four” arbitrators.[13] The hearing, held at a five-star resort, cost over $300,000 in room fees alone, and resulted in four wildly different awards, reaching conflicting conclusions on the “hotly disputed” issue of class certification and the personal liability of Jeff Carlson, president of one of the Capstone entities.[14] The amounts of the conflicting awards ranged from about $1 million to about $88 million.[15]
The district court entered a judgment “embodying all four awards in their riotously varying glory.”[16] The defendants appealed.[17]
The Reluctant Affirmance of Class Arbitrability
The panel “reluctantly” followed precedent holding that incorporation of the AAA Rules delegates class arbitrability issues to the arbitrators.[18] The parties’ agreement incorporated the AAA Commercial Arbitration Rules, which themselves incorporate the Supplementary Rules.[19] One of the Supplementary Rules provides: “[T]he arbitrator shall determine . . . whether the applicable arbitration clause permits the arbitration to proceed on behalf of or against a class.”[20]
Circuit courts are split on the effect of incorporation of the AAA Rules into an arbitration agreement: the Second, Tenth, and Eleventh Circuits have held that incorporation of the AAA Rules delegates class arbitrability issues to the arbitrator, but the Third, Fourth, Sixth, and Eighth Circuits have held it does not.[21] The court acknowledged that its own precedent was “questionable” in light of the Supreme Court’s admonishment in Lamps Plus, Inc. v. Varela that ‘‘[l]ike silence, ambiguity does not provide a sufficient basis to conclude that parties” agreed to delegate class arbitrability.[22] Nevertheless, the court affirmed the award.
Prior to Sullivan, the Fifth Circuit had charted a “middle path” between the two options.[23] In 2012, the court held “that the express adoption of [the AAA] rules presents clear and unmistakable evidence that the parties agreed to arbitrate arbitrability.”[24] But in 2019, the court decided 20/20 Communications, Inc. v. Crawford.[25] In that case, the court declined to decide whether incorporation of the AAA Rules delegates class arbitrability.[26] Instead, the court focused on a class arbitration bar in the parties’ agreement, which provided that the arbitrator “does not have the authority to fashion a proceeding gas class or collective action.”[27] The court concluded that the incorporation of the AAA Rules did not clearly and unmistakably delegate arbitrability to the arbitrator when “compare[d]” with the class arbitration bar.[28] But as one observer has pointed out, “the only way you get to the conclusion that the parties prohibited class proceedings is to read and interpret the contract,” and “the delegation provision should send all contract interpretation issues to the arbitrator.”[29] Consequently, 20/20 Communications “amounts to an elevation of the issue of class arbitrability.”[30]
A more recent Fifth Circuit case, however, is in tension with 20/20 Communications. In Work v Intertek Resource Solutions, Inc., the court held that incorporation of the JAMS Rules clearly and unmistakably delegates class arbitrability.[31] But the JAMS Rules at issue, unlike the AAA Rules, do not specifically mention class arbitrability. Rather, they state only that “[j]urisdictional and arbitrability disputes . . . shall be submitted to and ruled on by the Arbitrator.”[32] The Sullivan court thus described Work as an “outlier” in that “[n]o other circuit court has held that a rule generally delegating arbitrability questions carries with it a delegation of class arbitrability.”[33] The Fifth Circuit declined to rehear Sullivan en banc to resolve this tension.[34]
Work is also in tension with developing Supreme Court precedent concerning delegation of arbitrability and its relationship to class arbitrability. In First Options of Chicago, Inc. v. Kaplan, the Supreme Court unanimously held in 1995 that “[c]ourts should not assume that the parties agreed to arbitrate arbitrability unless there is ‘clea[r] and unmistakabl[e]’ evidence that they did so.”[35] Five years later, in Stolt-Nielsen S.A. v. AnimalFeeds International Corp., the Court held that an arbitration agreement that was “silent” as to class arbitration did not allow for class arbitration.[36] In a 5-3 decision by Justice Alito, the Court reasoned that “class-action arbitration changes the nature of arbitration to such a degree that it cannot be presumed the parties consented to it by simply agreeing to submit their disputes to an arbitrator.”[37] The “differences between bilateral and class-action arbitration” were “too great for arbitrators to presume . . . that the parties’ mere silence on the issue of class-action arbitration constitutes consent to resolve their disputes in class proceedings.”[38] The interaction of these two cases has been working itself out in the Circuit Courts and the Supreme Court.
In the 2013, the Supreme Court “seemingly took a step back from Stolt-Nielsen by establishing that an arbitrator’s clause construction award will be upheld under the FAA as long as the arbitrator ‘(even arguably) interpreted the contract.’”[39] In Oxford Health Plans LLC v. Sutter, the Court unanimously held that an arbitrator may determine class arbitrability when “[t]he parties agreed that the arbitrator should decide whether their contract authorized class arbitration.”[40] But in 2019, the Court expressed renewed skepticism towards the delegation of class arbitrability when it held 5-4 in Lamps Plus, Inc. v. Varela that “[c]ourts may not infer from an ambiguous agreement that parties have consented to arbitrate on a classwide basis.”[41] Chief Justice Roberts authored the majority opinion, and Justices Ginsburg, Breyer, Sotomayor and Kagan wrote four dissents. Since, then, Justices Barrett and Jackson have replaced Justices Breyer and Ginsburg on the Court. Based on this history, some commentators have suggested that the Supreme Court is likely to rule that “incorporation of the AAA rules is not ‘clear and unmistakable’ enough to delegate” to the arbitrator the authority to decide class arbitrability.[42]
The Multiple Arbitrators and the Four-Month Deadline
Apart from the class arbitrability issue, the parties’ arbitration agreement contained provisions that “encouraged, or at least permitted, a veritable parade of arbitrations.”[43] One provision gave the arbitrator the “the sole and exclusive ability to rule on all aspects of the arbitrator’s appointment.’’[44] Another provided that “either party may directly appoint the single arbitrator” who “shall proceed to resolve the dispute.’’[45] The arbitrators construed the “single arbitrator” provision to mean that “multiple arbitrations could proceed simultaneously” because each arbitration was a different “dispute.”[46] The parties’ agreement did not allow the court to “second-guess” the arbitrators’ decision, “as long as the arbitrator’s decision ‘draws its essence’ from the contract—even if [the court] disagree[s] with the arbitrator’s interpretation.’’[47] Therefore, under the parties’ agreement, the court was bound to defer to the arbitrators.[48]
Other provisions, too, contributed to the Bleak House “parade.” The agreement stated: “[T]he arbitrator has exclusive authority to resolve all disputes and challenges to the formation and enforceability of this” agreement.[49] If the arbitrator did not complete the arbitration within four months, “any party then may file another written demand for arbitration . . . with another” arbitrator.[50] The final four arbitrators all agreed that this deadline was “unenforceable as unconscionable.”[51] The court refused to review this determination, following the parties’ agreement.[52] Under Supreme Court precedent, ‘‘[t]he sole question for [this court] is whether the arbitrator[s] (even arguably) interpreted the parties’ contract, not whether [they] got its meaning right or wrong.’’[53] The court therefore declined to “upend” the arbitrators’ unconscionability finding.[54]
The clause delegating enforceability questions thus backfired here against the drafter in a way similar to the AAA Rule delegating questions of arbitrability, including class arbitrability. At least one scholar has suggested that the law should “distinguish[] between agreements to arbitrate a complaint and agreements to arbitrate the enforceability or scope of an arbitration provision” by treating delegation clauses “like weaker cousins of agreements to arbitrate the merits: terms that are presumptively valid but also laden with commonsense exceptions.”[55] Although such concerns have usually been expressed in the consumer and employment arbitration contexts, this case shows that even sophisticated parties like the law firm in Sullivan may find there is a drawback to such broad delegations of authority.
Conclusion
This case illustrates complications arising from the circuit split over whether incorporation of the AAA Rules serves to delegate class arbitrability issues to the arbitrator—or in this case, arbitrators. Although the arbitrators reached opposite conclusions on this issue, the court was bound by precedent not to second-guess them.
This case also stands as a reminder to those who draft arbitration agreements of what can go wrong when parties delegate to arbitrators issues which will thereafter be unreviewable by courts. The parties’ agreement stated that arbitration must take place before a “single arbitrator” over “four months,” but the arbitration took place before eleven arbitrators over five years.
Those drafting arbitration agreements ought to weigh carefully the pros and cons of extensive delegation of authority to arbitrators. Depending on the circuit, they should consider whether they want class arbitrability, in particular, to be decided by the arbitrators or by the courts.
[1] 132 F.4th 315, 323 (5th Cir. 2025) (quoting Sullivan v. Feldman, No. CV H-20-2236, 2022 WL 17822451, at *4 (S.D. Tex. Dec. 20, 2022)).
[2] Id. at 323–25.
[3] Id. at 325–26.
[4] Id. at 325.
[5] Id. at 321. One of the awards was reversed in part as against a defendant who was not a signatory to the arbitration agreement. Id.
[6] Id. at 333–34; March 18, 2025 email from J. Madrid at 1, Sullivan v. Feldman, No. CV H-20-2236 (S.D. Tex. Mar. 20, 2025), Dkt. No. 247-2 (email in which tenth arbitrator notes he has been replaced by eleventh arbitrator).
[7] Sullivan, 132 F.4th at 328–31.
[8] Feldman v. Sullivan, 24A1278 (U.S. June 25, 2025), https://www.supremecourt.gov/docket/docketfiles/html/public/24A1278.html; Sullivan, 132 F.4th at 330.
[9] Sullivan v. Feldman, 4:20-cv-2236 (S.D. Tex. June 24, 2025), Dkt. No. 256 (order staying case); Sullivan v. Feldman, 4:20-cv-2236 (S.D. Tex. July 22, 2025), Dkt. No. 258 (order amending stay order).
[10] See Sullivan, 4:20-cv-2236, Dkt. No. 256.
[11] Id.; Sullivan, 132 F.4th at 321–22.
[12] Sullivan, 4:20-cv-2236, Dkt. No. 256; Sullivan, 132 F.4th at 322 (quoting Rsrv. Mech. Corp. v. Comm’r, 115 T.C.M. (CCH) 1475 (T.C. 2018), aff’d 34 F.4th 881 (10th Cir. 2022)).
[13] Sullivan, 132 F.4th at 323–24.
[14] Id. at 324–25.
[15] Id. at 324.
[16] Id. at 325 (citing Sullivan v. Feldman, No. CV H-20-2236, 2023 WL 2392746 (S.D. Tex. Mar. 7, 2023)). The court reversed only the award against Carlson, on the ground that he was a nonsignatory and therefore not bound to arbitrate. Id. at 334–37.
[17] Id.
[18] Id. at 328.
[19] Id.
[20] Id.
[21] Id. at 329–30 (collecting cases).
[22] Id. at 328–29 (quoting Lamps Plus, Inc. v. Varela, 587 U.S. 176, 185–86 (2019)) (alteration in Sullivan).
[23] Helen Allen Blair, The Fifth Circuit Weighs in About Who Decides Class Arbitrability, Arbitration Nation (July 28, 2019), https://www.arbitrationnation.com/the-fifth-circuit-weighs-in-about-who-decides-class-arbitrability/.
[24] Petrofac, Inc. v. DynMcDermott Petroleum Operations Co., 687 F.3d 671, 675 (5th Cir. 2012).
[25] 930 F.3d 715 (5th Cir. 2019).
[26] 930 F.3d 715, 721 (5th Cir. 2019).
[27] Id. at 719.
[28] Id.
[29] Blair, supra.
[30] Id.
[31] 102 F.4th 769, 772 (5th Cir. 2024).
[32] Id.
[33] Sullivan v. Feldman, 132 F.4th 315, 330 (5th Cir. 2025).
[34] Sullivan v. Feldman, 23-20140 (5th Cir. Apr. 30, 2025), Dkt. No. 293 (order denying petition for rehearing en banc).
[35] 514 U.S. 938, 944 (1995) (quoting AT & T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 649 (1986)). The opinion was by Justice Breyer.
[36] 559 U.S. 662, 669 (2010).
[37] Id. at 685.
[38] Id. at 697.
[39] Jacob Petersen, Splitting Hairs: Resolving the Circuit Split on AAA Incorporation in Class Arbitration Delegation, 42 Mitchell Hamline L. J. Pub. Pol’y & Prac. 124, 133 (2021) (quoting Oxford Health Plans, LLC, v. Sutter, 569 U.S. 564, 566 (2013)).
[40] 569 U.S. at 566. The opinion was by Justice Kagan.
[41] 587 U.S. 176, 189 (2019).
[42] Petersen, supra, at 150.
[43] Sullivan v. Feldman, 4:20-cv-2236 (S.D. Tex. June 24, 2025), Dkt. No. 256 (order staying case).
[44] Sullivan v. Feldman, 132 F.4th 315, 332 (5th Cir. 2025) (emphasis added).
[45] Id.
[46] Id.
[47] Id. at 332, 327 (quoting Timegate Studios, Inc. v. Southpeak Interactive, L.L.C., 713 F.3d 797, 802 (5th Cir. 2013)).
[48] Id. at 332.
[49] Id. at 331 (emphasis added).
[50] Id. at 331 n.7.
[51] Id. at 324.
[52] Id. at 331.
[53] Id. at 332 (quoting Oxford Health Plans LLC v. Sutter, 569 U.S. 564, 569 (2013)) (second, third, and fourth alterations in Sullivan).
[54] Id.
[55] David Horton, Arbitration About Arbitration, 70 Stan. L. Rev. 363, 374, 440–41 (2018).
