When “Clear and Unmistakable” Isn’t So Clear: The Fifth Circuit’s Arbitration Ruling Heads to the Supreme Court

The U.S. Supreme Court may soon revisit one of arbitration’s most vexing threshold questions — who decides whether an arbitration agreement permits class-wide arbitration. In Sullivan v. Feldman, 132 F.4th 315 (5th Cir. 2025), the Fifth Circuit reluctantly upheld a panel of arbitrators’ authority to decide that issue based on nothing more than a generic incorporation of the AAA Commercial Rules. That ruling places the Fifth Circuit squarely at odds with half of the federal appellate courts and prompted the defendants, led by Stewart Feldman and Capstone Associated Services, to petition for certiorari. The plaintiffs’ response is due November 6, 2025.

At stake is a deceptively simple but far-reaching question — whether incorporating a standard set of arbitral rules is “clear and unmistakable evidence” that the parties intended to delegate class arbitrability to the arbitrator.

The Fifth Circuit’s Reluctant Step

The Sullivan case involved multiple overlapping arbitrations between Louisiana plastic surgeons at the Center for Restorative Breast Surgery in New Orleans (https://www.breastcenter.com/) and their consulting firm over complex insurance structures. Each arbitration clause required disputes to be conducted under the AAA Commercial Arbitration Rules but said nothing about class proceedings. Several arbitrators reached contradictory results, with one (Judge Charles Jones) certifying a class and issuing an $88 million award, while another expressly held that class arbitration was not authorized.

When the dust settled, the Southern District of Texas confirmed all four awards, including the class award, and the Fifth Circuit largely affirmed. The appellate panel — led by Judge Edith Jones — made clear that it did so “reluctantly,” observing that its hands were tied by prior circuit precedent, particularly Work v. Intertek Research Solutions, Inc., 102 F.4th 769 (5th Cir. 2024).

Under Work, the Fifth Circuit held that incorporation of arbitral rules granting the arbitrator authority over “arbitrability disputes” was enough to delegate the question of class arbitrability. Applying that reasoning in Sullivan, the court concluded that by referencing the AAA Commercial Rules, the parties had implicitly adopted the AAA Supplementary Rules for Class Arbitrations, which state that the arbitrator shall decide whether the agreement permits class treatment.

The panel expressed serious concern with this chain of inferences — what one court aptly described as a “daisy-chain of cross-references.” Yet it felt compelled to affirm that delegation under binding precedent. Judge Jones noted that this interpretation effectively makes the Fifth Circuit “an outlier on the far side” of an eight-circuit divide.

The Petition for Certiorari

The defendants’ petition for writ of certiorari, filed August 28, 2025, presses that very divide. The petition opens by framing the question presented:

Whether the parties’ generic incorporation of an arbitration association’s rules is clear and unmistakable evidence that the parties intended to delegate the issue of class arbitrability to an arbitrator — as four circuits hold — or whether such generic incorporation is insufficient, as four other circuits hold.

The petition argues that the Fifth Circuit’s approach “stretches the clear-and-unmistakable standard beyond its breaking point,” eroding the Supreme Court’s repeated insistence that arbitration “is strictly a matter of consent.” It highlights the eight-circuit split:

• Four circuits (3d, 4th, 6th, 8th) reject delegation based solely on incorporation of generic rules, reasoning that class arbitration presents a fundamentally distinct process requiring explicit consent.

• Four others (2d, 5th, 10th, 11th) find such incorporation sufficient, emphasizing efficiency and deference to arbitral authority.

This split, the petition contends, is both “open and notorious,” with federal and state courts nationwide acknowledging the division. Given the widespread use of AAA and JAMS rules in consumer, employment, and commercial contracts, the petition calls the question “exceptionally important and frequently recurring.”

The Stakes for Arbitration Law

At the heart of the dispute lies a principle reaffirmed in First Options of Chicago v. Kaplan, 514 U.S. 938 (1995): gateway questions of arbitrability are presumptively for courts, absent clear and unmistakable evidence that the parties agreed otherwise. The Feldman petition argues that the Fifth Circuit’s approach dilutes that safeguard — allowing a boilerplate reference to arbitral rules to delegate questions that can transform the entire nature of the proceeding.

The practical consequences are significant. Class arbitration differs sharply from bilateral arbitration in speed, cost, and risk exposure. As AT&T Mobility v. Concepcion, 563 U.S. 333 (2011), emphasized, class arbitration is “slower, more costly, and more likely to generate procedural morass.” It also magnifies defendants’ exposure while severely limiting judicial review — the combination that led the petitioners to warn that defendants may be pressured into settling questionable claims simply to avoid catastrophic risk.

In short, whether class arbitration exists at all in a given dispute can dictate not just procedure but outcome. And whether that determination is made by a court or a private arbitrator — whose decision is subject to minimal review — has constitutional and practical implications for parties nationwide.

A Clash of Interpretations

The Sullivan decision epitomizes how fractured the law has become. The Fifth Circuit acknowledged the “serious concerns” with allowing arbitrators to decide class arbitrability through implied delegation, especially when those arbitrators themselves reached opposite conclusions in parallel proceedings. Yet, under its own precedent, the court deferred.

The cert petition urges the Supreme Court to restore uniformity, arguing that the “clear and unmistakable” standard has been watered down beyond recognition. In the petitioners’ words, “boilerplate references to arbitral rules cannot supply consent by osmosis.” Instead, parties must expressly state their intent to delegate this extraordinary question.

If the Court grants certiorari, the decision could unify how arbitration agreements are read across jurisdictions — and perhaps rein in what many see as overbroad deference to institutional rulemaking. On the other hand, if the Court declines review, the circuit split will deepen, leaving parties subject to different interpretations depending on geography.

Why This Matters for Practitioners

For counsel drafting arbitration clauses, Sullivan v. Feldman is a cautionary tale. Clauses incorporating AAA or JAMS rules — once thought neutral — may now carry unintended consequences in jurisdictions that read them as broad delegations of power. Businesses that use standard-form agreements nationwide face inconsistent enforcement depending on venue.

Until the Supreme Court resolves the split, practitioners should:

• Be explicit: If class arbitration is not intended, say so plainly.

• Define delegation: State which issues of arbitrability are for the court and which, if any, are for the arbitrator.

• Understand local precedent: The same clause may be read very differently in the Fifth Circuit than in the Sixth or Eighth.

Outlook

The Supreme Court has not yet addressed this precise question since Lamps Plus v. Varela (2019), which reaffirmed that ambiguity cannot justify class arbitration. The Sullivan petition offers the Court a clean vehicle to clarify who decides that threshold issue.

With briefing underway and the plaintiffs’ response due November 6, 2025, the arbitration community will be watching closely. A grant of certiorari could reshape delegation doctrine and redefine how far courts — and arbitrators — may go in expanding class proceedings under the Federal Arbitration Act.

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At Nationwide ADR, we follow these developments closely because they affect how arbitration agreements are drafted, interpreted, and enforced. For parties navigating complex arbitration disputes — especially those involving multi-party or class issues — clarity at the drafting stage can be the best defense against costly procedural surprises. Unlocking Solutions for Demanding Cases.