Opinion issued August 28, 2025
In The
Court of Appeals For The
First District of Texas ———————————— NO. 01-23-00629-CV ——————————— POOLRE INSURANCE CORP., Appellant V. STEWART A. FELDMAN, THE FELDMAN LAW FIRM LLP, CAPSTONE ASSOCIATED SERVICES LTD., CAPSTONE ASSOCIATED SERVICES (WYOMING), LIMITED PARTNERSHIP, AND CAPSTONE INSURANCE MANAGEMENT, LTD., Appellees
On Appeal from the 334th District Court Harris County, Texas Trial Court Case No. 2023-15570
OPINION
PoolRe Insurance Corp. appeals the trial court’s denial of its plea to the
jurisdiction and its order confirming an arbitration award as requested by Stewart A.
Feldman and The Feldman Law Firm LLP (collectively, Feldman) and Capstone Associated Services, Ltd., Capstone Associated Services (Wyoming), Limited
Partnership, and Capstone Insurance Management, Ltd. (collectively, Capstone).
In two issues, PoolRe contends that the trial court erred in denying its plea to
the jurisdiction and granting the appellees’ motion to confirm the arbitration award.
We affirm.
Background
A. The Parties’ Dispute
Feldman, Capstone, and PoolRe were claimants in the underlying arbitration
proceeding. The respondents were Scott Sullivan and Frank DellaCroce
(collectively, the Doctors), St. Charles Surgical Hospital, L.L.C., St. Charles
Holdings, L.L.C., Center for Restorative Breast Surgery, LLC, Sigma Delta Billing,
LLC, Sunrise Productions, LLC, Cerberus Insurance Corp., Orion Insurance Corp.,
and Janus Insurance Corp. A summary of the circumstances that gave rise to the
arbitrated dispute, gleaned from the 421-page final arbitration award, follows.
The Doctors created three captive insurance companies named Cerberus,
Orion, and Janus, which they had operated since 2011.1 Over time, the Doctors
1 Texas law defines a captive insurance company as “a company that holds a certificate of authority under this chapter to insure the operational risks of the company’s affiliates or risks of a controlled unaffiliated business.” TEX. INS. CODE § 964.001(2). Federal tax law allows businesses to deduct ordinary and necessary expenses, which typically include the cost of insurance premiums. Swift v. Comm’r of Internal Revenue, T.C.M. (RIA) 2024-013, 2024 WL 378671, at *15 (2024) (citing 26 U.S.C. § 162(c)). Payment of insurance premiums to certain small insurance companies, including captive insurance companies, may qualify for favorable
2 became concerned about the Internal Revenue Service’s increased scrutiny of
captive insurance companies. In about 2015, they learned that Feldman and
Capstone jointly offered “turnkey” administrative and management services for
captive insurance owners and had a program to structure and operate captive
insurance companies to qualify for partial tax-exempt status under federal law.2
In January 2015, the Doctors met with Feldman to discuss their captive
operations and structure. After the meeting, they retained Feldman and Capstone to
conduct a “health check-up” of the Doctors’ captive operations.
In the summer of 2015, Feldman and Capstone provided their report to the
Doctors. Feldman explained that risk distribution was essential for a “true insurance
arrangement” to exist and thus for a captive insurance company to qualify for
favorable tax treatment. Feldman stated further that, “[t]o achieve risk distribution,
the insurance company must distribute its risks among a pool of risks.” Feldman and
Capstone used PoolRe “for the purpose of satisfying the IRS’s risk distribution
treatment under an alternative taxing structure but only if they satisfy the necessary criteria. See id. 2 The United States Tax Court has described the relationship between Feldman and Capstone as follows: Capstone employed insurance and accounting professionals, and it was closely affiliated with the Feldman Law Firm, LLP (Feldman firm), which provided legal services to Capstone clients. Feldman was the Feldman firm’s managing partner and chief executive officer of Capstone’s corporate general partner. Rsrv Mech. Corp. v. Comm’r of Internal Revenue, 115 T.C.M. (CCH) 1475, 2018 WL 3046596 at *10 (2018), aff’d, 34 F.4th 881 (10th Cir. 2022). 3 requirement.” But Feldman and Capstone concealed that they “were under extreme
scrutiny from the IRS” when they were soliciting the Doctors’ business. Feldman
did not disclose to the Doctors any IRS findings regarding PoolRe’s inability to
satisfy the risk distribution requirement as to Capstone or that Feldman was using
PoolRe’s risk pool to provide him and his related entities with their primary
malpractice and legal expense insurance coverages.3
After considering the report, the Doctors hired Capstone to manage their
captive insurance companies. In a draft engagement letter, Feldman and Capstone
proposed that they structure and operate the Doctors’ captive insurance companies
to qualify for partial tax-exempt status. The engagement would be for a five-year
term.
After the Doctors agreed to the terms of the engagement letter, Feldman and
Capstone began the process of redomiciling Cerberus, Orion, and Janus from the
Bahamas to Delaware and took over their administration. Feldman and Capstone
“expected” and “encouraged” the Doctors to participate in PoolRe, and the Doctors
were led to believe that participation in PoolRe was necessary for them to obtain
tax-exempt status for the captive insurance companies. For 2016, 2017, and 2018,
3 PoolRe had no employees and no office, and it “receive[d] no business except that given to it by Feldman and Capstone.” Capstone managed PoolRe’s day-to-day operations and exercised “certain decision-making authority on behalf of PoolRe.”
4 the Doctors elected to have their captive insurance companies participate in
PoolRe’s reinsurance risk pools.4
In June 2018, the United States Tax Court decided Reserve Mechanical Corp.
v. Commissioner of Internal Revenue, involving the captive operations of another of
Feldman’s clients. 115 T.C.M. (CCH) 1475, 2018 WL 3046596, at *10 (2018), aff’d,
34 F.4th 881 (10th Cir. 2022). The Tax Court decided that “PoolRe was not a bona
fide insurance company” and thus, Reserve Mechanical, the client’s captive
operations, did not achieve risk distribution through its agreements with PoolRe. Id.
at *47. As a result, Reserve Mechanical’s “transactions during the tax years in issue
were not insurance transactions.” Id.
After learning of the Tax Court’s decision in Reserve Mechanical, Dr.
Sullivan conveyed to Feldman that he wanted to immediately liquidate and wind
down Cerberus, Orion, and Janus. Feldman responded by identifying an eight-step
process to liquidate them by August 2021. The relationship between Dr. Sullivan
and Feldman continued to deteriorate, and on January 5, 2020, Feldman formally
withdrew from representation. By April 2020, the Doctors had fired Capstone as
insurance manager. The Doctors anticipated that for tax years dating to 2015, the
4 Reinsurance is “the transfer of all or part of one insurer’s risk to another insurer, which accepts the risk in exchange for a percentage of the original premium.” Tex. Dep’t of Ins. v. Am. Nat’l Ins. Co., 410 S.W.3d 843, 848 (Tex. 2012). A reinsurer underwrites or insures other insurance companies. Id.
5 IRS would determine that Cerberus, Orion, and Janus were not insurance companies
and order payment of back taxes, interest, and penalties.
B. Arbitration Proceedings
The arbitrator characterized the Doctors’ claims against Feldman, Capstone,
and PoolRe as falling into two “broad categories”: 1) breach of fiduciary duty and
legal malpractice claims arising from Feldman’s and Capstone’s material
nondisclosures and misrepresentations, and 2) conversion and RICO claims arising
from Feldman’s and Capstone’s theft of millions of dollars from their clients. The
Doctors sought disgorgement of all fees paid to Feldman and Capstone, the back
taxes, interest, and penalties expected to be imposed by IRS as a result of their
participation in the captive insurance scheme, and other damages.
Feldman, Capstone, and PoolRe initiated arbitration under arbitration
agreements “contained in a December 2015 Joint Engagement Letter (“2015
Engagement Letter”) and the 2018 and 2019 Stop Loss Reinsurance Agreements and
Quota Share Reinsurance Policies.”5 Under those provisions, the parties agreed to
submit to arbitration “any and all other controversies, disputes or claims whatsoever”
between the claimants and the respondents “arising under or in connection with or
related to any of the parties’ agreements.”
5 The arbitrator’s decision states that PoolRe was not bound by the 2015 Engagement Letter. 6 In the arbitration award, the arbitrator found Feldman and Capstone jointly
and severally liable to the Doctors and the other respondents for “breaching fiduciary
duties, committing professional malpractice, making negligent misrepresentations
or omissions, and converting funds” and ordered them to pay “losses in the total
amount of $1,471,949.21 for the[ir] foregoing wrongful acts.” The arbitrator also
issued a declaratory judgment for the Doctors and the other respondents and against
Feldman, Capstone, and PoolRe declaring that
Feldman and those in active concert with him, including his related entities, the Feldman Law Firm, all Capstone companies, and PoolRe, cannot tender to the risk pool or pool participants for payment or reimbursement any portion of: (1) [the claims of Feldman’s own captive, A.M.Y. Property & Casualty Corp.], (2) the legal fees and expenses incurred in [the related past and pending arbitrations and related court and state bar proceedings], and (3) the damages award [issued in this arbitration].
C. Trial Court Proceedings
In their original petition and motion to confirm the arbitration award, Feldman
and Capstone asked the trial court to confirm the award as authorized under the
Federal Arbitration Act (FAA)6 and the Texas General Arbitration Act (TAA).7 They
alleged that “[o]ne of the parties’ arbitration agreements” stated that venue was
proper in Harris County and asserted that they had standing to request confirmation
as to PoolRe because they participated as parties in the arbitration. Feldman and
6 9 U.S.C. § 9. 7 TEX. CIV. PRAC. & REM. CODE §§ 171.081, 171.082(a), 171.087. 7 Capstone recounted that the prevailing parties in the arbitration asked a federal
district court to confirm the arbitration award as to Feldman, Capstone, and PoolRe,
but after concluding that PoolRe never became a party in its proceeding,8 the federal
district court confirmed the award only as to Feldman and Capstone. The prevailing
parties then requested leave to request confirmation of the award as to PoolRe in
Texas state district court. The federal court granted leave. After the prevailing parties
did not file a state action, Feldman and Capstone did so.
Feldman and Capstone argued that because PoolRe “never moved, in any
court, to vacate, correct, or modify” the award within the deadlines contained in the
FAA and the TAA,9 the statutes required the trial court to confirm the award.
PoolRe opposed Feldman and Capstone’s motion to confirm the arbitration
award in a plea to the jurisdiction. In its plea, PoolRe argued that Feldman and
Capstone lacked standing to seek confirmation of the arbitration award because the
arbitration did not involve a dispute between PoolRe and Feldman or Capstone but
one between the prevailing parties in the arbitration (who were not parties to the state
court action), on the one hand, and PoolRe, Feldman, and Capstone, on the other.
8 The record indicates that joining PoolRe in the federal proceeding would have destroyed diversity and thus deprived the district court of jurisdiction. See 28 U.S.C. § 1332 (conferring federal jurisdiction in cases where complete diversity of citizenship exists). 9 Both the FAA and the TAA apply to this case. See 9 U.S.C. §§ 2–16; TEX. CIV. PRAC. & REM. §§ 171.001–171.098. 8 PoolRe also maintained that because it had settled its dispute with the prevailing
parties to the arbitration, confirming any arbitration award against PoolRe would be
moot.
In their response to PoolRe’s plea to the jurisdiction, Feldman and Capstone
argued that the FAA and the TAA conferred standing on them because both statutes
entitled “any party to the arbitration” to move to confirm the award. Also, because
PoolRe did not timely move to vacate the award, the TAA and the FAA
“mandate[d]” that the trial court confirm the award.
In its reply, PoolRe asserted that the arbitration decision did not adjudicate
any case or controversy between PoolRe and Feldman or Capstone, and the federal
and state arbitration statutes did not create subject matter jurisdiction where there
was no case or controversy.
The trial court denied PoolRe’s plea to the jurisdiction and signed an order
confirming the arbitration award.
Standard of Review
In its first and second issues, PoolRe argues that the trial court erred in
confirming the arbitration award because (1) Feldman and Capstone were not
adverse to PoolRe in the underlying arbitration and thus lacked standing to have the
award confirmed as against PoolRe and (2) the arbitration was moot as to PoolRe.
We review de novo a trial court’s order confirming or vacating an arbitration award.
9 See In re Marriage of Piske, 578 S.W.3d 624, 629 (Tex. App.—Houston [14th Dist.]
2019, no pet.); Forest Oil Corp. v. El Rucio Land & Cattle Co., Inc., 446 S.W.3d 58,
77 (Tex. App.—Houston [1st Dist.] 2014), aff’d, 518 S.W.3d 422 (Tex. 2017). Issues
of standing and mootness are questions of law that we also review de novo. Heckman
v. Williamson Cnty., 369 S.W.3d 137, 149–50 (Tex. 2012).
Confirmation of Arbitration Award
PoolRe’s arguments assume that a court must examine the dispute resolved
by the underlying arbitration to determine issues of justiciability before it can
confirm the arbitration award. But implicit in this assumption is a misunderstanding
of the purpose of a confirmation proceeding. An application for confirmation of an
arbitration award is not a lawsuit—it is just a request, consistent with the agreement
that led to the arbitration itself, for a court to enter an order.
The general purpose of the federal and state arbitration statutes is to facilitate
arbitration agreements. Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84, 96 (Tex. 2011);
Floyd v. MMWKM Advisors, LLC, No. 05-22-01147-CV, 2023 WL 8595693, at *5
(Tex. App.—Dallas Dec. 12, 2023, pet. denied) (explaining that purpose of
application under either FAA or TAA is “to expedite judicial treatment of matters
pertaining to arbitration”). The specific purpose of a confirmation proceeding is to
provide a “mechanism[] for enforcing arbitration awards.” Hall St. Assocs., L.L.C.
v. Mattel, Inc., 552 U.S. 576, 582 (2008); Guerra v. L&F Distribs., LLC, 521 S.W.3d
10 878, 885 (Tex. App.—San Antonio 2017, no pet.) (“An action for confirmation of
an arbitration award is intended to be a summary proceeding, the purpose of which
is to implement the arbitrator’s award by making the award a final, enforceable
judgment of the court.” (citing Menke v. Monchecourt, 17 F.3d 1007, 1009 (7th Cir.
1994)).
“Confirming an arbitration award . . . is not to be confused with litigating a
dispute over the validity or accuracy of that award . . ., or seeking later to enforce
that arbitration award where there is noncompliance.” Teamsters Local 177 v. United
Postal Serv., 966 F.3d 245, 252 (3d Cir. 2020). Both the FAA and the TAA require
the court to enter an order confirming the arbitration award unless the award is
vacated, modified, or corrected. See 9 U.S.C. § 9; TEX. CIV. PRAC. & REM. CODE
§ 171.087; Teamsters Local 177, 966 F.3d at 248 (“The FAA not only authorizes,
but mandates, that district courts confirm arbitration awards by converting them into
enforceable judgments through a summary proceeding.”).
A. Feldman and Capstone, as parties to the arbitration proceeding, were entitled to apply for confirmation of the arbitration award.
We first consider PoolRe’s argument that Feldman and Capstone lack
standing to apply for confirmation of the arbitration award because there is no
arbitration agreement between Feldman, Capstone, and PoolRe in the record.
Feldman, Capstone, and PoolRe initiated the arbitration proceedings
submitting for resolution all disputes, claims and controversies involving the parties.
11 PoolRe does not identify any authority that would require a separate arbitration
agreement between itself, Feldman, and Capstone. Feldman and Capstone attached
to their application for confirmation a 2019 Quota Share Reinsurance Policy
containing an arbitration provision that applied to “[a]ny dispute arising out of or
relating to or touching upon this Policy, the relationship among the signatories
hereof or parties related to them concerning disputes arising out of or related to [the
Policy].” (Emphasis added). The policy identifies Capstone as the managing agent
and provides that in the event of a dispute, the undersigned “expressly agree[d] that
they ha[d] no objection to [Capstone] or [Feldman] joining in any arbitration
proceeding provided they may be affected by the outcome of the proceeding.” This
policy was enough to show that Capstone and Feldman agreed to be bound by one
or more of the arbitration agreements before the arbitrator. See In re Labatt Food
Serv., L.P., 279 S.W.3d 640, 643 (Tex. 2009) (“[N]onsignatories to an agreement
subject to the FAA may be bound to an arbitration clause when rules of law or equity
would bind them to the contract generally.”); see also Cerna ex rel. R.W. v. Pearland
Urban Air, LLC, 714 S.W.3d 585, 589 (Tex. 2025) (explaining that when arbitration
agreement signatory attempts to compel nonsignatory to arbitrate, ordinary contract
law principles apply to determine whether agreement to arbitrate exists).
In any event, Feldman and Capstone were entitled to apply for confirmation
because the arbitration award itself identifies them as parties to the arbitration. The
12 FAA confers standing to apply for confirmation, modification, correction, or vacatur
of an arbitral award on “any party to the arbitration.” See 9 U.S.C. §§ 9–10. The
TAA likewise provides for confirmation “on application of a party.” See TEX. CIV.
PRAC. & REM. CODE § 171.087 (“Unless grounds are offered for vacating,
modifying, or correcting an award under Section 171.088 or 171.091, the court, on
application of a party, shall confirm the award.”).
PoolRe argues that because the federal and state arbitration statutes both
require service of an application to confirm an arbitration award on the “adverse
party,” and PoolRe was not adverse to Capstone or Feldman in the underlying
arbitration, Capstone and Feldman cannot apply for confirmation of the award. See
9 U.S.C. § 9; TEX. CIV. PRAC. & REM. CODE § 171.094(1). But this proposed
interpretation contradicts the plain language of the statutes, which contain no such
limitation on a party seeking confirmation of an award. See 9 U.S.C. §§ 9–10; TEX.
CIV. PRAC. & REM. CODE § 171.087. Based on the plain terms of the statute, the term
“adverse party” refers to service of the confirmation application on the adverse party
in the confirmation proceeding and does not deprive Capstone or Feldman of
standing to pursue confirmation. See 9 U.S.C. § 9; TEX. CIV. PRAC. & REM. CODE
§ 171.094(1).
Because Feldman and Capstone are parties to the arbitration award, they have
standing to apply for confirmation of the award. See 9 U.S.C. §§ 9–10; TEX. CIV.
13 PRAC. & REM. CODE § 171.087. Thus, we hold that the trial court did not err in
denying PoolRe’s plea to the jurisdiction on that ground.
We overrule PoolRe’s first issue.
B. Feldman and Capstone’s interest in having the arbitration award confirmed is not moot.
PoolRe asserts that its settlement with the Doctors rendered the application
for confirmation moot. This assertion, like PoolRe’s standing argument, misses the
mark because it focuses on the underlying dispute resolved by the arbitration, not on
Feldman and Capstone’s rights under the arbitration statutes. Under the FAA, “a
party seeking to confirm an arbitration award continues to have a live stake in the
proceeding, and thus it has standing to seek confirmation.” Teamsters Local 177,
966 F.3d at 253.
Zeiler v. Deitsch, 500 F.3d 157 (2d Cir. 2007), sheds light on the nature of a
confirmation proceeding and the issues relevant to determining whether to confirm
an arbitration award. There, the federal appellate court rejected Deitsch’s argument
that it should refuse to confirm an arbitration award because of his prior compliance
with the award, noting that as a summary proceeding, confirmation was “not
intended to involve complex factual determinations.” See id. at 169.
The Second Circuit observed that a court’s confirmation of an arbitration
award did “little more than give the award the force of a court order.” Id. Judicial
review did not include consideration of “the subsequent question of compliance”; it
14 was limited to “a determination of the limited statutory conditions for confirmation
or grounds for refusal to confirm.” Id.; accord Teamsters Local 177, 966 F.3d at
251–52 (rejecting argument that case-or-controversy requirement was not met
because party had agreed to abide by arbitration award and had remedied any
violations of cease-and-desist letter). The parties below were involved in an
arbitration dispute which was reduced to an arbitration award and the federal
confirmation proceeding did not include confirmation of the arbitration award
against PoolRe. Thus, a case and controversy remained and could be fully remedied
only by the entry of a confirmation order against PoolRe. See Teamsters Local 177,
966 F.3d at 251.
We hold that Feldman and Capstone’s application for confirmation was not
moot. As a result, the trial court did not err in denying PoolRe’s plea to the
jurisdiction on that ground.
We overrule PoolRe’s second issue.
C. PoolRe did not assert any viable ground for denying the application for confirmation of the arbitration award.
Here, there is no showing that Feldman and Capstone failed to comply with
any statutory requirement in filing their application for confirmation. Further,
PoolRe did not timely raise any statutory grounds for vacating, modifying, or
15 correcting the arbitration award.10 Under these circumstances, the trial court was
required to confirm the arbitration award. See 9 U.S.C. § 9; TEX. CIV. PRAC. & REM.
CODE § 171.087; Nafta Traders, 339 S.W.3d at 89–90.
Conclusion
We affirm the trial court’s orders denying PoolRe’s plea to the jurisdiction
and granting Feldman and Capstone’s motion for confirmation of the arbitration
award.
Clint Morgan Justice
Panel consists of Justices Rivas-Molloy, Guiney, and Morgan.
10 See 9 U.S.C. § 12 (motion to vacate, modify, or correct award must be served within three months after award filed or delivered); TEX. CIV. PRAC. & REM. CODE §§ 171.054(c), 171.088(b) (stating time limits for motion to modify, correct, or vacate award).