The Dallas Court of Appeals has reversed a trial court order vacating a $36 million arbitration award in a separation dispute between a corporate director and consultant and various investment funds.
Sheldon Stein v. Beneficient f/k/a The Beneficient Company Group, L.P., Beneficient Management, LLC, Beneficient Management Partners, L.P., and The Beneficient Management Group, LLC (No. 05-24-00914-CV; October 10, 2025) arose from a failed business relationship. In 2017 Stein entered into a letter agreement with Beneficient Management to serve as a senior partner director and as a consultant to Beneficient Company Holdings for a seven-year term. Stein received an annual fee plus restricted equity units (REUs) and an equity interest in Beneficient Management Partners. The agreement required arbitration of “any and all disputes” arising out of or related to the agreement. The parties agreed to conduct arbitration by a single arbitrator under the rules of the International Chamber of Commerce. In 2019 the parties concluded three other agreements providing various forms of equity interests as Stein’s services, all of which contained the same arbitration provisions.
Shortly thereafter a dispute arose between Stein and Beneficient when Stein gained control of a non-party corporation in the business of selling insurance bonds. Beneficient’s senior management team worried about Stein’s use of that company’s funds “to pay Beneficient’s third-party obligations rather than using them to build Beneficient’s business.” Stein resigned, and Beneficient notified him that his separation from the board of directors was for cause under the company’s benefits plans and that he thereby forfeited his equity interests. Stein requested arbitration, claiming breach of contract and conversion. Beneficient counterclaimed for breach of fiduciary duty. The parties mutually selected an arbitrator, who presided over a three-day arbitration hearing. She entered an arbitration award in Stein’s favor for nearly $36 million. She also decided Beneficient’s counterclaim in Stein’s favor. Stein filed a petition to confirm arbitration award and for entry of judgment. Beneficient opposed the petition and moved to vacate the arbitration award. The trial court denied Stein’s petition and granted Beneficient’s motion to vacate. Stein appealed.
In an opinion by Justice Goldstein, the court of appeals reversed. Stein argued that the trial court erred because there were no legitimate grounds for vacating the award. The first issue was whether the arbitrator exceeded her powers under § 10(a)(4) of the Federal Arbitration Act. Beneficient asserted that the arbitrator exceeded her powers by awarding equitable relief not contemplated by the parties’ contracts. The arbitrator considered evidence of Beneficient’s valuation of Stein’s equity interests according to SEC filings and internal documents. Beneficient argued that Stein should have followed the parties’ agreement, which established a buyout process for separation without cause. The court rejected this argument. Here the “arbitrator correctly observed that damages for breach of contract are measured by the value of the good bargained for at the time of the breach” (citation omitted). Even supposing that the arbitrator erred by failing to award damages in accordance with the agreements, “her failure to do so was, if anything, an error of law. As the U.S. Supreme Court has explained, “an arbitrator’s error—even [her] grave error—is not enough” (citation omitted). Courts may not “correct” an arbitrator’s decision or mistake of law. The court concluded that the arbitrator did not award equitable relief and did not exceed her authority.
As to the award of compounding interest, the court held that the arbitrator acted within her discretion in awarding it. The agreements required the arbitrator to apply Delaware law, which provides that “[i]nterest is awarded as a matter of right and not of judicial discretion” (citations omitted). Awarding compound interest, however, is within the discretion of the trial court. Observing that Delaware courts have upheld the award of compounding interest in arbitration awards, the court did so here. Beneficient next argued that the arbitrator erred by issuing an award that did not “draw its essence” from the parties’ contracts. To “draw its essence from the parties’ contract, an arbitral award must have a basis ‘that is at least rationally inferable, if not obviously drawn,’ from the contract” (citations omitted). While arbitrators may not ignore the plain language of a contract, the court “should not reject an award on the ground that the arbitrator misread the contract” (citations omitted). The court thus looked to “whether the arbitrator’s award was ‘so unfounded in reason and fact, so unconnected with the wording and purpose’ of the contract as to ‘manifest an infidelity to the obligation of the arbitrator’ such that the arbitrator failed to interpret the contract at all” (citations omitted). As the court previously determined, Beneficient’s claims are all based on the argument that the arbitrator misread the contract. Observing that the arbitrator carefully analyzed the plain language of the contract, the arbitrator’s “determinations were ‘at least rationally inferable, if not obviously drawn’ from the plans and agreements at issue.”
The court further ruled that Beneficient was not entitled to remand for a recalculation of damages. Generally, reviewing courts must not disturb an award of damages except in the event of a computational error in determining the total amount of the award. Again, Beneficient’s argument was that the arbitrator made a legal error, not a computational one. It likewise rejected Beneficient’s argument that the size of the award rendered the equity interests of all other participants in the plan worthless. The agreements at issue all required the parties to arbitrate disputes, so the court declined to look beyond that.
