Boston Robotic Hair Restoration, PLLC v. Venus Concept Inc.

Background

Venus Concept, Inc. marketed and sold the ARTAS iX, a robotic device designed to assist physicians with hair-transplant surgery. Boston Robotic Hair Restoration, PLLC and Melissa R. Schneider, M.D., P.C. alleged that Venus advertised the device as performing graft harvesting, recipient-site making, and implantation, but that it could not actually perform implantation. Their putative class-action complaint asserted nine counts.

Venus moved to compel arbitration. Boston Robotic argued that the document containing the arbitration provision had not been incorporated into the purchase agreement. It did not dispute that the arbitration agreement delegated gateway questions of arbitrability—threshold questions about whether a dispute must be arbitrated—to the arbitrator. On March 30, 2023, the court found that the arbitration provision had been incorporated into the purchase agreement, found a valid agreement to arbitrate, directed the parties to arbitration, and stayed the case.

Arbitration dispute

Boston Robotic filed an arbitration demand, and Judge Robert A. Baines (Ret.) was appointed as arbitrator. Boston Robotic raised the same nine counts in arbitration. During proceedings on Venus’s motion to dismiss, Venus raised a new response to Boston Robotic’s challenges that provisions of the arbitration agreement were unconscionable, meaning unfairly one-sided or oppressive and therefore unenforceable.

Judge Baines ordered briefing on whether Boston Robotic had waived those challenges by not raising them in federal court and whether Venus had waived its waiver argument. He then concluded that he lacked authority to decide the challenges. Boston Robotic asked the federal court either to decide whether the provisions were enforceable or to clarify that the arbitrator had authority to decide that issue.

Court’s analysis

The court explained that parties may delegate gateway arbitrability questions to an arbitrator if they clearly and unmistakably agree to do so, unless the delegation provision itself is unenforceable. A party may challenge in federal court whether an arbitration agreement was formed, but challenges to the arbitration agreement as a whole generally go to the arbitrator when arbitrability has been delegated.

The court found that Venus had argued in its motion to compel arbitration that the agreement delegated arbitrability issues to the arbitrator, and Boston Robotic had not disputed that point. The court therefore clarified that, after finding a valid arbitration agreement, it had referred all gateway arbitrability disputes to the arbitrator. That included whether the contractual statute-of-limitations provision and the limitations on attorney’s fees and punitive damages were unconscionable. Boston Robotic could properly raise those challenges for the first time in arbitration because they were directed at provisions of the arbitration agreement rather than at the delegation provision itself.

The court also agreed with Venus that it lacked authority under 9 U.S.C. § 10(a)(4) to grant relief concerning an arbitration award because no award had yet been made.

Disposition

The court granted Boston Robotic’s motion to temporarily lift the stay and for interim relief. It clarified that its prior order referred gateway arbitrability issues to the arbitrator and held that the arbitrator had jurisdiction to consider whether provisions other than the delegation provision were unconscionable.