Johnson & Johnson persuaded Delaware’s highest court to reverse a portion of the $1 billion damages granted for breaching its 2019 agreement to acquire Auris Health, a surgical robot manufacturer.
The Supreme Court of Delaware issued a unanimous decision on Monday to set aside a portion of the September 2024 award to former Auris shareholders, who accused Johnson & Johnson of failing to support Auris’ iPlatform technology and being too slow to seek regulatory approvals for the commercial launch of devices to market.
The ruling might reduce the damages, including interest, by several hundred million dollars, once recalculated. The shareholders are represented by Fortis Advisors, and they allege that J&J committed fraud in persuading Auris to accept payments contingent upon whether certain “milestones” were met, rather than receiving more money initially to be purchased. Therefore, the acquisition was worth $3.4 billion to Auris.
In an 87-page ruling, Justice Abigail LeGrow overturned a judge in the Delaware Chancery Court. The lower court had found that Johnson & Johnson had an implied duty to obtain approval by the end of 2021 to introduce an iPlatform product for abdominal procedures.
However, the Supreme Court still affirmed the majority of the findings made by Vice Chancellor Lori Will and directed her to recalculate damages. Johnson & Johnson, headquartered in New Brunswick, New Jersey, stated that it was assessing follow-up actions.
The company reported, “We are pleased that the court reversed the trial court’s improper substitution of its subjective views for the parties’ carefully negotiated agreement on milestone regulatory requirements. We are disappointed that the court did not similarly follow the language of the contract in permitting the remainder of the trial court’s decision to stand.”
Philippe Selendy, a lawyer representing Fortis, stated that the ruling demonstrated that Johnson & Johnson “inexcusably breached the merger agreement and deprived the world of Auris’s transformative and life-saving surgical robot, as well as the separate holding of J&J’s fraud on Auris.”
