The Delaware Supreme Court has partially reversed a lower court decision ordering Johnson & Johnson(NYSE: JNJ) to pay former Auris Health shareholders $1 billion in damages.
In a ruling filed Jan. 12, the state’s high court mostly agreed with a lower court’s findings that J&J failed to meet contract terms related to $2.35 billion in milestone payments on top of the initial $3.4 billion it paid for the surgical robotics company in 2019.
Fortis Advisors, which represented the former Auris shareholders, claimed in its lawsuit that J&J had thrown Auris’ tech off its regulatory milestones timeline. J&J allegedly subjected Auris to an unnecessary bakeoff called Project Manhattan, which pitted Auris’ iPlatform soft-tissue surgical robotics system with separate technology J&J had developed in its Verb Surgical partnership with Google sibling company Verily — a claim the high court agreed with.
The Delaware Supreme Court ruling said: “Project Manhattan therefore marked the first and clearest point at which J&J’s post-closing conduct diverged from its contractual promise to use ‘commercially reasonable efforts’ to achieve the iPlatform regulatory milestones.”
However, the high court said the lower court erred by finding J&J liable for the milestone of Auris securing an FDA 510(k) clearance for iPlatform, since the FDA later changed course and requested a De Novo.
Said the ruling: “We therefore reverse the Court of Chancery’s ruling that J&J breached its implied obligation to pursue De Novo clearance for iPlatform’s first milestone and the portion of the damages award attributable to that milestone.”
The Delaware Supreme Court, though, disagreed with J&J that it was off the hook on future milestones, saying that a De Novo for iPlatform could have then been used as a predicate for future 510(k) fillings.
The case goes back to the Delaware Court of Chancery to recalculate damages.
