Johnson & Johnson Ordered To Pay $1 Billion Over Unmet Promise

Johnson & Johnson has been ordered to pay $1 billion for breaking promises on surgical robots, raising questions about corporate accountability in acquisitions.

At a Glance

J&J was ordered to pay over $1 billion for breaching an agreement on surgical robots acquired from Auris Health Inc.
A Delaware judge ruled J&J failed to pursue regulatory approvals for iPlatform and Monarch projects
J&J criticized the ruling, stating it had no impact on their current robotics program
Case highlights common theme of corporate acquirers avoiding post-deal payments
J&J plans to review the decision and consider options for appeal

Court Rules Against Johnson & Johnson in Billion-Dollar Surgical Robot Case

In a significant legal blow, Johnson & Johnson has been notified that it owes over $1 billion in damages to investors for breaching its agreement to prioritize two surgical robots acquired from Auris Health Inc. The ruling, handed down by a Delaware judge, comes eight months after a trial that scrutinized J&J’s failure to pursue regulatory approvals for the iPlatform and Monarch projects.

The case, titled Fortis & Fortis Advisors LLC v. Johnson & Johnson, reflects a common theme in Delaware’s Chancery Court, where lawsuits often claim that corporate acquirers attempt to avoid post-deal payments. This ruling sends a strong message about the importance of honoring contractual obligations in corporate acquisitions.

Johnson & Johnson owes more than $1 billion in damages after breaching its pledge to prioritize two surgical robots it acquired when it bought Auris Health for $3.4 billion, a judge ruled. https://t.co/23CRSXI2yO

— Bloomberg Law (@BLaw) September 4, 2024

Broken Promises and Lost Potential

Vice Chancellor Lori W. Will, who presided over the case, did not mince words in her 145-page opinion. She stated that J&J’s actions resulted in the loss of the transformative potential of Auris’ robots.

“J&J’s promise to Auris was broken almost immediately,” Will wrote in her opinion. Despite the damages awarded to Auris investors, “what remains irretrievably lost is the transformative potential of Auris’ robots,” Will said.

The lawsuit, filed in 2020, claimed that J&J misled Auris about resource allocation between the iPlatform and the Verb, a rival robot developed with a Google affiliate. J&J held an internal competition called “Project Manhattan” between the two systems, which the iPlatform won but ultimately suffered delays. The judge found that J&J’s actions were intended to avoid making earnout payments by hindering iPlatform’s progress.

J&J’s Response and Future Implications

Johnson & Johnson has criticized the ruling, emphasizing that it has no bearing on their current robotics program or the Ottava system they plan to bring to market. The company has stated its intention to review the decision and consider options for appeal.

This case serves as a stark reminder of the legal and financial risks associated with corporate acquisitions, especially when substantial post-deal payments are involved. It also highlights the importance of transparency and good faith in honoring contractual obligations, particularly in rapidly evolving technological fields like surgical robotics.

The Future of Surgical Robotics

Despite this setback, the field of surgical robotics remains a promising and rapidly advancing area of medical technology. The potential benefits of robotic-assisted surgery, including increased precision and reduced recovery times for patients, continue to drive innovation and investment in the sector.

As the legal dust settles, the medical community and investors will be watching closely to see how this ruling impacts the development and deployment of surgical robots. The case may also prompt other companies in the field to reassess their acquisition strategies and contractual commitments, potentially reshaping the landscape of medical technology development and corporate partnerships.