Johnson & Johnson (NYSE: JNJ) achieved a partial judicial victory this week when the Delaware Supreme Court unanimously ruled to overturn a segment of a prior $1 billion damages judgement connected to its purchase of Auris Health, a surgical robotics company. This development follows a protracted legal dispute regarding Johnson & Johnson's post-acquisition commitments and strategic conduct.
In 2019, Johnson & Johnson acquired Auris Health for approximately $3.4 billion in cash. Beyond this upfront payment, the acquisition agreement anticipated up to $2.35 billion in additional contingent payments contingent upon the achievement of specific, predefined milestones related to product and regulatory progress.
Challenges emerged as Johnson & Johnson sought to advance the surgical robotics space internally through its own technology, referred to as Verb. Despite substantial investment, the Verb project lagged behind schedule, highlighting the strategic importance of Auris, which offered an established platform known as iPlatform.
The acquisition agreement included Johnson & Johnson's commitment to allocate commercially reasonable efforts to Auris in a manner consistent with the priorities typically applied to a "priority medical device." Auris agreed to the buyout on this explicit understanding.
After the deal closed, Johnson & Johnson altered course. Instead of prioritizing the regulatory progression of Auris's iPlatform, the company directed the technology to compete directly with Verb through an initiative known as "Project Manhattan." This redirect caused a stall in regulatory momentum and diverted engineering focus. Though iPlatform ultimately demonstrated superior performance compared to Verb, Johnson & Johnson merged the two programs, effectively subordinating iPlatform to salvage its investment in Verb.
Former Auris shareholders initiated a lawsuit in 2024 alleging multiple breaches and fraudulent conduct by Johnson & Johnson. Claims cited breach of contract, violation of the implied covenant of good faith and fair dealing, and fraudulent nondisclosure concerning a regulatory investigation linked to a Monarch milestone that had been represented as virtually guaranteed.
An earlier ruling by the Delaware Chancery Court sided largely with Auris's former shareholders. It found that Johnson & Johnson had breached its contractual duties by failing to prioritize the iPlatform's regulatory milestones and by intentionally obstructing earnout payments. The company was also found to have violated the implied covenant by not supporting the development of an alternative regulatory pathway for the device. Furthermore, fraud findings emerged from Johnson & Johnson's lack of transparency regarding regulatory probes.
Consequent damages awarded, with accrued interest, exceeded $1 billion, compensating the former Auris stakeholders for the lost contingent payments.
Crucially, the Delaware Supreme Court this week challenged a key determination made by the Chancery Court. Specifically, it rejected the lower court's conclusion that Johnson & Johnson had an implied obligation under the merger agreement to secure regulatory approval for an iPlatform product related to abdominal surgical procedures by the end of 2021. The Supreme Court ruled that the merger contract language did not support an express or implied deadline for this milestone.
Despite this reversal, the Supreme Court upheld most of the Chancery Court's findings regarding other contractual breaches by Johnson & Johnson. The ruling maintains that Johnson & Johnson failed to meet several other obligations tied to the management and support of Auris's technology.
Following the Supreme Court's judgment, the case was remanded to Vice Chancellor Lori Will to reassess damages considering the adjusted legal interpretations. As a result, the total financial award, including interest, is expected to decrease by a few hundred million dollars.
Johnson & Johnson has indicated that it is currently reviewing its options in response to the Supreme Court's decision.
This judicial development follows other significant legal challenges confronting Johnson & Johnson. Notably, in December 2025, a Baltimore jury ordered the company and its subsidiaries to pay more than $1.5 billion in damages to a plaintiff who linked her peritoneal mesothelioma cancer to prolonged asbestos exposure from talc-based products sold by Johnson & Johnson.
At market close on Tuesday, Johnson & Johnson's stock price increased marginally by 0.46% to $210.68, nearing its 52-week high of $215.18.