Judge says J&J must pay Auris shareholders $1B in damages

By Sean Whooley | September 5, 2024

A Delaware judge ruled that Johnson & Johnson, or J&J, must pay $1 billion in damages to Auris Health shareholders, according to media reports.

Reuters, Bloomberg Law, and others reported that the ruling claims that J&J breached its agreement to acquire Auris, which went through for $3.4 billion in February 2019. The deal also included up to an additional $2.35 billion in payments to shareholders based on various milestones.

Vice Chancellor Lori Will of the Delaware Court of Chancery ruled that J&J breached the agreement and failed to support the acquired iPlatform technology. The report said this would have led to increased payments to Auris shareholders.

Reuters said Will’s ruling stated that J&J breached the agreement “almost immediately after closing.” The judge deemed that the company declined to put resources toward advancing iPlatform. Instead, the company pitted it against its own Verb device.

J&J allegedly misled Verb Surgical

In a 2021 denial of J&J’s effort to dismiss the Auris shareholder suit, Fortis Advisors, acting on behalf of Auris shareholders, claimed a partnership between J&J’s Ethicon and Google company Verily’s Verb Surgical began raising questions. During acquisition talks, Auris founder Dr. Fred Moll and his colleagues were led to believe that Auris could run independently of Verb after the acquisition, according to Fortis.

Fortis alleged that, after the acquisition, the Auris team had to enter into a covert “bakeoff” with Verb Surgical, diverting employees and resources. After the iPlatform won out over the Verb Surgical Robot, Ethicon bought out Verily’s stake in Verb and rolled Verb into Auris, according to Will back in 2021.

The latest report quoted Will saying that iPlatform “effectively became a parts shop for Verb.”

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Monarch and Ottava surgical robots unaffected by ruling

The ruling wasn’t a complete loss for J&J, however. Will rejected contract claims involving Auris’ other device, the Monarch robotic-assisted surgical system.

While she did rule with Auris shareholders on one count of fraud involving Monarch, the judge also dismissed allegations of J&J defrauding Auris by convincing it to accept deferred payments J&J never planned to make. 

According to Reuters, J&J said it disagrees with the ruling and is considering an appeal.

The company also said this ruling has no bearing on its current robotics program, which includes the much-anticipated Ottava system. J&J remains on track to submit the Ottava surgical robot for FDA investigational device exemption (IDE) in the second half of this year.

J&J blamed missed milestones on technical issues with Auris devices, said Reuters. The company also claimed that the merger agreement allowed it to use Auris products in any way that advanced its robotics program. However, Will’s opinion disputed that, the report said.

Editor’s note: This article was syndicated from The Robot Report sibling site MassDevice.