Billion-Dollar Judgment: What Went Wrong with JJ’s Surgical Robot?

A court has handed down a significant ruling against Johnson & Johnson, ordering the company to pay $1 billion over unmet promises regarding their surgical robot technology.

At a Glance

Johnson & Johnson has been ordered to pay $1 billion in damages for breaches of contract and fraud related to surgical robotics.
The decision is a victory for the law firms Ross Aronstam & Moritz and Selendy Gay, who represented a shareholder group.
The case involves Johnson & Johnson’s development of the iPlatform and communications with Auris regarding soft tissue ablation.
Johnson & Johnson disagrees with the court’s decision, arguing their contract was commercially reasonable.
The company is reviewing the decision and considering options for appeal.

Johnson & Johnson Ordered to Pay $1 Billion

Johnson & Johnson has been ordered by a Delaware judge to pay over $1 billion in damages for breaching its acquisition agreement with Auris Health Inc. The verdict highlights the importance of upholding high performance standards in medical technology.

The ruling is a legal victory for the former shareholders of Auris, represented by Ross Aronstam & Moritz LLP and Selendy Gay PLLC. This case focused on Johnson & Johnson’s development of the iPlatform and communications with Auris regarding soft tissue ablation.

Auris Merger Details

Vice Chancellor Lori W. Will stated in a 145-page opinion that Johnson & Johnson failed to prioritize the development of the iPlatform and Monarch devices after acquiring Auris for $3.4 billion in 2019. Almost immediately after the acquisition, J&J diverted resources from the iPlatform to its own robot, Verb, through an internal competition called “Project Manhattan.” Despite winning the competition, the iPlatform’s progress was further hindered by the integration with Verb components.

“Fundamentally, the court viewed our commercially reasonable contract as imposing a commercially unreasonable obligation. We are reviewing the decision and assessing our options for appeal.”

The lawsuit, filed in 2020, alleged that Johnson & Johnson misled Auris about resource allocation between the iPlatform and its own robot, Verb. The ruling concluded that J&J’s actions delayed the iPlatform’s progress to avoid making earnout payments that the merger agreement stipulated, which allowed Auris shareholders to receive an additional $2.35 billion if regulatory targets were met.

New: We’ve announced our Q2 2024 earnings results. See the press release for financial details, non-GAAP reconciliations and cautionary statements: https://t.co/CmjzrQkurh $JNJ #earnings

— Johnson & Johnson (@JNJNews) July 17, 2024

J&J’s Defense and Next Steps

Johnson & Johnson argued that their contract with Auris was commercially reasonable and that the delays in the regulatory approval process were due to unforeseen technical difficulties. However, the court found this defense dubious, noting that the technical issues were anticipated and solvable.

“We respectfully disagree with the court’s decision regarding our development of the iPlatform and communications with Auris regarding soft tissue ablation,” a Johnson & Johnson spokesperson said.

While the judge ruled in favor of J&J on some matters, rejecting most contract claims involving the Monarch device and dismissing fraud allegations, the case’s primary focus was the company’s actions regarding the iPlatform.

Johnson & Johnson has indicated that this ruling does not affect their current robotics program or the upcoming release of the Ottava surgical robotics system. The company is currently reviewing the decision and considering options for appeal.