Johnson & Johnson v. Fortis Advisors LLC

Johnson & Johnson v. Fortis Advisors LLC is a 2026 en banc decision of the Delaware Supreme Court arising from a massive post-closing earn-out dispute following Johnson & Johnson’s 2019 acquisition of Auris Health, a surgical robotics company. The case is now a leading Delaware authority on earn-out provisions, “commercially reasonable efforts” clauses, and the limits of the implied covenant of good faith and fair dealing in M&A deals.

Key facts

Court: Delaware Supreme Court (appeal from Delaware Court of Chancery)
Decision date: January 12, 2026
Deal context: J&J’s $3.4B acquisition of Auris Health with up to $2.35B in earn-out milestones
Core issue: Efforts to achieve regulatory and sales milestones, and use of implied covenant
Outcome: Chancery win for Fortis mostly affirmed, but implied-covenant ruling and related damages reversed in part

Background and earn-out structure

J&J acquired Auris Health with a large contingent earn-out: up to $2.35 billion payable if specific regulatory and sales milestones were hit for Auris’s surgical robotics products, including the iPlatform and Monarch systems. The merger agreement required J&J to use “commercially reasonable efforts,” defined by reference to how it treated its own top-priority products, and tied regulatory milestones to achieving specified FDA 510(k) clearances.

When none of the milestones were achieved, Fortis Advisors LLC, acting as stockholder representative for former Auris shareholders, sued J&J in the Court of Chancery, alleging failure to use the required efforts and fraud in negotiations over one Monarch-related milestone.

Chancery Court decision

Vice Chancellor Lori Will largely sided with Fortis in 2024, finding that J&J:

Failed to apply the contractually required “commercially reasonable efforts” to advance Auris’s iPlatform and other products.
Breached the implied covenant of good faith and fair dealing by not pursuing an alternative FDA regulatory pathway after the original 510(k) route became unavailable for an iPlatform milestone.
Fraudulently induced Auris into accepting a contingent earn-out payment rather than more upfront value for the Monarch lung ablation milestone by overstating how certain the milestone was, despite knowing about a patient death and active FDA scrutiny.

The court awarded nearly $1 billion in damages plus interest to former Auris shareholders, one of the largest earn-out awards in Delaware history.

Supreme Court’s ruling and partial reversal

On appeal, the Delaware Supreme Court:

Reversed the implied-covenant piece: It held there was no “gap” in the contract about what would happen if the 510(k) pathway became unavailable; that risk was foreseeable and contractually allocated, so the implied covenant could not be used to require J&J to pursue a different regulatory route.
Vacated related damages tied to that first iPlatform milestone, meaning the overall award will be reduced by several hundred million dollars after recalculation.
Affirmed the findings that J&J breached express “commercially reasonable efforts” obligations for other milestones and upheld most of the damages associated with those breaches.
Affirmed the fraud finding and held that the merger agreement did not bar extra-contractual fraud claims, preserving an important path for targets alleging deal-related fraud.

Significance for Delaware earn-out law

For M&A practitioners and parties, the decision reinforces several themes:

Primacy of contract text: Courts will be reluctant to use the implied covenant to rewrite risk allocation, especially in sophisticated, heavily negotiated deals. Parties must expressly address foreseeable contingencies, such as regulatory pathway changes, in the agreement itself.
Efforts provisions still bite: Even while trimming back the implied-covenant holding, the Supreme Court affirmed that “commercially reasonable efforts” clauses have real teeth, particularly when defined by comparison to how a buyer treats its own key products.
Fraud carve-outs matter: The court’s willingness to sustain extra-contractual fraud claims underscores the continued importance of fraud exceptions to non-reliance and exclusive-remedy clauses in Delaware-governed deals.

Because of its detailed treatment of efforts standards, implied covenant limits, and fraud in an earn-out, Johnson & Johnson v. Fortis Advisors LLC is expected to be a key reference for future Delaware M&A litigation and deal drafting.