Fortis Fires Back: “J&J Got a Windfall”
Representing Fortis Advisors, Philippe Z. Selendy of Selendy Gay PLLC countered that the Chancery Court correctly applied the implied covenant to uphold the spirit of the merger deal amid an unforeseen regulatory twist.
“The merger agreement was drafted based on what was reasonably foreseeable,” Selendy said. “510(k) was the only logical path at the time of contracting. No one expected the FDA to reverse course.”
He argued that J&J’s move to abandon the 510(k) route was not permitted under the contract, and the company should not benefit from a “windfall” at the expense of Auris shareholders.
“There was no reservation of rights to avoid milestone obligations,” Selendy added. “To deny the implied duty is to give J&J an unbargained-for escape.”
Justices Question Damages and Risk Allocation
The justices pressed both sides on whether reversing the implied covenant finding would require a recalculation of damages. Fortis maintained that the Chancery Court’s findings were independently supported by breach of contract claims tied to later milestone payments under Section 2.07(a).
According to the court record, Ethicon’s 2019 acquisition of Auris included $3.4 billion in cash and up to $2.35 billion in milestone payments linked to regulatory milestones for the iPlatform.
Fortis sued in October 2020, alleging J&J failed to treat iPlatform as a priority project, undermining its regulatory progress. In September 2024, Vice Chancellor Will awarded $968.8 million in damages plus $42.4 million in interest — a total nearing $1 billion.
