This Week in Chancery Court: Johnson & Johnson, TransCanada

Johnson & Johnson will face former Auris Health Inc. investors at trial before the Delaware Court of Chancery in a case alleging fraud related to the development and regulatory approval of a surgical robot system.

Here are more highlights from the court’s calendar this week:

Tuesday: Fortis Advisors LLC v. Johnson & Johnson, Del. Ch., No. 2020-0881, trial 1/16/24

At issue: A long-running dispute stemming from the Food and Drug Administration’s decision to change the regulatory pathway for “robotically assisted surgical devices” finally comes to trial. Johnson & Johnson faces allegations that its Ethicon Inc. unit duped Auris investors into a $3.4 billion acquisition in 2019. Auris was developing the “iPlatform” surgical robot system at the time. Ex-Auris shareholders claim Ethicon misled them about the way it would allocate resources between iPlatform and another surgical robot in development. They also allege Ethicon made billions of dollars in post-deal payments to Auris contingent on unreachable regulatory and sales milestones related to iPlatform. Johnson & Johnson denies the allegations and argues it still poured time and resources into the iPlatform system even after receiving FDA feedback that made making its milestones “unachievable.” Attorneys for the former Auris shareholders said in a pre-trial brief that “the milestones were not hit because that was never J&J’s objective.”

Court action: A ten-day trial opens Tuesday in Wilmington.

J&J Loses Bid to Nix Fraud Lawsuit Over $3.4 Billion Auris Deal

Tuesday: Lien v. Eagle Equity Partners II LLC, Del. Ch., No. 2022-0972, oral argument 1/16/24.

At issue: An investor in online video game company Skillz Inc. is suing the Hollywood executives—including MGM Studios ex-chairman Harry Sloan and former CBS Entertainment president Jeff Sagansky—who backed the blank-check deal that took it public, claiming they engineered the merger to give them a windfall regardless of its merits and duped shareholders into approving it with virtually no due diligence. Attorneys for Sloan, Sagansky, and other defendants have filed motions seeking to dismiss the lawsuit. The Skillz acquisition resembles other SPAC litigation where the court has found that “the SPAC structure may incentivize its fiduciaries to deviate from their duties of loyalty to pursue value-destructive deals that generate outsized returns for themselves at the expense of public stockholders,” the investor’s attorneys said in an answering brief.

Court action: Oral arguments on the motions to dismiss will be heard in Wilmington.

Skillz eSports Investor Sues Hollywood Veterans Behind SPAC Deal

Friday: In re Columbia Pipeline Grp., Merger Litig., Del. Ch., No. 2018-0484, hearing 1/19/24.

At issue: The court last year found TransCanada liable to investors for allowing certain fiduciary breaches to occur during a $13 billion merger with Columbia Pipeline Group Inc., and the plaintiffs were awarded sale process damages of $1 per share based on a reneged-upon $26 per share deal and disclosure damages of $0.50 per share. However, there remained some issues for the court to resolve, the parties told Vice Chancellor J. Travis Laster in a letter. Among those issues: TransCanada seeks a judgment reduction under the terms of a $79 million class action settlement that allowed two former Columbia executives to exit the litigation in 2022. The plaintiffs also now seek pre- and post-judgment interest and an award for fees and costs.

Court action: Hearing in Wilmington to address remaining post-opinion issues.

TransCanada Breached Duties in $13 Billion Columbia Merger (1)

Friday: Omni Newco LLC v. Forward Air Corp., Del. Ch., No. 2023-1104, trial 1/19/24.

At issues: Omni Logistics sued Forward Air Corp. in late October, seeking a court order that would compel closing a $3.2 billion supply chain logistics merger after Forward moved to cancel the transaction. The litigation is a relatively rare breed of court cases that seek to force a transaction after one side balks, a remedy called specific performance. This lawsuit has proceeded on an expedited basis, with the parties recently arguing over motions to compel text messages, handwritten notes, or other documents before trial.

Court action: A four-day trial begins Friday in Wilmington and continues the following week.

Omni Sues Forward to Force Closing of $3.2 Billion Merger (1)