Michael Holmes is a Vice Chair, and Jason Halper and Jeffrey Crough are Partners at Vinson & Elkins. This post is based on a Vinson & Elkins memorandum by Mr. Holmes, Mr. Halper, Mr. Crough, Timbre Shriver, Brandon Osowski, and Elizabeth Ilyina-Orak, and is part of the Delaware law series; links to other posts in the series are available here.
On January 12, 2026, the Delaware Supreme Court issued an en banc opinion in Johnson & Johnson v. Fortis Advisors LLC, No. 490, 2024, 2026 WL 89452 (Del. Jan. 12, 2026), largely affirming and reversing in part a Court of Chancery post-trial decision that awarded former stockholders of Auris Health, Inc. (“Auris”) over $1 billion in damages in their post-closing earnout dispute against Johnson & Johnson (“J&J”). Apart from the high stakes, the Supreme Court’s unanimous opinion, authored by Justice LeGrow, is notable because it is the first opinion to address the recent slew of earnout disputes in Delaware (which we have previously summarized here). The decision reinforces three key principles of Delaware M&A and contract law. First, absent unusual circumstances, a court will not utilize the implied covenant of good faith and fair dealing to rewrite the parties’ agreement as reflected in the words in the contract. Second, where a party’s obligation is dependent on regulatory approval, courts will hold the parties to the standard they set for themselves in the contract, including where that standard is by reference to the buyer’s past practices with respect to securing regulatory approval for its own products. Third, fraud claims based on extracontractual statements are precluded only by clear “anti-reliance” language in the contract, not by an “exclusive remedy” provision. Together, these principles underscore the importance of careful drafting so that the language of an agreement conforms to the parties’ expectations.
