Selendy Gay Secures Record-Breaking Earnout Award in Delaware Case
A major legal decision in Delaware has resulted in the largest earnout-related damages award in the state’s history, following a series of trial and appellate victories secured by Selendy Gay.
The case, involving Fortis Advisors LLC as representative for former shareholders of Auris Health, concluded with a final stipulated judgment of approximately $811 million. The judgment was entered by the Delaware Court of Chancery on January 26, 2026, after the Delaware Supreme Court affirmed key aspects of an earlier trial ruling.
Background of the Dispute
The case stems from a long-running dispute between Auris Health and its acquirer, Johnson & Johnson, following a merger agreement that included earnout provisions tied to performance milestones.
In September 2024, Vice Chancellor Lori W. Will ruled that Johnson & Johnson had breached the merger agreement. The court found that the company failed to use the required level of effort to achieve key milestones and had engaged in fraudulent conduct that affected shareholder outcomes.
Key Findings Upheld on Appeal
The Delaware Supreme Court, sitting en banc, upheld the majority of the trial court’s findings. The appellate decision affirmed that:
Johnson & Johnson breached its obligation to use “priority” commercially reasonable efforts to meet agreed-upon milestones
The damages methodology applied by the trial court was appropriate
The company, through its CEO, fraudulently induced Auris shareholders to accept a reduced contingent payment
The court also rejected arguments that contractual limitations within the merger agreement prevented the fraud claim from proceeding.
Significance of the Ruling
The approximately $811 million award represents the largest earnout-related damages ruling in Delaware history, a jurisdiction widely regarded as a leading venue for corporate law.
The case highlights the importance of transparency and good faith in merger agreements, particularly when performance-based payments are involved. It also reinforces that contractual provisions may not shield parties from liability in cases involving fraud.
Legal Team and Recognition
The legal team representing Fortis was led by Selendy Gay partners Philippe Selendy, Jennifer Selendy, Sean Baldwin, Oscar Shine, Meredith Nelson, and Julie Singer. The team also included appellate specialist Corey Stoughton and several associates, working alongside Delaware co-counsel Ross Aronstam & Moritz LLP.
Following the outcome, the team was recognized by The American Lawyer as “Litigators of the Week,” reflecting the significance of both the trial and appellate victories.
Broader Implications
This case underscores the evolving standards around corporate accountability and the enforcement of merger agreements. It serves as a reminder that earnout provisions, often complex and highly negotiated, can carry substantial legal and financial consequences when disputes arise.
As similar agreements continue to play a central role in mergers and acquisitions, this ruling may influence how future contracts are structured and litigated.