Delaware's Supreme Court clarifies the limits of earnout protections: specific milestone language controls, efforts clauses carry real obligations.
In Fortis Advisors v. Johnson & Johnson (Jan. 12, 2026), J&J acquired a robotics company for $3.4B cash plus up to $2.35B in milestone-based earnouts. None were ever paid. The Court awarded over $600M in damages. Here's why it matters:
๐ง๐ฎ๐ธ๐ฒ๐ฎ๐๐ฎ๐ ๐ญ: ๐ช๐ฟ๐ถ๐๐ฒ ๐ฒ๐
๐ฎ๐ฐ๐๐น๐ ๐๐ต๐ฎ๐ ๐๐ผ๐ ๐บ๐ฒ๐ฎ๐ป โ ๐ฐ๐ผ๐๐ฟ๐๐ ๐๐ผ๐ป'๐ ๐ณ๐ถ๐
๐ถ๐ ๐น๐ฎ๐๐ฒ๐ฟ.
The milestones required a specific type of FDA clearance (510(k)). When the FDA closed that pathway, the seller argued the buyer should pursue an alternative route. The Court said no โ you picked your trigger, and the contract won't be rewritten because circumstances changed. If a risk is foreseeable, even if unlikely, you must draft for it at the negotiating table.
๐ง๐ฎ๐ธ๐ฒ๐ฎ๐๐ฎ๐ ๐ฎ: "๐ฅ๐ฒ๐ฎ๐๐ผ๐ป๐ฎ๐ฏ๐น๐ฒ ๐ฒ๐ณ๐ณ๐ผ๐ฟ๐๐" ๐ฐ๐น๐ฎ๐๐๐ฒ๐ ๐ฎ๐ฟ๐ฒ๐ป'๐ ๐ฒ๐บ๐ฝ๐๐ ๐ฝ๐ฟ๐ผ๐บ๐ถ๐๐ฒ๐.
J&J committed to pursue the milestones with the same effort it gave its own top-priority products. Instead, it ran an internal competition that set the acquired product back, merged it with a rival platform, and stripped employee incentives tied to the milestones. The Court held that a buyer can choose how to pursue a milestone, but it cannot abandon the goal altogether while hiding behind business judgment.
๐ง๐ฎ๐ธ๐ฒ๐ฎ๐๐ฎ๐ ๐ฏ: ๐๐๐ถ๐ป๐ด ๐ฑ๐๐ฟ๐ถ๐ป๐ด ๐ป๐ฒ๐ด๐ผ๐๐ถ๐ฎ๐๐ถ๐ผ๐ป๐ ๐ฐ๐ฎ๐ป ๐ฐ๐ผ๐๐ ๐๐ผ๐ โ ๐ฒ๐๐ฒ๐ป ๐ฎ๐ณ๐๐ฒ๐ฟ ๐ฐ๐น๐ผ๐๐ถ๐ป๐ด.
J&J's CEO pitched a $100M milestone as a near-certainty while concealing a patient death and FDA investigation that threatened it. The contract's exclusive remedy clause didn't save J&J because only J&J โ not the seller โ had agreed not to rely on statements made outside the contract. If you want protection from fraud claims based on what was said at the negotiating table, both sides must expressly disclaim reliance.
Fortis v. J&J is now the leading Delaware earnout opinion โ addressing milestone drafting precision, the enforceability of efforts obligations, and the limits of exclusive remedy clauses against extra-contractual fraud. Essential reading for anyone structuring contingent consideration.