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A Delaware judge denied Johnson & Johnson’s motions to dismiss a fraud lawsuit filed by former shareholders of Auris Health. The lawsuit alleges that J&J executives misrepresented their intentions for the robotic surgery company when it acquired Auris Health for $3.4 billion in 2019.

Acting as the representative of the former Auris shareholders, Fortis Advisors sued in 2020 after the medtech giant released reserves related to the additional $2.35 billion in milestone payments that were part of the agreement.

J&J, its Ethicon subsidiary and top corporate officers violated the merger agreement and made false promises during negotiations, according to the lawsuit.

Vice chancellor Lori W. Will in Delaware, in a December 13 order, allowed more than half of Fortis Advisors counts against J&J to proceed, though she dismissed claims against individual J&J executives on jurisdictional grounds.

Surgical robotics is a hot space in medtech. As a result, many companies, large and small, seek to take on the dominant surgical robotics company, Intuitive.

Founded and run by Intuitive co-founder Dr. Fred Moll, Auris was a rising star in surgical robotics with its FDA-cleared Monarch platform and its in-development iPlatform. Moll saw iPlatform as a next-generation successor to Intuitive’s da Vinci robots that dominate the space, according to Will’s description of the case.

Meanwhile, J&J’s Ethicon surgical instruments business found itself increasingly challenged by the rise of robotic surgery. It sought to compete against Intuitive through a partnership with Google’s sister company Verily called Verb Surgical. However, questions about the Verb Surgical robot grew inside J&J, according to Will’s relating of Fortis’ claims.

A separate J&J subsidiary from Ethicon had already invested in Auris, and top J&J executives began arms-length negotiations with Moll and his team in December 2018 to acquire the company. Over the two months of talks, Moll and his colleagues were led to believe that Auris would be able to run independently of Verb after the acquisition, according to Fortis Advisors.

Fortis now alleges the Auris team was subjected post-acquisition to a covert “bakeoff” with Verb Surgical that diverted employees and resources. After the iPlatform won out over the Verb Surgical robot, Ethicon bought out Verily stake in Verb and rolled Verb into Auris, according to Will’s recounting.

“Fortis alleges that the purported bakeoff and the defendants’ restrictions on Auris’s hiring and expansion needs began immediately upon closing,” said Will. “A reasonable inference can be drawn that the defendants planned those actions during negotiations. Fortis has also alleged that the defendants’ post-closing intentions during negotiations, which were inconsistent with the defendants’ statements, were known to the defendants and within the defendants’ — rather than Auris’s — control.”

J&J has denied wrongdoing in the matter, claiming that other factors such as the pandemic delayed Auris from reaching its milestones.

Meanwhile, Moll remains at J&J as its chief development officer for surgical robotics. J&J recently announced a two-year delay in developing the team’s robot, now called Ottava, which may not see human clinical trials until the middle of the decade. The delays come even as another medtech giant Medtronic moves forward with its Hugo robot to compete against Intuitive.

Editor’s Note: This article first appeared on sister publication MassDevice.