UMB Bank, N.A. v. Bristol-Myers Squibb Company

Background

The case concerned a $6.4 billion dispute arising from Bristol-Myers Squibb Company’s November 2019 acquisition of Celgene Corporation. As part of that transaction, BMS issued contingent value rights, or CVRs, to Celgene shareholders. Each CVR would pay $9 if the Food and Drug Administration approved three Celgene products by specified deadlines. If any deadline was missed, the CVRs would expire worthless. The complaint alleged that BMS failed to use the contractually required “Diligent Efforts” to obtain approval for Liso-cel by December 31, 2020, and failed to make books and records available for inspection. The complaint alleged that approval came 36 days late.

The CVR Agreement authorized only the trustee to sue on behalf of CVR holders. Equiniti Trust Company was the original trustee. In December 2020, investors, UMB Bank, N.A., and others attempted to remove Equiniti and appoint UMB as successor trustee. The Agreement defined “Holders” as people or entities listed as owners in the Security Register and required an act of the “Majority Holders.” The Depository Trust Company, through its nominee Cede & Co., was the registered holder of more than 99% of the CVRs, but it did not sign the appointment instrument and did not provide an omnibus proxy at the time.

UMB filed suit on June 3, 2021, claiming to act as trustee. BMS initially moved to dismiss for failure to state a claim, but the court denied that motion. During discovery, BMS moved under Rule 12(h)(3) of the Federal Rules of Civil Procedure to dismiss for lack of subject-matter jurisdiction, arguing that UMB had not been properly appointed before filing suit. UMB argued that its appointment complied with the Agreement, that BMS had waived or ratified any defect, and, alternatively, that later authorization from Cede & Co. had cured the defect.

Court’s Analysis

The court held that UMB was not properly appointed as successor trustee before filing the lawsuit. Under the unambiguous terms of the CVR Agreement, removal and appointment required an act of a majority of registered holders, not merely beneficial owners. The court rejected UMB’s argument that the existing trustee had authority to treat beneficial-owner support as sufficient. It also rejected UMB’s argument that BMS had appointed UMB, because the contractual conditions for BMS’s appointment authority had not arisen and there had been no required BMS board resolution or chief executive officer action.

The court also rejected waiver and ratification. It found that BMS’s conduct did not clearly show an intentional abandonment of its contractual rights or informed approval of the defective appointment. The court explained that BMS’s failure to object more forcefully, and its reliance on Equiniti’s determination, did not establish the required intent.

Because UMB was not properly installed as trustee when it sued and was not itself a beneficial CVR owner, the court concluded that UMB had no legally recognized injury and therefore lacked Article III standing. Article III standing is the constitutional requirement that a plaintiff have a sufficient personal stake in a federal case. The court ruled that this jurisdictional defect could not be cured after filing. It distinguished cases allowing a real party in interest to replace a nominal plaintiff because UMB had never possessed the claim it asserted in this lawsuit. The court did not decide whether Cede & Co.’s later authorization effectively installed UMB as trustee, because that later authorization could not establish jurisdiction at the time of filing.

Disposition

Judge Jesse M. Furman granted BMS’s motion to dismiss for lack of subject-matter jurisdiction. The court dismissed UMB’s claims without prejudice, meaning the dismissal did not bar a new lawsuit by a properly appointed trustee. The Clerk of Court was directed to terminate the motion at ECF No. 73 and close the case. The court did not decide whether BMS breached the CVR Agreement or whether UMB’s underlying contract claims had merit.

The court also ruled on sealing. Personally identifying information of non-party CVR holders and their investment amounts may remain redacted. The merits discovery materials and related briefing may remain sealed or redacted because the court decided only the jurisdictional issue and did not rely on those materials. By contrast, materials concerning UMB’s attempted appointment as successor trustee, including currently sealed exhibits quoted or cited in the opinion, had to be filed publicly within two weeks, subject to proposed redactions and an explanation for those redactions. The court also set a one-week deadline for any additional motion seeking to unseal materials not addressed in the opinion.