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

Background

The dispute arose from Bristol-Myers Squibb Company’s November 2019 acquisition of Celgene Corporation. In connection with that acquisition, Bristol-Myers Squibb issued contingent value rights, or CVRs, to Celgene stockholders. The CVRs would have value only if marketing applications for three products received Food and Drug Administration approval by specified dates. Under the agreement, approval even one day late would automatically terminate the CVR Agreement and make the CVRs worthless.

The complaint alleged that Bristol-Myers Squibb slowed the approval process for Liso-cel so that it was approved 36 days after the applicable milestone. UMB Bank N.A., the trustee under the CVR Agreement, sued on behalf of the CVR holders. UMB alleged that Bristol-Myers Squibb breached the agreement by failing to use “Diligent Efforts” to obtain timely approval and by failing to make its books and records available for inspection after a December 29, 2020 request.

Motion to Dismiss

Bristol-Myers Squibb moved under Rule 12(b)(6), which allows dismissal for failure to state a legally sufficient claim. It principally argued that UMB had not followed the agreement’s pre-suit notice requirements. The agreement authorized the trustee to sue if an “Event of Default” occurred and continued. An Event of Default included a material breach that continued for 90 days after notice to the company.

UMB sent a notice of default on March 4, 2021, about three months after the CVR Agreement had automatically terminated. UMB waited until June 3, 2021—90 days after the notice—and then filed suit.

Court’s Analysis

The court rejected Bristol-Myers Squibb’s argument that a breach could not continue for 90 days after the agreement terminated. The agreement stated that the provision authorizing suit would survive termination and that termination would not relieve a party of liability for a material breach occurring before termination. The court also relied on its earlier reasoning that termination ordinarily does not eliminate liability for a breach that already occurred. The 90-day language was more reasonably understood as barring a demand based on a breach that had been cured.

The court also rejected the argument that the notice period was ineffective because Bristol-Myers Squibb could not have cured the alleged failure to obtain timely approval. The agreement did not expressly require that the breach be capable of cure during the 90-day period. The alleged default remained unremedied after 90 days, and the court noted that other remedies could potentially address a default, including damages or reinstatement of the CVR Agreement. At minimum, the relevant contract provisions were ambiguous, which was enough to deny dismissal at this stage.

As to the books-and-records claim, Bristol-Myers Squibb argued that UMB’s request came only two days before termination and that the requested damages were not legally recoverable. The court held that whether providing the records would have unreasonably interfered with normal business operations or been impractical involved factual questions that could not be resolved on a motion to dismiss. The court also held that UMB sufficiently alleged damages by claiming that it incurred investigation expenses that would have been avoided or reduced if Bristol-Myers Squibb had provided the records. UMB did not need to specify the precise damages measure or provide detailed proof of causation at this stage.

Disposition

The court denied Bristol-Myers Squibb’s motion to dismiss the complaint. Bristol-Myers Squibb was ordered to answer within 14 days. The ruling allowed the case to continue; it did not determine whether Bristol-Myers Squibb ultimately breached the CVR Agreement or what damages, if any, UMB or the CVR holders would recover.