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Litigation Coverage: NY Federal Court Dismisses $6.4B CVR Suit Against Bristol-Myers Squibb After 3 Years of Litigation Because Trustee UMB Bank Not Appointed by Registered Holder DTC, Lacks Standing to Sue

Relevant Document:
Opinion

Judge Jesse Furman of the U.S. District Court for the Southern District of New York today granted Bristol-Myers Squibb’s motion to dismiss UMB Bank’s $6.4 billion breach of contract suit because “UMB was not properly appointed Trustee” for the Celgene contingent value rights, or CVRs, prior to filing suit and “this defect compels dismissal for lack of subject-matter jurisdiction.” Specifically, Judge Furman finds UMB’s appointment was not valid because it was not approved by the Depository Trust Company, or DTC, the registered holder of almost all of the CVRs.

As part of the Celgene acquisition, BMS issued CVRs worth up to $6.4 billion if Celgene’s cancer therapy Liso-cel received regulatory approval by specified post-merger milestone dates. In 2021, UMB, as the putative trustee appointed by the beneficial holders of the CVRs, alleged that BMS intentionally delayed regulatory approval of Liso-cel to avoid paying. In June 2022 Judge Furman denied BMS’ motion to dismiss based on the termination provisions in the agreement; BMS filed a second motion to dismiss for lack of standing in February.

In today’ opinion, Judge Furman holds that the agreement required UMB to be appointed by a majority of the registered CVR holders, and DTC, the registered holder of over 99% of the CVRs, did not approve. The approval of the beneficial owners of the CVRs was insufficient to ratify the appointment under the CVR agreement, according to Judge Furman.

The judge also rejects UMB’s argument that BMS waived its right to object to UMB’s appointment by treating UMB as the CVR trustee. “There is no record evidence evincing any ‘intent to relinquish contractual protection’” or “‘deliberate, informed abandonment of known rights’” by BMS, Judge Furman says.

The judge further holds that the defect in UMB’s appointment cannot be cured after the fact. UMB’s lack of standing at the time the lawsuit was filed “means the Court lacks subject-matter jurisdiction,” Judge Furman states. “[A] case initiated in the name of a plaintiff that lacks standing is an incurable nullity,” Judge Furman concludes.