The U.S. Court of Appeals for the Second Circuit has ruled that UMB Bank, acting as Trustee, can proceed with its lawsuit against Bristol-Myers Squibb. This decision affects the rights of contingent value rights holders and clarifies issues around trustee appointments in corporate agreements.
The case, UMB Bank v. Bristol-Myers Squibb Company, was decided on August 13, 2026, under docket number 24-2865. The court's ruling allows UMB Bank to challenge Bristol-Myers for allegedly failing to meet its contractual obligations under a Contingent Value Rights (CVR) Agreement.
This ruling is significant as it highlights the legal standing of trustees in corporate law, particularly in cases where the appointment process may be disputed. The decision impacts not only UMB Bank and Bristol-Myers Squibb but also sets a precedent for how similar disputes may be handled in the future.
Background
The parties in this case are UMB Bank, N.A., and Bristol-Myers Squibb Company. UMB Bank serves as the Trustee under a CVR Agreement established during Bristol-Myers' acquisition of Celgene, a competitor pharmaceutical company, in 2019. This agreement allowed for cash payments to shareholders contingent upon the approval of certain products by the FDA.
The dispute arose when UMB Bank was appointed as Trustee after the original Trustee, Equiniti Trust Company, was removed. UMB Bank claimed that Bristol-Myers failed to use diligent efforts to secure FDA approvals, which would trigger payments to CVR holders. However, Bristol-Myers argued that UMB Bank was not properly appointed as Trustee, which led to the dismissal of UMB's claims in the lower court.
The case reached the Second Circuit after UMB Bank appealed the lower court's judgment, which stated that UMB lacked standing due to alleged defects in its appointment as Trustee. Bristol-Myers also cross-appealed, challenging the denial of its motion to dismiss on other grounds.
The Ruling
The Second Circuit ruled in favor of UMB Bank, stating that the lower court erred in concluding that UMB lacked Article III standing to sue. The court emphasized that the injuries to the beneficial owners of the securities were cognizable and redressable, meaning that UMB's claims were valid as they were brought in its capacity as Trustee.
The court stated, "Because the injuries to the beneficial owners of securities whose interests the trust was formed to protect constituted cognizable and redressable injuries to the trust, and because UMB’s claims were solely brought in its putative capacity as Trustee of the trust, any defects in UMB’s appointment as Trustee implicate its capacity to sue, but not its Article III standing."
The judges on the panel included Circuit Judges Robinson, Merriam, and Kahn. The court vacated the lower court's judgment, dismissed Bristol-Myers' conditional cross-appeal, and remanded the case back to the district court for further proceedings.
Impact
This ruling has significant implications for the future of trust law and corporate governance. By affirming UMB Bank's ability to sue, the court has reinforced the rights of trustees to act on behalf of beneficiaries, even in cases where the appointment process may be contested. This decision could influence how corporations structure their agreements and the roles of trustees in similar financial arrangements.
The ruling also clarifies that issues surrounding a trustee's capacity to sue do not necessarily affect the Article III standing of a case. This distinction may lead to a more streamlined approach in future litigation involving trustees and their authority to represent beneficiaries.