On January 24, 2024, Justice Reed of the New York County Commercial Division issued a decision in Memorial Sloan Kettering Cancer Ctr. v. Bristol Myers Squibb Co., 2024 NY Slip Op. 50074(U), dismissing a claim based on a corporate parent’s liability for a subsidiary’s contractual allegations, explaining:
In New York, a parent corporation generally cannot be held liable for the debts of its wholly owned subsidiary, nor can it be bound by the contract of that subsidiary. Parent and subsidiary entities are generally considered and treated as separate legal entities, so that the contract of one does not bind the other.
However, a parent company can be held liable as a party to its subsidiary’s contract: (1) if the parent manifests an intent to be bound by the contract; or (2) if the elements of piercing the corporate veil are present. Intent is inferable if the parent participated in the negotiation of the contract, if the subsidiary is a dummy for the parent, or if the subsidiary is controlled by the parent for the parent’s own purposes.
Here, it is alleged that Celgene and Juno were subsumed into the regular business operations of BMS and that Celgene and BMS took exclusive control of performing under the license agreement. It is further alleged that BMS assumed Juno’s contractual obligations by sending updates to MSK, by making initial milestone royalty payments, and by operating clinical trials and communicating with regulatory agencies about a related product development. The complaint also alleges that BMS made representations to investors and the SEC that MSK’s technology was licensed to BMS and Celgene.
It is this court’s view, however, that there are insufficient facts pled that would support the claim that BMS or Celgene assumed Juno’s contractual obligations under the license agreement, or otherwise operated Juno in a manner sufficient to pierce the corporate veil. The complaint relies, most heavily, upon BMS’s conduct that was interpreted by MSK as having domination over Juno’s operation. Conclusory allegations of business overlap, however, are insufficient to impose contractual liability on a parent corporation. To impose parental liability, facts must be alleged that establish an intent to be bound, which may be shown by contract negotiation, use of the subsidiary as a shell and use of the subsidiary solely for the parent’s operational purposes. Here, there are no facts pled to support the contention that BMS participated in the relevant contract negotiations, or that Juno was otherwise operated by BMS or Celgene as a dummy corporation. Although it appears that the entities worked jointly to bring products to market, it is not sufficiently alleged that Juno essentially ceased to operate and functioned solely for BMS’s own interests.
(Internal quotations and citations omitted).