Matter of Avangrid, Inc., Shareholder Litig.
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Opinion
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Bureau Thomas J.K. Smith, State Reporter
Matter of Avangrid, Inc., Shareholder Litig.
2026 NY Slip Op 04141
June 30, 2026
Appellate Division, First Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This decision is uncorrected and subject to revision before publication in the Official Reports.
In the Matter of Avangrid, Inc., Shareholder Litigation.
v
Dekalb County Employees' Retirement System, et al., Appellants,
Ignacio S. GalÁn et al., Respondents.
Decided and Entered: June 30, 2026
Index No. 659327/24|Appeal No. 7002|Case No. 2026-00346|
Before: Scarpulla, J.P., González, Rodriguez, Higgitt, Hagler, JJ.
Johnson Van Kwawegen LLP, New York (Thomas G. James and Eric J. Riedel of counsel), for appellants.
Davis Polk & Wardwell LLP, New York (Andrew Ditchfield of counsel), for respondents.
Order, Supreme Court, New York County (Andrew Borrok, J.), entered December 22, 2025, which granted defendants' motions to dismiss the complaint pursuant to CPLR 3211(a)(7), unanimously affirmed, with costs.
Plaintiffs, former minority shareholders of nonparty Avangrid, Inc., alleged that defendants — Avangrid's directors, its CEO, and Iberdrola, S.A., Avangrid's parent holding company — breached their fiduciary duties during Iberdrola's buyout of the remaining outstanding shares of Avangrid. Plaintiffs further alleged that defendant Moelis & Company LLC, the financial advisor retained for the transaction, aided and abetted the breach of fiduciary duty. According to plaintiffs, the motion court should have applied the entire fairness standard of review to the transaction because defendants did not adhere to the procedural safeguards stated in Kahn v M & F Worldwide Corp. (88 A3d 635, 645 [Del 2014]) (MFW), and as adopted by the Court of Appeals in Matter of Kenneth Cole Prods., Inc., Shareholder Litig. (27 NY3d 268, 277 [2016]). "[I]n controller buyouts, the business judgment standard of review will be applied if and only if: (i) the controller conditions the procession of the transaction on the approval of both a Special Committee and a majority of the minority stockholders; (ii) the Special Committee is independent; (iii) the Special Committee is empowered to freely select its own advisors and to say no definitively; (iv) the Special Committee meets its duty of care in negotiating a fair price; (v) the vote of the minority is informed; and (vi) there is no coercion of the minority" (Kenneth Cole, 27 NY3d at 277, quoting MFW, 88 A3d at 645]). Supreme Court properly granted defendants' motion to dismiss because the complaint did not sufficiently allege that defendants failed to satisfy these requirements and thus, the business judgment rule analysis applied. Under the business judgment rule, the Unaffiliated Committee's determinations were entitled to deference and dismissal of the complaint was warranted.
With respect to the first and sixth conditions, the transaction was conditioned on the approval of the Unaffiliated Committee and a majority of the minority shareholders, and the minority vote was not coerced. Contrary to plaintiffs' argument, defendants could include nonparty Qatar Investment Authority, which held 8.7% of the common stock of Iberdrola and 3.7% of Avangrid as a "minority" shareholder of Avangrid without coercing the minority (see Matter of Baltic Trading Stockholders Litig., 160 AD3d 599, 602 [1st Dept 2018]).
[*2]With respect to the second condition, independence of the Unaffiliated Committee, "the question is whether a director is beholden to the controlling party or so under that party's influence that the director's discretion would be compromised" (Kenneth Cole, 27 NY3d at 279). The issue of the Unaffiliated Committee's supposedly deficient mandate, which required the Committee to consider Iberdrola's interests, does not concern independence but rather goes to the committee's power to say no, the fourth condition under MFW. At oral argument before the court, plaintiffs' counsel admitted, "we've not alleged that the committee did not have the ability to say no."
Similarly, the issue of whether "the committee had an incentive to accept an inadequate price without meaningful negotiations" (Kenneth Cole, 27 NY3d at 280) does not concern independence but rather also concerns the fourth MFW requirement that "the [Unaffiliated] Committee meets its duty of care in negotiating a fair price" (id. at 277 [internal quotation marks omitted]). During oral argument before the motion court, plaintiffs' counsel also conceded, "we have not alleged the committee failed to satisfy its duty of care."
As to director independence, the second MFW condition, the fact that defendants Patricia Jacobs and Robert Duffy, members of the Unaffiliated Committee, remained on Avangrid's board after Iberdrola purchased the remaining shares of Avangrid did not strip them of independence (see Baltic, 160 AD3d at 600).
The allegation that Jacobs, a retiree, was not independent because her fees for sitting on Avangrid's board and Unaffiliated Committee formed the bulk of her income is unavailing (see Simons v Brookfield Asset Mgt. Inc., 2022 Del Ch LEXIS 15, *34, 2022 WL 223464, *15 [Jan. 21, 2022, C.A. No. 2020-0841-KSJM]). Otherwise, courts would have to find "that all retired board members lack independence" (Chester County Employees' Retirement Fund v New Residential Inv. Corp., 2017 Del Ch LEXIS 767, *22, 2017 WL 4461131, *9 [Oct. 6, 2017, C.A. No. 11058-VCMR]).
Plaintiffs allege that the director fees that Duffy received formed a smaller percentage of his income than Jacobs'. The fact that Duffy publicly praised defendant Ignacio GalÁn, the chairman of the boards of Avangrid and Iberdrola, and described him as a friend is insufficient to call his independence into question (see Matter of Cadus Corp. Stockholder Litig., 2020 NY Slip Op 30547[U], *3-4 [Sup Ct, NY County], affd 189 AD3d 437 [1st Dept 2020], lv denied 37 NY3d 906 [2021]).
Plaintiffs' allegation that defendant John Balducci, the third member of the Unaffiliated Committee, had a personal relationship with GalÁn that called his independence into question is also insufficient (see Kenneth Cole, 27 NY3d at 279; Cadus, 189 AD3d at 437-438; Baltic, 160 AD3d at 600).
[*3]Finally, the fact that the Unaffiliated Committee, aided by a law firm, contacted eight financial firms and interviewed three before choosing defendant Moelis shows that it was "empowered to freely select its own advisors," in satisfaction of the third MFW condition (Kenneth Cole, 27 NY3d at 277, quoting MFW, 88 A3d at 645; see In re Match Group, Inc. Derivative Litig., 2022 Del Ch LEXIS 212, *44, 2022 WL 3970159, *22 [Sept. 1, 2022, C.A. No. 2020-0505-MTZ], revd on other grounds
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