Appellate victory in Avangrid fiduciary duty litigation in New York state court

On June 30, 2026, the Supreme Court of the State of New York Appellate Division, First Department, unanimously affirmed the dismissal of a putative stockholder class action filed against our clients, former Avangrid directors, alleging they had breached their fiduciary duties. 

The case arose from Iberdrola’s 2024 going-private acquisition of Avangrid in which Iberdrola acquired the remaining 18.4% of Avangrid stock that it did not already own. The plaintiffs, former Avangrid stockholders, alleged that the members of Avangrid’s board breached their fiduciary duties in approving the transaction. The plaintiffs alleged that the special committee tasked with considering the merger was not independent, that the committee’s financial adviser and legal counsel were not independent and that Iberdrola acquired the remaining minority stockholders’ interests in Avangrid at an unfairly low price.

The plaintiffs commenced their lawsuit in November 2024 and filed an amended complaint shortly after. In our motion to dismiss before Justice Andrew Borrok, we argued that the amended complaint should be dismissed on two grounds. First, we argued that under the standards set forth by the Delaware Supreme Court in its MFW opinion, later adopted by the New York Court of Appeals in In re Kenneth Cole, the business judgment rule applied. Specifically, the merger was conditioned from its inception on an independent special committee approval and the uncoerced, informed approval of the majority of the minority stockholders. Second, we argued that even if the court applied entire fairness review, the complaint regardless failed to properly plead that the defendants breached their fiduciary duties to those minority stockholders.

In a December 2025 decision, Justice Borrok agreed that the business judgment rule applied to the transaction because each of the MFW requirements was satisfied. The court also held that the plaintiffs failed to properly allege fraud or bad faith. The decision adopted two important arguments made in our motion: that a special committee director’s interactions with an acquirer in his capacity as an elected official cannot, without more, establish that the director lacked independence; and that minority stockholders are not coerced merely because a stockholder that holds shares of both the target and the acquiring company (but with a greater ownership stake in the acquiror) is included in the majority of the minority vote calculation.

The plaintiffs appealed. In the court’s June 2026 decision, the First Department decisively rejected the plaintiffs’ appeal and agreed with Justice Borrok that the MFW requirements were satisfied, and the plaintiffs’ complaint must be dismissed.

The Davis Polk team included partner Andrew Ditchfield (who argued the appeal), counsel Cristina M. Rincon and associates Erin Montera and Jiaqi (Jackie) Wang. All members of the Davis Polk team are based in the New York office.