Avangrid’s Unaffiliated Committee Directors Win Motion to Dismiss Shareholder Action Over Take-Private Deal

Paul, Weiss won a significant victory in the New York State Supreme Court, Commercial Division, for the directors of the unaffiliated committee of Avangrid, Inc., in a putative class action brought on behalf of Avangrid’s minority shareholders in connection with a take-private transaction by its majority shareholder, Iberdrola, S.A.

In December 2024, the plaintiffs filed a complaint against Avangrid, a sustainable energy company, alleging that Iberdrola, a Spanish multinational electric utility company, acted opportunistically by relying on information it received before other shareholders to acquire the minority shareholders’ interests at an unfairly low price, allowing it to purchase Avangrid’s outstanding shares at $35.75 per share for a total of $2.6 billion. The plaintiffs alleged that the unaffiliated committee tasked with evaluating the transaction lacked independence from Iberdrola, and that its financial advisor, Moelis, had economic incentives to push for the merger at the low price. The complaint further alleged that the Qatar Investment Authority, the second-largest Avangrid shareholder, tainted the vote of the minority shareholders because it owned 3.7% of Avangrid’s outstanding common stock but 8.8% of Iberdrola shares, and therefore was allegedly more aligned with Iberdrola’s interests. The plaintiffs also contended that the $35.75 per share figure fell at or below the low end of various ranges prepared by Moelis, and sought damages based on the alleged failure to secure a higher transaction price.

In May 2025, we argued that the complaint should be dismissed as the plaintiffs failed to allege that the unaffiliated directors harbored material self-interest, lacked independence from an interested party or acted in bad faith. In coordination with Avangrid, the non-committee members of the company’s board, Iberdrola and Moelis, we argued that the transaction was entitled to business judgment deference, which protects corporate directors and officers from liability for honest mistakes, rather than being subject to the more rigorous entire fairness standard. We asserted that the six necessary procedural safeguards for business judgment deference were in place, as required by Delaware and New York law: the transaction was conditioned on the approval of an unaffiliated committee and a majority vote of the minority stockholders; the unaffiliated committee was independent; the unaffiliated committee freely selected its own advisors, including Paul, Weiss and Moelis, and had the ability to say no definitively; the unaffiliated committee met its duty of care in negotiating a fair price; the vote of the minority shareholders was fully informed; and there was no coercion of the minority shareholders.

In his ruling, Justice Andrew Borrok granted the defendants’ motion in full. The court agreed with the defendants that all six procedural safeguards were met, and therefore that the transaction was entitled to business judgment deference. On the allegations about the unaffiliated committee members’ independence, which were the subject of our briefing, Justice Borrok noted that routine relationships in the course of members’ involvement in political duties with individuals at Iberdrola did not, without more, cast doubt on their independence.

The Paul, Weiss team includes litigation partners Andrew Gordon and Lina Dagnew and counsel Yotam Barkai.