Key Points

  • The First Department unanimously affirmed the with-prejudice dismissal of Iberdrola Energy Projects' second amended complaint against Oaktree Capital Management, L.P., and other defendants, with costs.
  • Iberdrola's fraud claims failed for lack of detrimental reliance because the conduct it was allegedly induced into consisted of pre-existing obligations under the EPC, and it alleged no misrepresentations or omissions collateral to the contract.
  • Iberdrola's renewed challenge to the work-pending-dispute clause was barred by law of the case, and its newly-discovered-facts argument failed because it used the dispute resolution procedures to reach an arbitration in which it was awarded approximately $230 million.
  • The court declined to revisit its prior ruling on the enforceability of the EPC's nonrecourse provision, holding that the narrower exculpatory clause in One River Run Acquisition, LLC v Milde creates no conflict.

A New York appeals court on Thursday ended Iberdrola Energy Projects' fraud lawsuit against Oaktree Capital Management, holding that Iberdrola could not recover for fraud based on costs it incurred doing work its construction contract already required.

A five-justice panel of the Appellate Division, First Department, unanimously affirmed a May 7, 2025, judgment of Supreme Court, New York County, that dismissed Iberdrola's second amended complaint with prejudice. The appeal also brought up for review a Feb. 26, 2025, order by Justice Jennifer G. Schecter granting the defendants' motion to dismiss. The appellate court affirmed with costs to Oaktree and the other defendants.

The unsigned decision and order, issued by Justices Manzanet-Daniels, Kennedy, Friedman, Kapnick and Higgitt, with Justice Manzanet-Daniels presiding, turned back Iberdrola on three fronts. The panel held that Iberdrola failed to plead the element of detrimental reliance in support of its fraud claims. The panel also declined to reopen two contract provisions whose enforceability it had already addressed earlier in the same case.

Iberdrola had alleged that the defendants' misrepresentations and omissions caused it to incur additional labor, costs and expenses as part of its obligations under an Engineering, Procurement, and Construction contract, which the decision calls the EPC.

The panel found that theory deficient. "Notably, however, none of the allegations supporting plaintiff's fraud claims rely on any misrepresentations or failures to disclose by defendants that are collateral to the contract," the court wrote, citing its own 2024 decision in the case's earlier appeal.

"Thus, plaintiff's fraud claims fail because the conduct into which plaintiff was allegedly induced consisted of pre-existing obligations under the EPC," the panel held, citing Megaris Furs v Gimbel Bros., a 1991 First Department decision. Under that reasoning, the extra labor and expense Iberdrola described were costs of performing duties it had already undertaken in the EPC, rather than harm caused by reliance on the alleged deception.

The court then turned to the EPC's work-pending-dispute clause. Iberdrola renewed its challenge to the clause's enforceability. The panel held that the challenge "is barred by the doctrine of law of the case, as we decided this issue on the prior appeal." The panel cited its 2024 decision and a 2024 ruling of the Appellate Division's Second Department.

Iberdrola also contended that newly discovered facts supported its renewed argument. The panel rejected that contention as well. "To the extent plaintiff contends that its renewed argument is based on newly discovered facts, it is still without merit," the court wrote.

The panel held that any breach by the defendants did not cause the contract's dispute resolution procedures to "fail of their purpose," citing for comparison a 1990 decision of the U.S. Court of Appeals for the Second Circuit, Granite Computer Leasing Corp. v Travelers Indem. Co. The court pointed to Iberdrola's own use of those procedures, writing that its conclusion applied "particularly where, as here, plaintiff was able to use those procedures to advance to an arbitration in which it was awarded approximately $230 million."

The third issue concerned the EPC's nonrecourse provision. The First Department had already ruled on the provision's enforceability earlier in the case. "We decline to revisit our prior ruling on the enforceability of the nonrecourse provision," the panel wrote.

The court also addressed its 2025 decision in One River Run Acquisition, LLC v Milde, which involved an exculpatory clause. The panel held that the One River Run clause differed in scope from the provision in Iberdrola's contract. The exculpatory clause in that case "was narrower than the nonrecourse provision in the EPC," the court wrote. "Accordingly, there is no conflict between our prior order in this case and One River Run."

The 2024 ruling, reported at 231 AD3d 33, figured in two parts of Thursday's decision. The panel cited it for the absence of collateral misrepresentations in Iberdrola's fraud allegations and for its earlier resolution of the work-pending-dispute clause.

Lawyers for Iberdrola included Robert W. Mockler of Steptoe LLP in New York. Oaktree and the other respondents were represented by Richard T. Marooney of King & Spalding LLP in New York.

The affirmance leaves in place the judgment dismissing Iberdrola's second amended complaint with prejudice. The decision, reported as 2026 NY Slip Op 05854, is uncorrected and subject to revision before publication in the Official Reports.