In another case regarding Section 220 of the General Corporation Law, the Delaware Court of Chancery dismissed a derivative suit brought by two stockholders against the directors of Hecla Mining Company ("Hecla"), for allegedly permitting Hecla to commit safety violations and failing to adequately oversee Hecla's operations. Hecla had recently suffered a series of mining accidents. The Court held that the plaintiff stockholders and their counsel failed to adequately represent Hecla's interests because they failed to request Hecla's books and records and carefully investigate its allegations. The lawsuit was dismissed with prejudice solely with respect to the plaintiff stockholders, thus permitting other stockholders to inspect Hecla's books and records to properly investigate their claims and, if appropriate, file suit against the directors of Hecla.
In its decision, the Court stressed that stockholders should request and obtain books and records of a corporation pursuant to Section 220 of the General Corporation Law before filing a derivative suit against such corporation. In the Court's view, plaintiffs who fail to investigate and review the books and records of a corporation and rush to file derivative suits against such corporation are not adequately representing the corporation's interests.
South v. Baker, C.A. No. 7294-VCL (Del. Ch. Sept. 25, 2012).