Document: South v. Baker, C.A. No. 7294-VCL (Del. Ch. Sept. 25, 2012)

The Delaware Court of Chancery dismissed a complaint alleging that the board of directors of Hecla Mining Company (“Hecla”) knowingly caused the corporation to violate federal safety regulations applicable to mining companies.  In 2011, the United States Mine Safety and Health Administration investigated and fined Hecla after several accidents occurred at Hecla’s mines.  A number of derivative lawsuits ensued, including this action.

Ruling on plaintiffs’ motion to dismiss, the Court noted that the complaint failed to cite any connection between acts or omissions of the Hecla board and Hecla’s violation of health and safety laws.  Specifically, the complaint did not allege any facts from which a decision by the Hecla board to knowingly violate the law could be inferred.  Further, according to the Court, the complaint did not contain allegations from which it could infer a systemic failure of the board’s oversight function.  To the contrary, plaintiffs affirmatively pled that the Hecla board created a committee to monitor safety and environmental issues at Hecla’s mines.  Thus, the Court dismissed the complaint for failure to establish futility of demand and admonished future plaintiffs to use a Section 220 action to investigate potential Caremark claims before filing a derivative action.