Delaware Chancery Court Dismisses Stockholder's Derivative Claim Because of Inadequate Representation for Failing to First Make a Section 220 Books and Records Request

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On September 25, 2012, the Delaware Chancery Court dismissed, with prejudice, a named plaintiff's derivative claim because of inadequate representation. The dismissal applied to the named plaintiff's claim only — not to claims filed on behalf of other plaintiffs. The derivative action was filed in response to two class action lawsuits against the company, which alleged violations of the federal securities laws relating to the closure of one of its silver mines by the United States Mine Safety and Health Administration and a corresponding downward adjustment of the company's financial projections. The derivative action was based on "Caremark claims," where stockholders seek to hold directors liable to the corporation for injury the corporation suffers when the directors knowingly cause or consciously permit the corporation to violate positive law, or utterly fail to take steps to ensure the corporation's compliance with positive law.