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In re Massey Energy Company Derivative and Class Action Litigation
Delaware Court of Chancery
2011 Del. Ch. LEXIS 83 (2011)
Massey Energy Company (Massey) (defendant) was a large coal mining corporation that had a reputation for intentionally disregarding safety regulations. Massey was openly hostile and aggressive toward state and federal regulators. In short, Massey had a history of non-compliance with regulations and several settlements and judgments against it for safety violations, including a 2008 settlement of a derivative suit alleging that the Massey board breached its fiduciary duties. After these settlements and judgments, the corporate culture of Massey did not significantly change. Then, in April 2010, an explosion occurred at a Massey mine, killing 29 miners. The West Virginia Governor and the Mining Safety and Health Administration (MSHA) produced reports concluding that the cause of the explosion was Massey’s chronic lack of compliance with federal and state safety regulations. Massey stockholders (plaintiffs) brought another derivative suit in the Delaware Court of Chancery, alleging continued breach of the board’s fiduciary duties. Specifically, the plaintiffs claimed that even after being found criminally liable for safety violations and settling the prior derivative suit, the Massey board and CEO knowingly and intentionally continued to violate safety regulations and, by doing so, knowingly and intentionally put miners at risk.
Rule of Law
Holding and Reasoning (Strine, J.)
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