i would try meeting with the teacher in private and see what her problem with your son is first, before going to the principle. however, if she for some reason refuses to meet with you, then by all means tell her boss right away. it's wrong for her to not correct your son's grades, and that's more than enough reason for me to take action against such a person.

as for your son, let him know that you are going to try to work things out so that the rest of his year is not so bad. thankfully, he doesn't have much longer with this teacher. i would just work on making sure his grades are what they should be and that she is not bringing him down because of some weird issue she may have against you or him.