One California law is receiving special attention in Superior Court this month. The state law is SB 826, which requires every corporate board to appoint at least three women as directors. The bill was signed into law by then-Governor Jerry Brown on September 30, 2018.
Superior Court Judge Maureen Duffy-Lewis ruled that this law violated the Constitutional right to equal treatment. The decision was applied in the Crest v. Padilla case on May 13.
Called a “taxpayer suit,” the litigation sought a ruling making the use of taxpayer funds to enforce or implement SB 826 to be illegal and an injunction preventing the California Secretary of State from expending taxpayer funds for those purposes.
The judge ruled the law was an unconstitutional gender-based quota and infringed on the Equal Protection Provisions of the California Constitution.
In the decision, Duffy-Lewis wrote the stated intention of SB 826 “was to achieve general equity or parity; its goal was not to boost California’s economy, not to improve opportunities for women in the workplace nor not to protect California taxpayers, public employees, pensions and retirees.”
However, she wrote further, “Putting more women on boards demonstrated that the Legislature’s actual purpose was gender-balancing, not remedying discrimination.”
She also wrote, “There is no compelling governmental interest in remedying discrimination in the board selection process because neither the Legislature nor the Defendant could identify any specific, purposeful, intentional and unlawful discrimination to be remedied.”
Daniel Ortner, the attorney for The Pacific Legal Foundation (PLF), also seeks to challenge similar legislation in the courts, filing a lawsuit on November 21 of last year.
He stated that the court striking SB 826 down means that his client, advocacy organization The National Center for Public Research, has a good chance of prevailing in court against AB 979, which requires corporations to choose their board members based on sexual orientation and race.
The National Center for Public Policy Research lawsuit argues that AB 979 uses discrimination to promote individuals based on their “immutable characteristics.”
AB 979 would require a corporation to choose its board members based on sexual orientation and race. Governor Gavin Newsom signed this legislation into law on September 30, 2021, and he stated that he did it because he needed to “advance racial justice.”
Creighton Meland, a client and shareholder activist of the PLF, is challenging SB 826 in federal court. When California attempted to have the case thrown out in the U.S. Court of Appeals for the 9th Circuit, the court determined that a client and a shareholder have standing to sue over this law. The case is currently pending.
The ruling was not the first time that the courts did not uphold California’s attempt to require corporations to change their leadership.
In April, AB 979, a law stating that each public corporation in California must appoint at least two members of underrepresented groups by the end of this year, was adjudicated. The underrepresented groups may be racial, ethnic, or other groups. Judge Terry A. Green of the Los Angeles Superior Court overturned this law.
The brief ruling granted summary judgment to Judicial Watch, a conservative activist group that sought a permanent injunction against the measure. The decision did not clarify the judge’s reasoning.
The court overturning SB 826 and AB 979 was not a surprise. When Governor Brown signed he was not confident that it would make it past the scrutiny it would receive.
According to Governor Brown, “Serious legal concerns have been raised. I don’t minimize the potential flaws that indeed may prove fatal to its ultimate implementation.”
