Posted April 2022 by S. Ward Heinrichs
Equal Protection Arguments Challenge California Board Diversity Laws
California recently passed two laws designed to create more diversity on corporate boards of directors. In 2018, Senate Bill (SB) 826 passed, and it required publicly traded companies that have their headquarters in California to have women on their boards. The exact number of women on such boards depends on the size of the board of directors.
In 2020, the Governor signed Assembly Bill (AB) 979. That law requires publicly traded companies with headquarters in California to have members of underrepresented communities on their boards of directors. Again, the exact number of such persons depends on the size of the board of directors. AB 979 defines “Underrepresented Communities” as persons who self-identify as: Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, Alaska Native, gay, lesbian, bisexual, or transgender.
As you might suspect, both laws face legal challenges. Essentially, the challenges claim that the laws violate equal protection because they favor one sex (SB 826) or certain ethnicities or sexual orientations (AB 979) over other groups that enjoy protected status. For instance, Crest v. Padilla, aka Crest I, had taxpayers challenge SB 826 for using tax revenue to violate the California Constitution’s Equal Protection Clause by favoring women over men. Similarly, Crest v. Padilla, aka Crest II, challenged AB 979 for favoring certain ethnicities, sexual orientations, and gender identities over others in violation of the California Equal Protection Clause. In Meland v. Weber (Weber is the California Secretary of State), a shareholder claimed that SB 826 violated the U.S. Constitution’s Equal Protection Clause. Finally, Alliance for Fair Board Recruitment v. Weber challenges both SB 826 and AB 979 on federal equal protection grounds. These are not the only lawsuits filed to challenge SB 826 and AB 979, but the litigation in each is the farthest along.
The court in Crest II granted summary judgment and thereby struck down AB 979 because it violated the Equal Protection Clause of the California Constitution. The court in Crest I has heard evidence and has not yet issued a verdict, so SB 826 survives in that court, at least for now. In Meland, the 9th Circuit Court of Appeal overruled a District Court order denying the plaintiff standing to bring the claim. Later, the District Court denied plaintiff’s motion for preliminary injunction, which effectively allows SB 826 to survive in that court for the time being. The Plaintiff in the Alliance case has filed a Motion for Summary Judgement and the Court has ordered deadlines for each party to file more briefs.
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