California Superior Court Judge Maureen Duffy-Lewis Friday entered a verdict to enjoin California’s Senate Bill 826 (SB 826) after finding that the law violated Article I, Section 7 of the California Constitution.
The law, enacted in October, 2018, requires publicly held corporations in California to have one or more female directors for boards with four or fewer directors, 2 or more female directors for boards with five directors and three or more female directors for boards with six or more directors. The Secretary of State may impose a $100,000 fine for violation of this law and a $300,000 fine for subsequent violations.
Judicial Watch, Inc., a conversative activist group, filed the lawsuit against Alex Padilla, the Secretary of State of California, in 2019 on behalf of three California taxpayers. Plaintiffs alleged that SB 826 violated Equal Protection under both Article I, Section 7 and Article I, Section 31 of the California Constitution. Judge Duffy-Lewis did not make a determination regarding Article I, Section 31.
Both claims were brought under California’s Code of Civil Procedure Section 526a, which “allows a taxpayer to enjoin an actual or threatened expenditure of taxpayer funds by a state official where the expenditure is illegal.”
After considering depositions and testimony from female board of directors, discrimination experts and a senator, Judge Duffy-Lewis found Plaintiffs proved SB 826 was “presumptively unconstitutional” and “carried their burden to prove that men and women are similarly situated for purposes of SB 826’s gender-based quota.” The burden of proof then shifted to California to show that SB 826 satisfied strict scrutiny by proving “(1) a compelling state interest, (2) that S.B. 826 is necessary and (3) that S.B. 826 is narrowly tailored.”
California’s three claimed compelling interests were: (1) “to eliminate and remedy discrimination in the director selection process”; (2) “to increase gender diversity . . . to benefit the public and the state economy”; and (3) “to increase gender diversity . . .to benefit and protect California taxpayers, public employees and retirees.”
Judge Duffy-Lewis found that California’s compelling state interest was lacking, as SB 826 did not seek to remedy specific allegations of discrimination, and the purported discrimination was not supported by judicial, legislative or administrative findings of constitutional or statutory violations. Because various other ways to benefit the state economy are available, Judge Duffy-Lewis held that California failed to prove SB 826 was necessary. Additionally, Judge Duffy-Lewis found that California failed to prove SB 826 was narrowly tailored, as the state could not show gender-neutral alternatives were not available, or that it tried amending or enacting anti-discrimination laws focusing on the board selection process first.
Additionally, California’s own witnesses attributed the disparity between men and women on corporate boards to “reasons other than actual discrimination, including the lack of open board seats, women’s networking issues, board propensity to select persons that they already know, and boards preference for choosing CEOs to fill open board positions.” In addition, the court found that studies cited in SB 826 were unreliable.
SB 826 has also been challenged in federal court for violating the Equal Protection Clause of the US Constitution.
