Fitton: Victory–Court Rules Corporate Gender Quota Lawsuit May Go Forward

Good news! A California court authorized our taxpayer lawsuit to move forward against a California law that mandates gender quotas for corporate boards. The court held that our clients have standing to sue under state law, and our attorneys will now proceed to discovery, including depositions of various officials.

This action comes in the case (Robin Crest et al. v. Alex Padilla (No.19ST-CV-27561). We filed the lawsuit on August 6, 2019, on behalf of three California taxpayers to prevent the State from implementing Senate Bill 826. The 2018 law requires publicly held corporations headquartered in California to have at least one director “who self-identifies her gender as a woman” on their boards by December 31, 2019. Up to three such persons are required by December 31, 2021, depending on the size of the board.

Our lawsuit alleges that the mandate is an unconstitutional . In our complaint we argue:

SB 826 is illegal under the California Constitution. The legislation’s quota system for female representation on corporate boards employs express gender classifications. As a result, SB 826 is immediately suspect and presumptively invalid and triggers strict scrutiny review.

Even before the bill passed, a California Assembly floor analysis identified a “significant risk of legal challenges” to SB 826. It characterized the legislation as creating a “quota-like system” and noted:

[T]his bill, if enacted into law, would likely be challenged on equal protection grounds … The use of a quota-like system, as proposed by this bill, to remedy past discrimination and differences in opportunity may be difficult to defend.”

In signing SB 826 in September 2018, then-Governor Brown wrote that, “serious legal concerns have been raised” to the legislation. “I don’t minimize the potential flaws that indeed may prove fatal to its ultimate implementation.” He signed the bill anyway, noting, “Nevertheless, recent events in Washington, D.C. – and beyond – make it crystal clear that many are not getting the message.”

Currently, 625 publicly traded corporations are headquartered in California and are subject to the legislation’s provisions. In a March 2020 report, the secretary of state identified 282 corporations that reported compliance with the law’s requirements.

We are pleased that the court saw through California’s flimsy claim that taxpayers had no standing to sue to stop this brazenly unconstitutional gender-quota law. Even Gov. Brown, in signing the law, worried that it is unconstitutional. Our California taxpayer clients are stepping up to make sure that California’s Constitution, which prohibits sex discrimination, is upheld.