Judge Rules Law Requiring More Women on Corporate Boards is Unconstitutional

Judge Rules Law Requiring More Women on Corporate Boards is Unconstitutional
A file photo of a boardroom. (Rajesh Jantilal/AFP/Getty Images)
City News Service

LOS ANGELES—A California law requiring increased membership by women on corporate boards is unconstitutional and violates the right to equal treatment, a Los Angeles judge ruled.

Los Angeles Superior Court Judge Maureen Duffy-Lewis issued her ruling on May 13, three months after she heard final arguments in a lengthy non-jury trial regarding Senate Bill (SB) 826 that began in December.

Passed in 2018, the law applies to publicly held corporations with principal executive offices located in California and required them to have at least one female director on the board by the close of 2019. Additionally, by the end of 2021, some boards were required to have additional female directors based on the size of the board.

The conservative judicial watchdog group Judicial Watch filed the taxpayer lawsuit in August 2019 against then-Secretary of State Alex Padilla on behalf of plaintiffs Robin Crest, Earl De Vries, and Judy De Vries.

Judicial Watch argued that California's quotas for women on corporate boards violate the state constitution's equal protection clause and asks the court to permanently enjoin any expenditure of taxpayer funds to implement the quotas.

Padilla was appointed to the U.S. Senate by Gov. Gavin Newsom in January 2021 to fill the vacancy created when then-Sen. Kamala Harris was elected vice president. Newsom then appointed Shirley Weber to replace Padilla.

Plaintiffs' attorney Robert Patrick Sticht argued that laws already exist banning gender discrimination and if they are not being enforced, it is up to the legislature to do so. He also argued that if corporations want to add more women to their boards, they can increase the number of members on the board or fill vacancies with females.

However, SB 826 is the wrong way to go about solving the problem, he added.

"The statute is a mandate for a gender quota," Sticht told the judge.

Former state Sen. Hannah-Beth Jackson, who co-authored SB 826, testified during the trial. Jackson (D-Santa Barbara) previously said that it is "disappointing that this conservative right wing group is more invested in spending thousands of dollars on a questionable lawsuit than supporting policy that improves business' profits and boosts our economy."

But Sticht criticized Jackson often during his final argument, saying she had no answer for some of his questions, including whether there were any gender-neutral alternatives to SB 826.

In their court papers, lawyers for the Attorney General's Office argued that the plaintiffs could not show that any illegal or wasteful expenditures of taxpayer money occurred in the implementation of the law's requirements.

They also maintained that the law addresses longstanding discrimination against women in the "secretive process of corporate board director selection on publicly held corporations in California and attains the benefits of gender diversity for the public and the economy."

Lawyers for the Attorney General's Office further argued that SB 826 does not violate the California Constitution's equal protection clause.

In her final argument, Supervising Deputy Attorney General Ashante Norton recalled the testimony of defense witnesses who said that without SB 826, achieving gender equality on California's corporate boards could take decades. She said everyone benefits from boards that reflect the hard work and achievements of women.

"Increasing women on boards leads to better corporate performance," she said.

In the ruling, Judge Duffy-Lews wrote, “Defendant argued unpersuasively that the governmental conduct is legal. ... There is no Compelling Governmental Interest in remedying discrimination in the board selection process because neither the Legislature nor Defendant could identify any specific, purposeful, intentional and unlawful discrimination to be remedied."

Furthermore, "Legislative analysis of S.B. 826 found that connections between women on corporate boards and improved corporate performance and corporate governance are inconclusive," she wrote.

A similar ruling in favor of Judicial Watch was made last month that found California’s requirement for workplace boardroom quotas of underrepresented communities was also unconstitutional.

When he signed SB 826 into law in 2018, then-Gov. Jerry Brown noted that there have been "numerous objections to this bill and serious legal concerns that have been raised," adding that he would not "minimize the potential flaws that indeed may prove fatal to its ultimate implementation."

Epoch Times staff contributed to this report.