Judicial Watch to Court: Gender Quota Requirement for Corporate Boards is Gender Discrimination

Diversity for Diversity’s Sake is Never Constitutional’

(Washington, DC) Judicial Watch announced today that it filed a motion for summary judgment asking aCalifornia court to rule that the State’s quota for women on corporate boards is unconstitutional and to permanently enjoin any expenditure of taxpayer funds on the quota.

The filings come in the case Robin Crest et al. v. Alex Padilla (No.19STCV27561)).

Judicial Watch filed the lawsuit in Los Angeles County Superior Court on August 6, 2019, on behalf of three California taxpayers. The 2018 law, known as Senate Bill 826, requires every publicly held corporation headquartered in California to have at least one director “who self-identifies her gender as a woman” on its board of directors by December 31, 2019. The law requires corporations have up to three such persons on their boards by December 31, 2021, depending on the size of the board. The taxpayers challenging the provision claim that the quota violates the Equal Protection clause of the California Constitution.

In July 2020, the court cleared the way for the case to proceed, holding that Judicial Watch’s clients had standing under state law to sue.

In its filing, Judicial Watch argues:

There can be no doubt that SB 826 employs a suspect classification – gender – to differentiate between similarly situated persons – current and prospective members of corporate boards. The Legislature has decided that there are not enough women on corporate boards for its liking, so it has enacted SB 826, which requires that corporations have a minimum number of women on their boards. SB 826 treats current and prospective board members not as individuals, but as members of two groups based on their gender. Women may compete for every position on a corporation’s board, yet men are excluded from competing for those positions reserved for women. No matter how strong a male candidate’s qualifications might be, he is never afforded the opportunity to compete with female candidates for every board position available, but instead must compete only for those board positions for which there is no gender preference. In this regard, SB 826 creates the same type of quota system for seats on corporate boards that was found to be unconstitutional for seats in the medical school class at issue in Regents of the Univ. of Cal. v. Bakke (1978) 438 U.S. 265, 319-20 (“Bakke”).

Countering the State’s claim that the quota is necessary to “boost the California economy,” “improve opportunities for women in the workplace,” and “protect California taxpayers, shareholders, and retirees,” Judicial Watch argues: 

The requirement of necessity is also absent.  Does California really need to impose a gender-based quota on corporate boards to improve its economy? To improve opportunities for women in the workplace?  To protect taxpayers, shareholders, and retirees or improve corporate sustainability or preserve public confidence? Are the tools available to the Legislature really so weak or so limited that it must resort to gender discrimination to achieve these goals?  To state such a claim is to refute it. Nothing in SB 826’s legislative findings or legislative history demonstrate that the Legislature had to resort to a gender-based quota system out of necessity to achieve its goals.  

Judicial Watch also argues:

Diversity for diversity’s sake is never constitutional. “‘Preferring members of any one group for no reason other than race or ethnic origin is discrimination for its own sake. This the Constitution forbids.’” (Connerly, 92 Cal. App. 4th at 34 (quoting Bakke, 438 U.S. at 307.)) ….

Defendant’s “diversity for diversity’s sake” argument will not save SB 826’s blatantly unconstitutional quota. And of course, asserting that more women on corporate boards will add diversity merely perpetuates gender-based stereotypes about both men and women.

Judicial Watch also demonstrated that the State could provide no evidence of specific, past discrimination by the corporations subject to the law in selecting board members:

The Legislature made no effort to identify specific past or present victims of alleged discrimination or to identify specific perpetrators of such discrimination. No specific victims or perpetrators were identified in SB 826’s legislative findings, and Defendant was unable to identify any such victims or perpetrators in response to interrogatories seeking this specific information…. In response to an interrogatory asking Defendant to identify specific victims of discrimination, Defendant responded generically, identifying “women,” “corporations,” “California taxpayers and retirees,” and “shareholders and investors” as well as “the economy.” … Because SB 826 is not actually remedial and does not restore victims of alleged discrimination to the position they would have occupied absent the discrimination, and because no effort has been made to limit SB 826’s “remedy” to such victims, SB 826 cannot withstand strict scrutiny. Indeed, the blunt instrument of a quota is unlikely to ever satisfy this standard.

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.”

There are currently 625 publicly traded corporations headquartered in California that are subject to the quota. In a March 2020 report, California’s Secretary of State identified 282 corporations that reported compliance with the quota.

“Not a single dime of California’s taxpayer’s money should be going to support a law that requires sex discrimination,” said Judicial Watch President Tom Fitton. “The ‘Women on Corporate Boards’ statute is not only unconstitutional, but morally wrong.  Judicial Watch’s California taxpayer clients are asking the courts to uphold California’s Constitution which prohibits sex discrimination.”

In September 2020, Judicial Watch also filed a related taxpayer lawsuit to prevent California from enforcing Assembly Bill 979, which requires the same corporation subject to the gender-based quota also satisfy racial, ethnic, sexual preference and transgender status quotas by the end of the 2021 calendar year

In January 2021, Judicial Watch filed a public comment with the Securities and Exchange Commission in response to a proposed rule change requiring race and gender quotas on the boards of corporations listed on the Nasdaq exchange.

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