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Los Angeles trial court declares California law requiring publicly held corporations to have female directors on their boards unconstitutional

California

,

United States

In Crest et al. v. Padilla, C.A. No. 19STCV27561 (Cal. Super. Ct. May 13, 2022), the Superior Court of the State of California for the County of Los Angeles found that Senate Bill 826 (“S.B. 826”) was unconstitutional. S.B. 826 required that, by December 31, 2021, publicly held corporations in California have at least one female director if the number of directors is four or fewer, at least two female directors if the number of directors is five, and at least three female directors if the number of directors is six or more.

S.B. 826 Violates the Equal Protection Clause of the California Constitution

The equal protection clause of the California Constitution (Cal. Const., art I, § 7(a)) sets out that a person may not be denied equal protection of the laws. The Court found that the plaintiffs proved that men and women were similarly situated for purposes of S.B. 826. Under California law, classifications based on gender are considered "suspect" for the purposes of an equal protection analysis. When a statute makes express use of a suspect classification, the defendant bears the burden of demonstrating that the statute satisfies the strict scrutiny test. To satisfy this test, the defendant must show that the statute serves a compelling state interest and is necessary and narrowly tailored to serve that interest.

No compelling state interest

The defendant argued that S.B. 826 was passed to eliminate and remedy discrimination in the director selection process for publicly held corporate boards in California; to increase gender diversity on such boards to benefit the public and state economy; and, to increase gender diversity on publicly held corporations headquartered in California to benefit and protect California taxpayers, public employees, and retirees. However, after considering the evidence, the Court concluded that a compelling state interest was lacking and that the actual goal of S.B. 826 was to achieve gender equity or parity.

The Court noted that based on existing law, there is no compelling governmental interest in remedying societal discrimination, or in remedying generalized, non-specific allegations of discrimination. Furthermore, there was no compelling governmental interest in remedying discrimination in the board selection process because neither the Legislature nor the defendant identified any specific, purposeful, intentional, or unlawful discrimination to be remedied.

The statute was not necessary or narrowly tailored

Citing inconclusive studies about the effects of the inclusion of women on corporate boards, the Court found that the defendant failed to prove that S.B. 826 was necessary to achieve the interests cited by the defendant. Furthermore, when using a suspect classification to redress specific discrimination, the government must show that the use of the classification is remedial, which the defendant failed to do. The defendant also failed to show that the Legislature considered any gender-neutral alternatives to remedy discrimination in the board selection process before enacting S.B. 826.

Disposition

The Court enjoined S.B. 826.

June 15, 2022
Crest et al. v. Padilla, C.A. No. 19STCV27561 (Cal. Super. Ct. May 13, 2022)
Author: Grace Baehren