California’s Board Gender Quota Faces Conservative Showdown

(Bloomberg) -- California will have to defend its first-in-the-nation requirement that companies include women on boards of public companies at a trial.

Judicial Watch, the conservative advocacy group, and the California attorney general’s office each failed to persuade a judge to rule in their favor on the constitutionality of the measure. Los Angeles Superior Court Judge Maureen Duffy-Lewis decided there are issues that can only be resolved through a trial, which she set for Oct. 25 without a jury.

The group claims the use of taxpayer funds to enforce the rule is illegal under California’s constitution. Enacted in 2018 amid the #MeToo movement, the law required public corporations to have at least one woman on their boards of directors by 2019, and to have two or three female directors by the end of 2021 depending on the size of the board. Penalties for violations range from $100,000 to $300,000.

On top of that, California Governor Gavin Newsom last September signed into law the nation’s first mandate for boards of directors to seat members of underrepresented communities on boards. The legislation by one of the nation’s most progressive states was heralded as a victory for a social justice movement invigorated by the Black Lives Matter protests. Judicial Watch is also challenging that measure in court. 

Read More: California Board Diversity Bill Enters Uncharted Legal Waters

Illinois also has passed laws to make companies add women and minorities to their boards. In August, the Securities and Exchange Commission approved a board diversity proposal by Nasdaq Inc. to direct its listed companies to include at least one female board member and at least one who identifies as an underrepresented minority or LGBTQ member or explain why they can’t add such members on their boards.

Judicial Watch said it looks forward to taking California’s gender quota rule to trial on behalf of taxpayers.

“Under no interpretation of the state’s constitution is it right to require quotas and sex discrimination,” Tom Fitton, president of Judicial Watch, said in a statement. “The state is defending the indefensible and trying to upend decades of anti-discrimination laws. They want the state’s constitution reinterpreted to allow discrimination.”

Judicial Watch isn’t the only group challenging California’s mandates. The Alliance for Fair Board Recruitment sued in July claiming the “quota regime” imposed by laws that seek gender and racial balance run afoul of the U.S. Constitution. The group is led by Edward Blum, the longtime conservative activist and affirmative-action foe. Blum’s group is also suing to overturn the Nasdaq diversity rule.

California’s gender quota mandate also faces a lawsuit by a shareholder of OSI Systems Inc. who claims the rule “seeks to force shareholders to perpetuate sex-based discrimination.” A hearing on the investor’s request to block the law is set for next month in federal court in Sacramento. 

California Attorney General Rob Bonta didn’t immediately respond to a request for comment on Duffy-Lewis’s ruling.

The case headed to trial is Crest v. Padilla, 19STCV27561, Superior Court of California, County of Los Angeles (Los Angeles).

©2021 Bloomberg L.P.