Finds that shareholder of corporation has standing to sue: “because [the shareholder] has plausibly alleged that SB 826 requires or encourages him to discriminate on the basis of sex, he has adequately alleged that he has standing to challenge SB 826’s constitutionality”
Califoria leads the way in trying to legislate how private entities have to conduct business in order for the state to achieve the “diversity” it wants in the private workplace.
There were laws that prohibit discrimination and require equal opportunity, but there were no laws preexisting outcomes by race or sex. Until California passed a law with gender diversity mandates for private corporate boards of directors.
The law had the intended impact:
The California law requiring a minimum number of women on public company boards has decimated the number of all-male boards since it passed in 2018, new data from the California Partners Project shows.
Two years ago, 180 of the 650 public companies in California that are subject to Senate Bill 826 had zero women on their boards. That number has since shrunk to just 15, or 2.3% of company boards.
Notably, only two companies in California — San Francisco-based Gap Inc. and Oakland-based e.l.f. Cosmetics — have five or more women on their boards, according to the project, a state initiative founded by Jennifer Siebel Newsom, the wife of Gov. Gavin Newsom.
Because so many major tech companies are headquartered in California, the law had national implications:
Effective, but possibly illegal.
The Philanthropy Roundtable blog reports on the California law and a recent 9th Circuit decision:
In California, all publicly-traded corporations incorporated or headquartered in the state are mandated by law to have a certain number of female board members. As you know, the Philanthropy Roundtable filed an amicus brief in support of the Pacific Legal Foundation’s lawsuit (Meland v. Weber) to challenge this law on the grounds that it forces companies to discriminate on the basis of gender in their board member selections.
A district court dismissed the Meland case on procedural grounds, finding that the plaintiff lacked the standing to sue. However, on June 21, the U.S. Ninth Circuit Court of Appeals reversed the lower court’s decision. This means the case has the greenlight to move forward and be argued on its merits. This is an important victory in the fight against a patently discriminatory law.
As a reminder, Meland v. Weber pertains to a California law imposing gender mandates on public corporations incorporated or headquartered in the state. Each corporation is required to have had at least one female director by the end of 2019 and one, two, or three women depending on the size of the board by the end of 2021. The law also imposed reporting requirements to demonstrate that corporations are in compliance with the law. These disclosures would provide ample ammunition for public shaming and pressure campaigns by activists, stakeholders and staff. Non-compliant companies could be penalized with fines ranging from $100,000 to $300,000 per violation.
Creighton Meland, Jr. is a shareholder of OSI Systems, Inc., a California-based publicly-traded company. He sued the state arguing that the law discriminates on the basis of sex in violation of the Equal Protection Clause, and it actually seeks to force shareholders like him to perpetuate sex-based discrimination.
Without tackling the merits of his argument, the Ninth Circuit Court found that Meland did have standing to sue the state. The Court explained in its opinion: “We have long held that ‘[a] person required by the government to discriminate by ethnicity or sex against others has standing to challenge the validity of the requirement, even though the government does not discriminate against him.’”
California Senate Bill 826 (SB 826) requires all corporations headquartered in California to have a minimum number of females on their boards of directors. Corporations that do not comply with SB 826 may be subject to monetary penalties. The shareholders of OSI Systems, Inc., a corporation covered by SB 826, elect members of the board of directors. One shareholder of OSI, Creighton Meland, brought an action challenging the constitutionality of SB 826 on the ground that it requires shareholders to discriminate on the basis of sex when exercising their voting rights, in violation of the Fourteenth Amendment. We hold that because Meland has plausibly alleged that SB 826 requires or encourages him to discriminate on the basis of sex, he has adequately alleged that he has standing to challenge SB 826’s constitutionality. See Monterey Mech. Co. v. Wilson, 125 F.3d 702, 707 (9th Cir. 1997).
The standing hurdle, while it doesn’t go to the merits, is where many a challenge to government overreach ends. SCOTUS just tossed the recent Obamacare challenge on “standing” grounds. So this is an important step forward for the lawsuit.
The case also is significant because there will be more lawsuits challenging the constitutionality of other “equity” driven laws and practices.DONATE
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