The watchdog group Judicial Watch filed a lawsuit, requesting an injunction that would stop a new state law from requiring corporations to appoint a mandatory number of racial minorities on their board of directors.
Starting Jan. 1, 2021, corporate boards headquartered in California that do not include a director of color could face fines now that Assembly Bill (AB) 979 was signed into law on Sept. 30, according to a press release.
“Unless the injunction is granted, the law will continue to move towards enforcement,” said Angela Reddock-Wright, a constitutional attorney and mediator in Los Angeles. “Because an injunction is heard on emergency notice, most likely the court will resolve this prior to the enforcement date.”
Reddock-Wright
Under the new law, companies headquartered in the state are required to report to the Secretary of State how they are meeting the mandates, which include having at least one director from an underrepresented community by Dec. 31, 2021, two directors from underrepresented communities for corporations with more than four board members and a minimum of three directors for corporations with more than nine board members by 2022.
“If the law went through the legislative process, then it’s unlikely that the court will grant the injunction because the legislature has every right, upon a majority of votes of members of the legislature and signing of the law by the governor, to move forward with that law,” Reddock-Wright said.
Filed in Los Angeles Superior Court, Judicial Watch’s complaint argues that any expenditure of taxpayer funds or taxpayer-financed resources on AB 979 is illegal under the California Constitution.
“The legislation’s requirement that certain corporations appoint a specific number of directors based upon race, ethnicity, sexual preference, and transgender status is immediately suspect and presumptively invalid and triggers strict scrutiny review,” wrote Judicial Watch attorney Robert Patrick Sticht in his opening brief. “Because it classifies directors by virtue of their race, ethnicity, sexual preference, or transgender status, AB 979 can only be justified by a compelling governmental interest, and its use of race and ethnicity must be narrowly tailored to serve that compelling interest.”
Judicial Watch sued Secretary of State Alex Padilla, in his official capacity, on Oct. 2, alleging that AB 979 is unconstitutional and endangers the Equal Protection Clause of the U.S. Constitution.
“Most likely they're suing Alex Padilla because it's the Secretary of State that manages the registration of corporations in the state and each year corporations have to submit their board officer and board member list in their annual renewal,” Reddock-Wright told the Southern California Record.
But she added suing the Secretary of State is the wrong defendant to target.
“Even if the court is inclined to grant the injunction, the Secretary of State is just doing his job,” said Reddock-Wright. “I can't see where the Secretary of State, who is an elected official, can decline to accept a corporation’s registration or annual update.”
As previously reported, Assemblyman Chris Holden (D-Pasadena) co-authored the bill and alleges out of 1,222 new board members of Fortune 100 companies, 77% were white, according to Harvard Law School’s Missing Pieces Report: The 2018 Board Diversity Census of Women and Minorities on Fortune 500 Boards.
“The U.S. Constitution begins by saying we, the people, and talks about the importance of equality throughout various provisions as does the California constitution so there’s an argument to be made that when there's clear evidence of an imbalance in the structure of society, it is constitutional for the legislature to take action to correct it,” Reddock-Wright said.