Yearly Archives: 2022

The law suffers the same fate as the California board diversity law requiring directors from “underrepresented communities.”

On May 13, 2022, Los Angeles Superior Court Judge Maureen Duffy-Lewis issued a ruling in Crest v. Padilla I finding that California Corporations Code Section 301.3 (SB 826), which requires publicly listed corporations in California to have women on their boards, violates the Equal Protection Clause of the California Constitution. [1] The decision comes less than two months after Los Angeles Superior Court Judge Terry A. Green similarly ruled in Crest v. Padilla II that the California Equal Protection Clause rendered unconstitutional a law requiring California publicly listed corporations to have board members from “underrepresented communities.” [2]

Crest v. Padilla I

In Crest v. Padilla I, Judicial Watch — the same plaintiff as in Crest v. Padilla II — mounted a facial challenge to SB 826, arguing that the law violated the Equal Protection Clause of the California Constitution. The court first observed that SB 826 creates a gender-based quota system that “affects two or more ‘similarly situated’ groups in an unequal manner.” [3] After establishing that men and women are similarly situated, the court applied the strict scrutiny test to assess the constitutionality of SB 826. Under strict scrutiny, the state needed to show that SB 826: (1) satisfied a compelling government interest; (2) was necessary to satisfy that interest; and (3) was narrowly tailored to meet that government interest. The court held that the state failed to present sufficient evidence to meet any of the three prongs of the strict scrutiny test.

The court first rejected the state’s argument that eliminating and remedying discrimination in director selection was a compelling government interest. In so doing, the court stressed that while rectifying specific and intentional discrimination can be a compelling government interest, “remedying generalized, non-specific allegations of discrimination” is not. [4] In the court’s view, “neither the Legislature nor Defendant could identify any specific, purposeful, intentional and unlawful discrimination to be remedied” [5] and thus California lacked a compelling interest. The court also rejected the state’s argument that SB 826 satisfied a compelling interest by benefiting the public and state economy. In the court’s view, the evidence presented at trial demonstrated that the goal of SB 826 “was to achieve gender equity or parity; its goal was not to boost California’s economy, not to improve opportunities for women in the workplace nor not [sic] to protect California’s taxpayers, public employees, pensions and retirees.” [6] Moreover, even if the goal of SB 826 were to fuel the economy, the court noted that “analysis of S.B. 826 found that connections between women on corporate boards and improved corporate performance and corporate governance are inconclusive.” [7] That tenuous connection, the court reasoned, negated California’s claim that SB 826 was necessary to achieve its stated interest in growing the state’s economy. [8]

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