9th Circuit Rules Shareholder Can Challenge California’s SB826, Which Mandates Discrimination By Requiring Company’s Board of Directors to Have a Minimum Number of Women

A three-judge panel on the 9th Circuit Court of Appeals unanimously revived a legal challenge to California’s law that mandates discrimination by requiring companies headquartered there to have a minimum number women on their board of directors.

U.S. Circuit Judge Sandra Ikuta reversed the district court’s dismissal for lack of standing of an action brought by a corporate shareholder challenging the constitutionality of California Senate Bill 826.

The panel concluded, that because board members are elected by shareholders, compelling them to vote for female candidates is the only way to achieve the law’s ends.

U.S. District Judge John Mendez dismissed the case last year when he said that shareholder Creighton Meland did not have a claim because he believed that the law did not impair Meland’s right to vote as he chooses.

Senate candidate Tim Swain tweeted out about the ruling and called it “BIG!!”

“Standing is a huge hurdle in constitutional cases. This law is unconstitutional and is government mandated discrimination. We must treat everyone as individuals, not as members of larger groups,” Swain explained.

BIG‼️Standing is a huge hurdle in constitutional cases. This law is unconstitutional and is government mandated discrimination. We must treat everyone as individuals, not as members of larger groups. pic.twitter.com/fTdw12cBj2

— Tim Swain (@SwainForSenate) June 22, 2021

A representative for Meland, Anastasia Boden of the Pacific Legal Foundation, called the court’s recognition of his claim gratifying.

Boden said, “Accordingly, the California Legislature necessarily intended for SB 826 to require (or at least encourage) shareholders to vote in a manner that would achieve this goal.

“We look forward to pressing our claim that the Equal Protection Clause guarantees that the government will treat individuals as individuals, not simply as members of the group they are born into,” Boden added.

From Reuters:

A spokesperson for the California Secretary of State’s Office, which enforces the law, said it is reviewing the decision.

California State Senator Hannah-Beth Jackson, who authored the law, said it is aimed at addressing discrimination by companies whose boards have long been dominated by men.

“Let him make the argument that they should be able to continue discriminating,” she said of Meland.

SB-826, known as the Women on Boards law, requires publicly held companies headquartered in the state to include one to three women on their board, depending on its size, by the end of 2021.

When the law passed in 2018, California was the first state with such a mandate. Other states including Illinois and Washington followed with laws requiring disclosure of the number of women on corporate boards.

According to information collected by California’s Secretary of State, 48.1% of companies subject to the law reported compliance last year.

Meland sued California’s Secretary of State in Sacramento federal court in 2019, saying the statute violated the U.S. Constitution’s Equal Protection Clause.

The Office of the California Attorney General urged the 9th Circuit to uphold that ruling at oral argument in March, saying the alleged harm to Meland was speculative because he did not claim he had changed his vote because of the law.

Ikuta and her fellow Circuit Judges Margaret McKeown and Daniel Bress rejected that argument on Monday.

Meland “will continue to suffer the alleged violation of his individual rights” by being subjected to a law that requires or encourages discrimination, the panel wrote.

Meland’s lawsuit is similar to two others in state court challenging SB 826 and a similar law passed last year that requires California public companies to have at least one member who self-identifies as an underrepresented race, sexual orientation or gender. The case challenging SB 826 is scheduled for trial in October.