Conservative group sues to block California’s newest board diversity law

Conservative group sues to block California's newest board diversity law

A conservative activist organization has filed its second lawsuit challenging California's laws on corporate board membership quotas, days after one of the laws in question was signed by Gov. Gavin Newsom.

Assembly Bill 979 requires publicly-held companies that are headquartered in California to have at least one member on their board of directors come from an underrepresented community by the end of 2021. By the end of 2022, boards of directors with more than four but fewer than nine members must have at least two members from an underrepresented community, while boards with more than nine members need at least three.

The bill defines individuals from underrepresented communities as anyone in the LGBTQ community, or those who self-identify as Black, African-American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native.

The lawsuit from Judicial Watch filed Friday alleges the state cannot legally spend taxpayer money to enforce the bill, since the bill is unconstitutional.

"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," the complaint says. Crest, et al. v. Padilla, 20STCV37513 (L.A. Super. Ct., filed Oct. 2, 2020).

Last year, Judicial Watch filed a lawsuit challenging a similar law. Senate Bill 826, which went into effect Jan. 1, 2019, imposes similar quotas for boards of directors in publicly-held, California-based companies for women members. In its complaint, Judicial Watch alleged the bill was unconstitutional as well. Crest v. Padilla, 19ST-CV-27561 (L.A. Super. Ct., filed Aug. 6, 2019).

In June, the trial court issued an order stating the plaintiffs had standing to sue. Judicial Watch attorneys are now in discovery, the organization noted in a news release Monday.

Meanwhile, a third lawsuit filed by a shareholder at California-based company OSI Systems Inc. that also challenges SB 826 is pending in the 9th U.S. Circuit Court of Appeals, after a district court dismissed the case back in April. U.S District Judge John A. Mendez said the plaintiff lacked standing. Meland v. Padilla, 20-15762 (9th Cir., filed Nov. 13, 2019).

-- Jessica Mach