9th Circuit revives challenge to California women on boards law

The James R. Browning U.S. Court of Appeals Building, home of the 9th U.S. Circuit Court of Appeals, is pictured in San Francisco, California February 7, 2017. REUTERS/Noah Berger
  • California's first-in-the-nation law requires companies to put women on their boards
  • Shareholder plausibly alleged law encouraged or required him to discriminate based on sex
  • Being subject to such a law is an injury that creates standing

(Reuters) - The 9th U.S. Circuit Court of Appeals on Monday revived a legal challenge to California’s trailblazing law requiring companies headquartered there to include women on their boards.

U.S. Circuit Judge Sandra Ikuta wrote for a three-judge panel that OSI Systems Inc shareholder Creighton Meland had a plausible claim that California's SB 826 required him to discriminate based on sex.

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

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"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," she wrote.

Anastasia Boden of the Pacific Legal Foundation, who represents Meland, called the court's recognition of his claim gratifying.

"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," she said.

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.

U.S. District Judge John Mendez dismissed the case last year, saying Meland did not have a claim because the law did not impair his right to vote as he chooses.

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.

The case is Meland v. Padilla, No. 20-15762, 9th U.S. Circuit Court of Appeals

For Meland: Anastasia Boden of the Pacific Legal Foundation

For Padilla: Lara Haddad of the Office Of the California Attorney General

Read more:Shareholder asks 9th Circuit to nix Calif.'s corporate 'woman quota'

California’s new board diversity law challenged by conservative group

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Jody Godoy reports on banking and securities law. Reach her at jody.godoy@thomsonreuters.com