Judge unlikely to block California women on boards law

California flag flies above City Hall in Santa Monica
  • State law says boards must include up to three women by Dec. 31
  • Shareholder seeks injunction blocking enforcement of law
  • Judge indicated he will likely not grant the request

(Reuters) - A California judge said on Tuesday that he is unlikely to block a law requiring publicly held companies headquartered in the state to have a minimum number of women on their boards before a December deadline.

U.S. District Judge John Mendez of Sacramento said that he is still considering OSI Systems Inc shareholder Creighton Meland's argument that the 2018 law is unconstitutional because it pressures shareholders to vote for women directors.

But the judge said during a hearing that Meland has not shown the lawsuit is likely to succeed, meaning he will likely not block the California Secretary of State from enforcing the statute while the case is pending.

The lawsuit is one of several challenging the law, which required companies to have at least one woman on their board by the end of 2019. By the end of this year, boards with five members must include at least two women and larger boards must have three.

"Why is it in the public interest to allow an out-of-state shareholder who holds 65 shares in an 18-million-share company to stop a law that no corporation objects to, that no corporation is challenging, and is working?" Mendez asked.

Anastasia Boden, who represents Meland, said that while the law may have increased representation, it has led to the patronization of female board candidates.

While other states have passed similar laws, California's goes the farthest, allowing the secretary of state to levy fines as high as $300,000 per violation. The regulator has not yet fined any companies and is not required to do so, according to court filings.

Mendez dismissed Meland's lawsuit last year, ruling that Meland did not have a claim because the law did not impair his right to vote as he chooses.

The 9th U.S. Circuit Court of Appeals revived the case in June, saying Meland had a plausible claim that the law required him to engage in sex-based discrimination.

As of March, many companies did not yet have the number of female directors required, according to a study by 50/50 Women on Boards, a group that advocates for gender balance in the boardroom.

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

For Meland: Anastasia Boden of the Pacific Legal Foundation

For California Secretary of State Shirley Weber: Lisa Cisneros of the Office Of the California Attorney General

(NOTE: This story has been updated with detail from the hearing.)

Read more:

9th Circuit revives challenge to California women on boards law

Majority of Calif. cos still need women directors by looming deadline

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