There have been a number of challenges to California’s board diversity legislation, SB 826, the board gender diversity statute, and AB 979, the board diversity statute regarding “underrepresented communities.” In two cases, Crest v. Padilla I and II, filed in state court, the plaintiffs notched wins and the court issued injunctions against implementation and enforcement of these two statutes. Both of these cases are currently on appeal, and the injunctions remain in place. But there were also cases filed in federal court, and, in one of those cases, Alliance for Fair Board Recruitment v. Weber, the U.S. District Court for the Eastern District of California has just granted the Plaintiff’s motion for summary judgment, concluding that AB 979 is unconstitutional on its face. The federal court decision could have reverberations in other states and potentially influence the ongoing state court appeals (as could an earlier decision on SB 826 by the Court going the other way. See the third SideBar below.)
The original complaint. The instant case was originally filed in July 2021 in a California federal district court against the California Secretary of State, Dr. Shirley Weber, seeking declaratory relief that California’s board diversity statutes (SB 826 and AB 979) violated the Equal Protection Clause of the Fourteenth Amendment and the internal affairs doctrine, and an injunction to prevent Weber from enforcing those statutes. The Plaintiff, the Alliance for Fair Board Recruitment, was described as “a Texas non-profit membership association,” with members that include “persons who are seeking employment as corporate directors as well as shareholders of publicly traded companies headquartered in California and therefore subject to SB 826 and AB 979.”
In its complaint, the Plaintiff maintained that “states may not require discrimination on the basis of race without making a convincing showing at the outset that the discrimination is narrowly tailored to advance a compelling state interest. And they may not compel discrimination on the basis of sex without demonstrating that the discrimination is substantially related to achieving an important governmental interest.” AB 979, the complaint asserted, required all publicly traded corporations headquartered in California to discriminate based on race in selecting their board members. The complaint alleged that the law is “unconstitutional and patronizing social engineering,” relying on and perpetuating “invidious racial categories.” The Plaintiff argued that the law did not “claim to remedy any particular past discrimination.” Rather, the Plaintiff said, California viewed the mandate as “justified on the pretext that discrimination will be lucrative for California’s corporations and shareholders and thus for the state. That is unconstitutional. If the Fourteenth Amendment and our foundational civil rights laws stand for anything, it is that private moneymaking is no justification for race or sex discrimination.” The Fourteenth Amendment prohibition against discrimination based on race or ethnicity, the Plaintiff maintained, is prohibited “in all but the narrowest circumstances. Laws that discriminate based on race are subject to strict scrutiny, meaning they must be narrowly tailored to serve a compelling government interest.” But, the complaint contended, the law failed both prongs of the strict scrutiny test: there was no compelling state interest—the law neither remedied past discrimination nor fostered the educational benefits of diversity in a college setting—nor was it narrowly tailored.
The Plaintiff also contended that the statute violated the prohibition in 42 U.S.C. § 1981 against discrimination on the basis of race in the making and enforcing of contracts by hindering those who do not identify as members of the favored class from securing contracts for board positions at corporations headquartered in California. (See this PubCo post.)
Motion for summary judgment. In June 2022, the Plaintiff moved for summary judgment with regard to AB 979 on the grounds that there was no genuine issue as to any material fact and that Plaintiff was entitled to judgment as a matter of law because AB 979 “imposed race-based classifications in manner that cannot satisfy the requirements of strict scrutiny, in violation of the Fourteenth Amendment of the U.S. Constitution (Count II) and 42 U.S.C. § 1981 (Count III).”
In its motion for summary judgment, the Plaintiff asserted that AB 979 was a “paradigmatic violation of the Fourteenth Amendment’s equal protection clause,” that worked by “requiring set-asides,” making it “a race-based law, and it is in every aspect, at least in the Supreme Court’s view, a quota.” This kind of “‘race-based action’ can be countenanced only if it ‘is necessary to further a compelling interest’ and ‘satisfies the “narrow tailoring” test.’… AB 979 falls far short on both prongs.” The Secretary opposed the motion, contending that the law was not a quota because it established only a “flexible floor” for diversity and that it satisfied strict scrutiny. Alternatively, the Secretary requested that, if any provisions were held to be unconstitutional, they be severed from the rest of the statute.
The Court’s decision. The Court granted the Plaintiff’s motion, concluding that “the Plaintiff’s facial challenge to AB 979 must be affirmed.” Although the Secretary had conceded “that AB 979 constitutes a racial classification,” she argued that it was permissible because it was designed to remedy past discrimination, did not create “preferred racial and ethnic classes because no individual is insulated from competition with others and each candidate must still go through an individualized consideration process,” and expressly permitted boards to expand to accommodate more candidates so that no director’s seat was necessarily jeopardized.
In its order, the Court rejected the Secretary’s “semantic argument that [AB 979] only sets a ‘flexible floor’ for diversity.” Instead, the Court found that the statute’s racial classifications were indeed a “race-based quota,” as defined by SCOTUS, as it required a “certain fixed number of board positions to be reserved exclusively for certain minority groups.” Moreover, the Court highlighted that SCOTUS “has rejected racial and ethnic quotas and has declared them ‘facially invalid.’” Accordingly, as there was no genuine issue of material fact, the Court held that AB 979 was unconstitutional on its face, granting summary judgment to the Plaintiff as a matter of law. The Court did not even reach the issue of strict scrutiny “because the facial challenge to AB 979 is dispositive.” Because SCOTUS had stated that a violation of the Equal Protection Clause of the Fourteenth Amendment also constitutes a violation of §1981, the Court also granted summary judgment in favor of the Plaintiff on that count as well.
The Court also rejected the Secretary’s request to sever the unconstitutional provisions. Applying California law, the Court found that “removing AB 979’s racial and ethnic classifications would adversely affect the coherence of the remaining provision regarding those who identify as gay, lesbian, bisexual, or transgender because the statute’s language is almost exclusively cast in racial and ethnic terms and figures.” In addition, the Court looked to the language of the statute, the Secretary’s brief arguing that the main purpose of the statute was to remedy racial and ethnic discrimination, and the absence of a severability clause as indications that “the legislature would not have adopted the remainder of AB 979 had it foreseen its partial invalidation.”
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