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Constitutional Challenge To AB 979 Moving Toward A Trial
Tuesday, March 30, 2021

The constitutional infirmity of California's legislation, AB 979, mandating minimum numbers of directors was well known to the legislators.  Both the Assembly and Senate floor analyses noted that earlier legislation mandating minimum number of female directors on public company boards (SB 826) was being challenged in court on constitutional grounds.  The Senate floor analysis even noted that "by adding the provisions of this bill [AB 979] to two new code sections rather than amending the existing code sections added by SB 826, this bill’s author may avoid legal fallout that could result from court cases filed challenging the constitutionality of SB 826".  Thus it is no surprise that the very day on which Governor Newsom signed AB 979, a lawsuit was filed in California Superior Court, Crest v. Padilla, LA Super. Ct. Case No. 20STCV37513 (Sept. 30, 2020).   

"Did that voice inside you say I've heard it all before?"

Although the named plaintiff and defendant in the lawsuit challenging AB 979 were the same , this was not exactly deja vu all over again.  Secretary Padilla demurred to the lawsuit challenging SB 826, arguing that the plaintiff lacked standing.  The court, however, ruled that the plaintiff had taxpayer standing and allowed the case to continue.  Having lost once, Secretary Padilla elected to answer the complaint challenging AB 979 on November 4, 2020.   The court has set a case management conference for April 24, but I do not see that the court has set a trial date.  

In the meantime, publicly held corporations should keep in mind that federal and state laws prohibit discrimination.  As I have previously noted, the U.S. Supreme Court has found that a private entity can qualify as a state actor under the federal civil rights statute, 42 U.S.C. § 1983, in a few limited circumstances, including, for example, when the government compels the private entity to take a particular action, see, e.g., Blum v. Yaretsky, 457 U. S. 991 (1982) and Manhattan Cmty. Access Corp. v. Halleck, 139 S. Ct. 1921, 1928 (2019).

 John Fogerty, Deja Vu (All Over Again).

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