California corporate diversity law declared unconstitutional by Los Angeles judge

LOS ANGELES — A Los Angeles judge ruled Friday that California’s landmark law requiring companies to diversify their boards of directors with members of certain racial, ethnic or LGBTQ+ groups is unconstitutional.

The brief ruling granted summary judgment to Judicial Watch, a conservative legal group that sought a permanent injunction against the measure that was signed into law last year. The ruling did not explain the judge’s reasoning.

The measure requires the boards of publicly traded companies with a primary executive office in California to have a member of an “underrepresented community,” including LGBTQ+, Black, Latino, Asian, Native American or Pacific Islander .

The lawsuit argued that violated the constitutional clause of equal protection of the state.

The decision “declared unconstitutional one of the most flagrant and significant attacks on constitutional prohibitions against discrimination of the modern age,” Judicial Watch President Tom Fitton said in a statement.

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Messages seeking state comment were not immediately returned Friday evening.

However, in its court documents, the state argued that the measure does not “discriminate against or accord preferential treatment to any individual or group on the basis of race, sex, color, ethnicity or national origin in the operation of public services”. employment, public education or the award of public contracts”.

However, no company was fined and the state argued that no taxpayer money was in fact used to enforce the measure.

The 2020 law required companies to include at least one member of an underrepresented community on their board by the end of last year, either by adding a seat or filling a vacant seat.

The measure requires at least two such directors by the end of 2022 in boards of four to nine directors. Three directors are required for boards of nine or more directors. Companies that fail to comply could face fines of $100,000 for first violations and $300,000 for repeat violations.

A ‘Diversity on Boards’ report released in March by the Secretary of State found that around 300 of some 700 companies had complied. However, half of the companies did not file the required disclosure statement.

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Working to pass the law, supporters have referred to both the coronavirus pandemic and its disproportionate impact on minorities and the weeks of unrest and calls for inclusion that followed the May 2020 killing of George Floyd under Minneapolis police custody.

After Floyd’s death, many companies issued statements of support for diversity, but many did not follow through, said Democratic Rep. Chris Holden of Pasadena, a co-author of the bill, at the time.

Signing the bill, Governor Gavin Newsom said it was important for minorities to have a voice on the boards of powerful corporations.

“When we talk about racial justice, we talk about empowerment, we talk about power, and we have to talk about seats at the table,” Newsom said.

The measure was expected to face legal challenges from Tories who saw it as a discriminatory quota, just as they did a 2018 law requiring a female director on corporate boards .

A related lawsuit by Judicial Watch in Los Angeles challenges that law.

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This law was on shaky ground from the start with legislative analysis saying it could be difficult to defend and at the time the government. Jerry Brown said he was signing it despite the possibility of it being overturned by a court.

The state defended the law as constitutional, saying it needed to reverse a culture of discrimination that favored men and was only put in place after other measures had failed.

Associated Press writer Brian Melley in Los Angeles contributed to this story.

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