Meland v. Padilla

Docket number: 20-15762 (9th Cir.)

The Hamilton Lincoln Law Institute (HLLI) filed an amicus brief in support of a shareholder challenging California’s discriminatory quota requiring the election of a minimum number of women to the boards of directors of  publicly-traded companies. As of December 31, 2019, publicly traded companies that are incorporated or headquartered in California have been required to have at least one female board member, and this quota will increase in 2021, depending on the board’s size. Corporations face hundreds of thousands of dollars in fines for violating the quota, in addition to being placed on the Secretary of State’s public list of non-compliant corporations.

The plaintiff, represented by Pacific Legal Foundation, argued that the rule violates the Equal Protection Clause of the Constitution by requiring shareholders to discriminate on the basis of sex when voting for directors.

The district court dismissed the case for lack of standing.  It ruled that the plaintiff suffered no injury because the penalty for flouting the quota is imposed on the corporation, not the shareholders. The court further ruled that even if the penalty constituted an injury to the shareholders, there was no threat of injury because the corporation is currently in compliance.

HLLI urged reversal of the district court’s dismissal. The California law impinges on shareholders’ corporate voting rights by punishing their rejection of the quota, which imposes a direct harm on shareholders under either California or Delaware corporation law. In any event, the quota harms women by undermining the perceived competence of the women serving as directors, while failing to address the structural impediments women face.  Quotas impose token representation, while causing both men and women to believe that “merit seemingly played a lesser role” in the appointment of female directors. Finally, the quota hinders shareholders’ ability to partially own corporations unhindered by an unlawful quota system.

The Ninth Circuit agreed with HLLI and the plaintiff, reversing the district court’s holding that a shareholder doesn’t have standing to challenge California’s gender quota.

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