We may learn as early as today whether a pending constitutional challenge to AB 979 will be going to trial in May. AB 979 is California's law requiring publicly held domestic and foreign corporations having their principal executive offices in California to have a minimum number of directors from a underrepresented communities. A lawsuit challenging the law as filed on the day that Governor Gavin Newsom signed AB 979 into law. Crest v. Padilla, LA Super. Ct. Case No. 20STCV37513 (Sept. 30, 2020). Last month, the parties argued dueling motions for summary judgment before Judge Terry Green, who took the matter under submission. Because a final status conference is scheduled for next Monday, it seems likely that Judge Green will issue his ruling by then.
Defenders of California's female quota law (SB 826) and AB 979 argue that corporations with diverse boards enjoy better performance. Assuming that is accurate, Judge Green expressed some concern about whether improving economic performance was a "compelling state interest":
I think their [the Secretary of State's] declaration that creating good economic conditions is a compelling state interest is much more problematic and would allow - it would allow virtually unlimited power to do racial gerrymandering, as it were, under the guise of we're trying to create a good economy.
Defending the law on behalf of the Secretary of State, the California Attorney General's office argued that the state had an interest in corporate performance because its large public pension plans (CalPERS and CalSTRS) are investors in publicly held corporations. Judge Green, however, seemed to have his doubts:
But you didn't tell me if - if that were a legitimate interest that could justify racial classifications and lead classifications [sic], that would so open the door that that is so general, that is so general that it would simply wipe out this entire area of high scrutiny and wipe out the entire area of judicial protection under the equal protections [sic] clause. It could be used to justify anything.
Although Judge Green did not appear to be receptive to this part of the Secretary of State's argument, it is always difficult to predict how a judge will rule based on questions and comments at oral argument.