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Volume XII, Number 23

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Secretary Of State Argues SB 826 Does Not Require An Impermissible Quota

SB 826 is scheduled to go on trial today before Los Angeles Superior Court Judge Maureen Duffy-Lewis.  Crest v. Weber, Cal. Super. Ct. Case No. 19STCV27561.   SB 826 requires all publicly held corporations headquartered in California to have at least one woman on their boards of directors, and, by the end of this year, two women on boards of five directors, and three women on boards of six directors or more.  Cal. Corp. Code §§ 301.3 & 2115.5.   The plaintiffs contend that this mandate violates Article I, Section 7 and Article I, Section 31 of the California Constitution.  

The Secretary of State makes the surprising argument in her trial brief that "SB 826 does not require an impermissible set percentage or quota".   However, she cites Grutter v. Bollinger, 539 U.S.  306, 335 (2003) in which the U.S. Supreme Court said:

"Properly understood, a 'quota' is a program in which a certain fixed number or proportion of opportunities are 'reserved exclusively for certain minority groups.'"

(Emphasis added).  Although the Secretary of State describes SB 826 as establishing a "diversity floor", it cannot be gainsaid that it imposes fixed numbers of female directors depending upon the size of the board.  Indeed, the Assembly Judiciary Committee was well aware that SB 826 established quotas when it considered the bill:

"This bill, however, would create what is essentially a quota system for private corporate boards."

Bill Analysis, Assembly Committee on Judiciary (May 25, 2018).

The word "quota" is derived from the Latin word quota, which means "of what number".   In Latin, quota is the plural form of quotum.  English, however, seems to have forgotten this bit of etymologic fact and treats the word as if it were singular.  Thus, the English plural is quotas.  

© 2010-2022 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume XI, Number 335
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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Partner

Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...

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