July 7, 2020

Volume X, Number 189

July 07, 2020

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July 06, 2020

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Secretary Of State Declares Enforcement of Gender Quota Law To Be "Entirely Speculative" And Casts Doubt On Rulemaking

In August, I reported on the filing of a taxpayer challenge to California's Board Gender Quota Law.  California's Secretary of State, Alex Padilla, was named as the defendant in his official capacity.  The plaintiffs allege that the law (SB 826) violates Articles 7 and 31 of the California Constitution.  Late last month, Secretary Padilla filed a demurrer to the suit, arguing that the plaintiffs lack standing and that the action is not ripe.

California confers standing on taxpayers pursuant to Section 526a of the California Code of Civil Procedure.  However, Secretary Padilla faults the plaintiffs with failing to plead specific facts alleging illegal expenditures.  Although Corporations Code Section 301.3(e) authorizes the Secretary of State to adopt regulations and impose fines, the Secretary of State argues that it is "entirely speculative to assert that the Secretary of State will draft regulations or impose fines".  He doubles down on this assertion, claiming:

"Because of the discretion afforded to the Secretary of State by Corporations Code section 301.3, it is 'sheer guesswork' to conclude that the Secretary of State will undertake regulations to enforce SB 826, that the Secretary of State will impose fines pursuant to SB 826, or that any corporation would even fail to be in compliance with the statute."

These claims may come as a surprise to the proponents of SB 826 who most likely expect that the Secretary of State will implement and enforce the statute as authorized.  This assertion may be belied, moreover, if the Secretary of State's proposed budget includes expenditures related to either of these activities.  A hearing on the demurrer is not scheduled until next March.

© 2010-2020 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume IX, Number 316


About this Author

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

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...