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Will AB 979 Expose Corporations To Section 1983 Liability?

AB 979 would require publicly held corporations with their principal executive offices in California to have minimum number of directors from underrepresented communities.  If Governor Newsom signs the bill into law, corporations that attempt to comply with its quota requirements may face liability under 42 U.S.C. Section 1983 which provides:

"Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress, except that in any action brought against a judicial officer for an act or omission taken in such officer’s judicial capacity, injunctive relief shall not be granted unless a declaratory decree was violated or declaratory relief was unavailable. For the purposes of this section, any Act of Congress applicable exclusively to the District of Columbia shall be considered to be a statute of the District of Columbia."

Although private parties are usually not considered to be state actors for purposes of Section 1983, the U.S. Supreme Court has found that a private entity can qualify as a state actor in a few limited circumstances, including, for example, when the government compels the private entity to take a particular action, see, e.g., Blum v. Yaretsky, 457 U. S. 991 (1982) and Manhattan Cmty. Access Corp. v. Halleck, 139 S. Ct. 1921, 1928 (2019). 

© 2010-2020 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume X, Number 259

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About this Author

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

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...

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