California Corporate-Board Quota Law Unlikely to Survive a Constitutional Challenge

bainbridgeFeatured Expert Contributor, Corporate Governance/Securities Law

Stephen M. Bainbridge, William D. Warren Distinguished Professor of Law, UCLA School of Law.

The California state legislature recently passed SB 826, which will impose gender diversity quotas on all public corporations whose principal executive offices are located in California. If the corporation has six or more directors, it must have at least three female directors. If it has five board members, it will have to have at least two female members. If the board has four or fewer members, it will be required to have at least one female director. Governor Jerry Brown signed the bill into law.

SB 826 has been criticized on various grounds. Some commentators contend that the business case for gender quotas has not been made, so it is unclear whether the bill will benefit companies and their shareholders. Other commentators contend that state-mandated gender quotas are unconstitutional. Former SEC Commissioner Joseph Grundfest recently posted an article assessing the arguments on both sides of those debates, which I highly recommend for readers interested in pursuing those issues.1

Regardless of one’s views of the constitutional and business merits of diversity mandates, however, SB 826 is bad policy and of dubious constitutional validity for reasons wholly unrelated to gender issues. Continue reading “California Corporate-Board Quota Law Unlikely to Survive a Constitutional Challenge”

Updates: Supreme Court Refuses to Review Philly Cab Drivers’ Suit Against Uber

supreme courtOn April 24 in Ruling on Philly Taxis’ Suit vs. Uber, Third Circuit Reaffirms Antitrust Focus on Competition, not Competitors, one of our Featured Expert Contributors on antitrust, Baker Botts partner Anthony Swisher, wrote about a U.S. Court of Appeals for the Third Circuit decision that rejected a claim for attempted monopolization lodged against Uber. The taxi association sought a writ of certiorari from the U.S. Supreme Court, which yesterday announced in an orders list that it had denied the request.

A denial of certiorari has no precedential value; it simply means that the lower court decision stands. That said, the outcome may deter taxi organizations from other jurisdictions, as well as perhaps other businesses whose market share is threatened by “gig economy” entities, from filing similar antitrust suits. In addition, the Court let stand a decision that properly elevated protection of consumers over assisting competitors, a fundamental antitrust-law concept that is under attack by some politicians, legal activists, and antitrust academics. As the Third Circuit explained:

Appellants urge the application of antitrust laws for the express opposite purpose of antitrust laws: to compensate for their loss of profits due to increased competition from Uber. However, harm to Appellants’ business does not equal harm to competition.