2 F.4th 838
9th Cir.2021Background
- In 2018 California enacted SB 826 requiring publicly traded corporations with principal executive offices in California to have a minimum number of female directors (defined as individuals who self-identify as women), with escalating quotas through 2021 and reporting requirements.
- The Secretary of State may impose fines on corporations for violations ($100,000 for first violation; $300,000 for subsequent violations) and must publish compliance reports; no fines had been imposed at the time.
- Plaintiff Creighton Meland, an OSI Systems shareholder, sued the California Secretary of State under § 1983 claiming SB 826 forces shareholders to discriminate on the basis of sex when voting for directors in violation of the Equal Protection Clause.
- The district court dismissed for lack of Article III standing (asserting SB 826 targets corporations, not shareholders) and for lack of prudential standing (treating the claim as derivative); Meland appealed.
- The Ninth Circuit reversed, holding Meland plausibly alleged an Article III injury because SB 826 requires or encourages shareholders to discriminate and that his claim is direct (not derivative) so he has prudential standing; the court also rejected ripeness and mootness arguments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Article III standing (injury in fact) | SB 826 "requires or encourages" Meland to consider sex when voting, causing a concrete personal injury | SB 826 regulates corporations, not individual shareholders, so Meland suffers no personal injury | Meland plausibly alleged injury in fact; Monterey Mechanical precedent supports standing for persons coerced to discriminate |
| Are shareholders the objects of SB 826 / does the law compel individual voting behavior? | SB 826’s purpose and practical effect is to change board composition, and shareholders elect directors, so it necessarily targets/affects shareholders | The statute imposes obligations on corporations only and does not compel any individual shareholder to vote for a female nominee | Shareholders are an object of the statute because corporate compliance depends on shareholder votes; law therefore requires or at least encourages shareholder action |
| Prudential / derivative standing (direct vs. derivative claim) | Meland alleges a personal constitutional injury (being compelled to discriminate), not an injury to OSI | Any harm stems from fines or sanctions on OSI, so the claim is derivative and must be brought by the corporation | Meland’s claim is direct under Delaware law (Tooley): his alleged injury is personal and not dependent on an injury to OSI; prudential standing exists |
| Ripeness / Mootness | Injury is ongoing because shareholders vote annually and quotas escalate; relief would eliminate the coercion to discriminate | Case is moot or unripe because OSI currently complies and fines have not been imposed | Claim is ripe and not moot; injury is neither speculative nor hypothetical and relief would be meaningful |
Key Cases Cited
- Monterey Mech. Co. v. Wilson, 125 F.3d 702 (9th Cir. 1997) (holding a plaintiff has standing when the government requires or encourages it to discriminate)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (U.S. 1992) (establishing the elements of Article III injury in fact)
- Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (U.S. 2016) (injury must be concrete and particularized)
- Clapper v. Amnesty Int’l USA, 568 U.S. 398 (U.S. 2013) (threatened injury must be certainly impending)
- RK Ventures, Inc. v. City of Seattle, 307 F.3d 1045 (9th Cir. 2002) (owners/shareholders had standing when forced to discriminate)
- Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031 (Del. 2004) (Delaware test for direct vs. derivative shareholder claims)
- Franchise Tax Bd. of Cal. v. Alcan Aluminium Ltd., 493 U.S. 331 (U.S. 1990) (shareholders may have standing to challenge taxes on corporations that injure their investment)
- Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (U.S. 2014) (discussion of prudential standing and the role of federal courts)