Paramount to the ruling in the upcoming May 5, 2025, hearing is the likelihood that strict scrutiny will apply to the plaintiffs’ First Amendment claims against SB 253 and SB 261.

By Joshua Bledsoe, Nikki Buffa, Betty M. Huber, and Matthew Green

On February 25, 2025, in Chamber of Commerce of the United States of America et al. v. California Air Resources Board et al.,¹ the plaintiffs in the US District Court for the Central District of California filed a motion for preliminary injunction against Senate Bill (SB) 253 and SB 261.²

SB 253 and SB 261

Senate Bill 253, the Climate Corporate Data Accountability Act (SB 253), requires entities doing business in California, with annual revenues over $1 billion, to annually report their Scope 1 and Scope 2 greenhouse gas (GHG) emissions starting in 2026, and their Scope 3 emissions starting at a date to be determined by the California Air Resources Board (CARB).

Senate Bill 261, the Greenhouse Gases: Climate-Related Financial Risk Act (SB 261), requires entities doing business in California, with annual revenues over $500 million, to publish a climate-related financial risk report in accordance with the recommended framework and disclosures in the Final Report of Recommendations of the Task Force on Climate-related Financial Disclosures, starting on January 1, 2026, and biennially thereafter.

Read this Latham Client Alert for more detail on these laws.

Read this Latham blog post for more detail on the implementation of these laws by CARB, which issued an Enforcement Notice for SB 253 stating that CARB will not penalize in-scope entities for incomplete compliance when first disclosures under the law are due in 2026.

Background of Lawsuit

The US Chamber of Commerce, the California Chamber of Commerce, and other business groups sued the State of California and CARB on January 31, 2024, alleging that SB 253 and SB 261 were unconstitutional because the laws: (1) violate the First Amendment by compelling speech; (2) violate the Supremacy Clause by regulating GHG emissions when the US Clean Air Act and federalism principles reserve that authority to the federal government; and (3) violate the limitations on extraterritorial regulation, such as the Dormant Commerce Clause, because they impose significant burdens on interstate and foreign commerce.³

The plaintiffs filed an early motion for summary judgment on their first claim, that SB 253 and SB 261 facially violate the First Amendment. The court denied the motion, ruling that discovery was necessary.

Read this Latham blog post for more detail on the denial of summary judgment for the First Amendment claim.

The court then dismissed the Supremacy Clause and Dormant Commerce Clause claims, without prejudice for the claims against SB 253 and with prejudice for the claims against SB 261. These dismissals focused the lawsuit on the alleged First Amendment infirmities (though plaintiffs could revive the other challenges to SB 253).

Read this Latham blog post for more detail on the dismissal of the Supremacy Clause and Dormant Commerce Clause claims.

Motion for Preliminary Injunction

To succeed on their preliminary injunction motion, the plaintiffs must show that (1) they are likely to succeed on the merits of their First Amendment claim, and the balance of equities tips in the plaintiffs’ favor — both in terms of (2) their likelihood to suffer irreparable harm without an injunction, and (3) the imposition of an injunction being in the public interest.

Likelihood That Plaintiffs Succeed on the Merits

As the court has previously ruled, the “primary effect—and purpose—of SBs 253 and 261 is to compel speech.”⁴ However, the court pronounced that discovery was needed to determine which level of scrutiny it should apply: strict scrutiny because the laws are content-based restrictions on speech; intermediate scrutiny because the laws regulate commercial speech; or rational-basis scrutiny because the regulated speech is purely factual and uncontroversial. Because the level of scrutiny often determines the outcome of a case, the plaintiffs focused their preliminary injunction arguments on the fact that strict scrutiny should apply, and that the speech compelled by the laws (GHG emissions reporting under SB 253, and climate-risk reporting under SB 261) are neither purely factual nor commercial.

The plaintiffs contend that reporting GHG emissions necessarily turns on subjective judgments — especially for Scope 3 emissions, while reporting climate risk inherently involves subjective judgments about unverifiable, future-oriented events.⁵ Moreover, the plaintiffs maintain that climate change is a paradigmatic controversial subject, and that the speech compelled by the laws inevitably will be used to stigmatize companies and to shape their behavior.⁶

Likelihood That Plaintiffs Suffer Irreparable Harm Absent a Preliminary Injunction

The plaintiffs assert that compliance would occur before this litigation reaches a resolution, as they expect the discovery process and court proceedings to extend into 2026, while CARB plans to enforce SBs 253 and 261 in 2026.⁷[7] At the point of enforced compliance, plaintiffs would be compelled to speak against their will, constituting a classic irreparable First Amendment injury. Furthermore, plaintiffs state that companies must already start preparing for compliance with these laws in 2025, resulting in current expenses that cannot be recovered.

Whether a Preliminary Injunction Is in the Public Interest

Plaintiff argue that courts consistently have recognized a significant public interest in upholding First Amendment principles.

Implications and Next Steps for Stakeholders

We anticipate that the court’s decision on the preliminary injunction may hinge on whether the court deems it probable that the plaintiffs will succeed on the merits — and more specifically, whether the court deems it probable that strict scrutiny will apply to the compelled speech.

Resolution of the motion should occur within a couple months: the opposition to the preliminary injunction is due on April 7, 2025; the reply to the preliminary injunction is due on April 21, 2025; and the hearing is scheduled for May 5, 2025.

Stakeholders also should continue to monitor other significant dates related to this case. The defendants’ deadline to answer plaintiffs’ First Amended Complaint is March 17, 2025, which should provide more insight into the strength of the State’s arguments against the First Amendment claim. CARB’s solicitation of public comments on how it should implement SB 253 and SB 261 is open until March 21, 2025 and submitted comments will be posted on CARB’s website. Finally, CARB is required to adopt implementing regulations for SB 253 by July 1, 2025. Given the significance of CARB’s implementation and enforcement on the obligations imposed by the laws, engagement with CARB potentially would affect the litigation.

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1. Case No 2:24-cv-00801-ODW (PVCx). ↩︎
2. Senate Bill 219 (SB 219) amended both SB 253 and SB 261 to: (1) extend CARB’s rulemaking deadline from January 1, 2025, to July 1, 2025; (2) require the reporting of Scope 3 emissions under SB 253 starting at a date to be determined by CARB, rather than the previous timeline which required the disclosure of Scope 3 emissions in 2027; (3) permit covered entities under SB 253 to consolidate emissions disclosure reports at the parent company level; (4) eliminate filing fee requirements under both SB 253 and SB 261; and (5) permit, but not require, CARB to contract with a climate reporting organization to develop a program to publicize the required disclosures. ↩︎
3. A third California climate disclosure bill (the Voluntary Carbon Market Disclosures Business Regulation Act (AB 1305)), which Governor Newsom signed into law at the same time as SB 253 and SB 261, was not challenged as part of this litigation. ↩︎
4. Case No 2:24-cv-00801-ODW (PVCx), Order Granting Defendants’ Motion To Deny Or Defer Plaintiffs’ Motion For Summary Judgment And Denying Plaintiffs’ Motion For Summary Judgment, filed November 5, 2024, pg. 7. ↩︎
5. Case No 2:24-cv-00801-ODW (PVCx), Memorandum of Points and Authorities in Support of Plaintiffs’ Motion for Preliminary Injunction, filed February 25, 2025, pg. 5, 11. ↩︎
6. Id. at 3, 12. ↩︎
7. Id. at 3. ↩︎