Ninth Circuit Curtails California Greenhouse Gas Disclosure Laws
Appellate court rules parts of California climate mandates violate First Amendment compelled speech protections.
1Appellate Court Partial Injunction
The Ninth Circuit Court of Appeals issued a split decision regarding two California climate disclosure laws. The panel affirmed in part and reversed in part a lower court ruling that had previously denied the U.S. Chamber of Commerce's request to halt enforcement. This decision marks a significant legal setback for state-level environmental mandates.
2SB 261 Deemed Unconstitutional
The court ruled that the Climate-Related Financial Risk Act, or SB 261, violates First Amendment protections against compelled speech. Judge Jacqueline Nguyen noted that requiring companies to make predictive judgments about uncertain future climate risks constitutes value-laden assessments. Consequently, the law fails to meet the strict scrutiny required for non-commercial speech regulations.
3Commercial Speech Doctrine Limits
The panel distinguished between factual commercial speech and ideological assessments. While warning labels on products are generally permissible, the court found that forcing corporations to opine on politically fraught subjects falls outside the commercial speech doctrine. This distinction is central to the court's reasoning for blocking the broader requirements of SB 261.
4SB 253 Reporting Requirements
The Climate Corporate Data Accountability Act, SB 253, mandates that corporations with over $1 billion in annual revenue report their greenhouse gas emissions. The court allowed requirements concerning direct operational emissions and purchased energy to proceed. These disclosures were deemed factual enough to qualify as commercial speech under the current legal framework.
5Value Chain Disclosure Blocked
The court reversed the denial of an injunction regarding the third requirement of SB 253, which concerns indirect emissions from a company's value chain. The panel concluded that these diffuse third-party activities are insufficiently linked to a company's own operations to justify compelled disclosure, effectively halting that specific portion of the law.
6Dissenting Judicial Perspective
Judge Mark Bennett dissented, arguing that the majority incorrectly equated investor interests with consumer interests. He warned that allowing these disclosures could set a dangerous precedent, potentially enabling states to mandate the release of various other types of sensitive information under the guise of mitigating information asymmetries for investors and other stakeholders.
7Industry Reaction and Compliance
The U.S. Chamber Litigation Center hailed the decision as a victory for First Amendment rights and business operations. Daryl Joseffer stated that the injunction prevents the state from imposing massive compliance costs on companies. The ruling provides temporary relief for businesses struggling with the extraterritorial reach of California's sweeping environmental reporting mandates.
8Future Regulatory Implications
The California Attorney General's Office expressed satisfaction that Scope 1 and Scope 2 reporting under SB 253 will continue. Officials are currently evaluating next steps while maintaining their commitment to climate data transparency. This ruling highlights the ongoing tension between state-level climate policy goals and federal constitutional protections for corporations.
Original article: Courthouse News — Ninth Circuit Curtails California Greenhouse Gas Disclosure Laws