California climate disclosure laws: Ninth Circuit hears oral argument; no ruling yet

On January 9th, a three-judge panel for the U.S. Court of Appeals for the Ninth Circuit heard oral arguments relating to the U.S. Chamber of Commerce and other parties' (the "Chamber") challenge of SB 253 (the Climate Corporate Data Accountability Act) and SB 261 (the Climate-related Financial Risk Act) (the "Laws").¹  The panel did not issue a decision during the hearing, and it could take months to do so. 

This hearing is on appeal from the U.S. District Court for the Central District of California's decision to deny a preliminary injunction against California's enforcement of the Laws. The Ninth Circuit could either issue a preliminary injunction against one or both Laws or deny a preliminary injunction against the Laws; in either case, the litigation will return to the Central District of California court to proceed, where summary judgment briefing is scheduled for this summer.

The panel's questions mainly revolved around (i) the extensive, potentially controversial disclosures required by SB 261, (ii) Scope 3 emissions and in-scope entities' potential need to report on and engage third parties for such data, and (iii) whether the Laws compel "commercial speech" as defined by First Amendment caselaw.

Key takeaways:

• SB 261 remains on pause, while SB 253 remains in effect. On November 18th, 2025, the Ninth Circuit granted a motion for injunction on SB 261 prohibiting the California Air Resources Board ("CARB") from enforcing SB 261 pending the appeal period. While the litigation also challenges SB 253, the injunction does not directly impact the law. CARB has stated that the previous SB 261 January 1, 2026 deadline is no longer in effect, but companies may voluntarily post SB 261 reports via a public docket.²  If SB 261 is upheld, the timing of when CARB's potential new deadline for initial SB 261 reports will be set is unclear. Under SB 253, initial Scope 1 and Scope 2 emissions data must be reported on or before August 10, 2026.³
• SB 261. The panel asked probing questions on SB 261 and indicated that the disclosures are required to be "very specific and very complete" and potentially require companies to express views on climate change, which one judge noted "some would consider to be controversial". In defense of the Law, the State responded that a risk assessment (as required by SB 261) is a "commercial assessment" and not a political one.
• Scope 3 Emissions. The panel asked questions about the mechanics of Scope 3 reporting and whether it required in-scope entities to gather third-party data and engage with third parties. One judge indicated that there may be concerns about Scope 3 emissions reporting that could result in the court sending those parts of the Laws (or perhaps just SB 253) back to the district court for a severability analysis. The Chamber's counsel asserted that emissions reporting is "political or theological or controversial" in that such data is not "purely factual and uncontroversial", especially noting that reporting Scope 3 emissions requires collecting data from third parties.
• Commercial Speech and other First Amendment thresholds. A main focus of the hearing was whether the compelled speech constitutes "commercial speech" under First Amendment caselaw. Restrictions on commercial speech generally receive intermediate scrutiny under legal review, a tiered standard less rigorous than strict scrutiny, but more demanding than rational basis review. The relevant standard for commercial speech requires the government to show that the regulation directly advances a substantial interest and is narrowly tailored (not more extensive than necessary) to achieve that interest. The Chamber's counsel claimed that the required disclosure is not commercial speech (which definition it purported is essentially "speech that proposes a specific commercial transaction", e.g., an advertisement or sale). The State disagreed and asserted that the definition of commercial speech should relate to the "economic interests of the speaker and its audience". The State asserted that the "commercial transaction" relating to Scope 3 emissions disclosures is the evaluation of the overall risk that the company faces, specifically transition risk (e.g., relating to taxes or cap and trade programs), in an economy that is facing climate change. The State attorney said "emissions are tied to the price of an investment".
• The Chamber's counsel argued that (i) the Laws require "voluminous" reports of a new type of speech and are a material extension of existing compelled speech, (ii) California never weighed the costs and burdens that would be incurred by companies required to report, which analysis was required, and (iii) even Governor Gavin Newsom stated when he signed the Laws that they were "too much" and "too costly", when under law they must not require "more [speech] than reasonably necessary". The State reported that "the district court found that each law serves a substantial state interest in providing California investors, lenders, and other stakeholders with information allowing them to accurately price risk." The State noted that a majority of institutional investors analyze the emissions of their investments and a majority of large companies doing business in the state attract investors by disclosing voluntary greenhouse gas emissions and climate risk reports; the State stated that these reports are not standardized, consistent or verified and the Laws "fill that gap".
• Scope 1 and 2 emissions were not a major focus. The required reporting of Scope 1 and 2 emissions did not appear to be a major concern of the court so those elements of SB 253 may be the most resilient in withstanding challenges.

A recording of the hearing can be found here. Depending on the Ninth Circuit's ruling, a separate lawsuit against the Laws, currently paused, could resume.

On December 9, 2025, CARB issued draft regulations implementing the Laws. The draft regulations are currently subject to a 45-day public comment period closing February 9, 2026. 

CARB will conduct a public hearing on February 26, 2026, with an in-person and remote option, to consider approval of the Regulations. CARB will provide a public agenda ten days before the date of the public hearing. If CARB makes any revisions or updates to any of the documents in this rulemaking package prior to the Regulations' publication on

December 26, 2025, it will update its rulemaking webpage and notify stakeholders. Stakeholders can be notified of CARB updates by signing up here.

This article is part of a series on the California climate disclosure laws. For more information, see our previous articles: 'California Climate Disclosure Laws: CARB issues draft regulations,' 'California Climate Disclosure Laws: Ninth Circuit temporarily halts SB 261 and CARB provides new guidance', 'California Climate Disclosure Laws: CARB delays regulations, releases Scope 1 and 2 template, and list of covered entities,' 'California Climate Disclosure Laws: CARB releases draft guidance on SB 261,' 'California Climate Disclosure Laws: CARB Refines Applicability, Deadlines, and Scope,' 'California Climate Disclosure Laws: CARB Affirms Reporting Deadlines, but Delays Regulations that Would Clarify Applicability,' and 'California Bills to Require Greenhouse Gas Emissions Reporting From Companies Doing Business in the State.'

_{1 The three-judge panel was comprised of Judges Jacqueline Nguyen (appointed by President Obama), Mark Bennett (appointed by President Trump), and Kiyo Matsumoto (appointed by President W. Bush). The original legal challenge, Chamber of Commerce of the United States et al. v. California Air Resources Board et al., was brought in January 2024 in the U.S. District Court for the Central District of California by the U.S. Chamber of Commerce, the California Chamber of Commerce, the American Farm Bureau Federation, the Los Angeles County Business Federation, the Central Valley Business Federation, and the Western Growers Association. The appeal is Chamber of Commerce v. Sanchez, Case No. 25-5327 (9th Cir. 2025).
2 About 50 companies have submitted SB 261 reports voluntarily to the docket, which reports can be found here.
3 For the first SB 253 Scope 1 and 2 emissions 2026 deadline, entities that were not collecting emissions data (or were not planning to collect such data) as of the date of CARB's December 5, 2024 Enforcement Notice are not expected to submit Scope 1 and 2 reporting data in 2026. Instead, such entities should submit a statement on company letterhead to CARB stating that they did not submit a report and that the company was not collecting data or planning to collect data at the time the Enforcement Notice was issued.}

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_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

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