Chamber of Commerce of the United States of America v. California Air Resources Board

The federal district court for the Central District of California denied business groups’ motion for a preliminary injunction enjoining California’s laws requiring certain companies to submit annual reports on their Scope 1, Scope 2, and Scope 3 greenhouse gas emissions (SB 253) and requiring certain companies to disclose “climate-related financial risk information” (SB 261). The business groups asserted that the laws compel speech in violation of the First Amendment. As a threshold matter, the court found that the groups’ First Amendment challenge to SB 253 (unlike other claims they brought) was ripe for review even though the California Air Resources Board had yet to issue implementing regulations. Next, the court declined to alter its prior conclusion that both laws were subject to First Amendment review. The court found that both laws regulate commercial speech but applied a different level of scrutiny to each law. For SB 253, the court found that the Scope 1, Scope 2, and Scope 3 disclosure requirements required reporting only of factual, and not misleading, information. The court also found that the required factual disclosures were “uncontroversial” and therefore determined that it would apply the less stringent Zauderer review standard. For SB 261, the court concluded that the reporting requirements compel disclosure of more than factual information and are therefore subject to intermediate scrutiny. Applying the Zauderer standard to SB 253, the court found that the plaintiffs were unlikely to succeed on the merits of their facial First Amendment challenge because the disclosure requirements are reasonably related to the State’s substantial interests in providing reliable information to investors and in reducing emissions and mitigating climate change. However, the court concluded that the State’s interests in addressing misleading speech and in providing reliable information to consumers would likely not satisfy the Zauderer standard. Applying intermediate scrutiny to SB 261, the court found that the plaintiffs were unlikely to succeed on their First Amendment claim because the State “made a sufficient showing as to the benefits of investors’ desire for the specific disclosures required by SB 261 to achieve the legislature’s objective in reliable information that enables investors to make informed judgments about the impact of climate-related risks on their economic choices.” The court found that the State’s interests in emissions reduction and protecting stakeholders from fraud or misrepresentation would not survive First Amendment scrutiny. The court also found that the business groups did not show irreparable harm in the absence of a First Amendment violation and that the balance of equities favored denial of the preliminary injunction.