In a split ruling on a preliminary injunction, the appeals court held SB 261 is compelled speech but let core parts of the emissions law SB 253 proceed.
A divided Ninth Circuit panel said on Monday, 9 November, that California's two corporate climate disclosure laws are unconstitutional in part or in full, Courthouse News Service reported. The appeal concerned a preliminary injunction: the panel partly reversed a trial judge who last year refused the U.S. Chamber of Commerce's request to halt their enforcement.
The court found that the Climate-Related Financial Risk Act, SB 261, breaches the First Amendment's protection against compelled speech. Writing for the panel, Circuit Judge Jacqueline Nguyen said the law requires companies to give predictive, value-laden opinions on whether climate change threatens their business, on a politically contested subject. Because that is not commercial speech, such as a warning label, the law faces strict scrutiny, and the court held it is not narrowly tailored to California's stated aims of correcting information gaps for investors, reducing emissions and countering misleading statements.
The Climate Corporate Data Accountability Act, SB 253, fared better. It requires companies with more than US$1 billion in annual revenue that do business in California to report their emissions. The majority held that the duty to report emissions from sources a company owns or controls, and from the energy it buys, regulates commercial speech: it compels factual information relevant to investors. The panel found that California had shown substantial interests and that these two requirements directly advance them without going further than needed. The third requirement, covering indirect emissions across a company's value chain, was held not to be commercial speech, and the panel reversed the denial of a preliminary injunction for that part.
Circuit Judge Mark Bennett dissented on SB 253, warning that the majority's reasoning could let states compel a wide range of disclosures in the name of investor information. The California Attorney General's office said it was pleased that SB 253 reporting would move forward and was evaluating next steps.
