backThe Ninth Circuit heard oral argument on January 9, 2026, following its November 18, 2025 order that enjoined enforcement of SB 261 (the “Climate-Related Financial Risk Act”) but allowed SB 253 (the “Climate Corporate Data Accountability Act”) to proceed pending appeal. (See preceding link for our prior Client Alert on these statutes). Appellant U.S. Chamber of Commerce and Respondent State of California debated whether the statutes (1) compel speech in violation of the First Amendment and (2) regulate commercial speech involving purely factual, uncontroversial disclosures.
Highlights from the Arguments
- Compelled speech and conduct framing:Justice Jacqueline Nguyen asked whether California defends the laws as incidental regulations of conduct, noting the State’s existing emissions regulations. The Chamber emphasized SB 253 effectively forces companies to assume responsibility for emissions attributable to other entities with which they do business, particularly through Scope 3 reporting.
- Commercial speech and statutory scope.The panel pressed California on how SB 253 and SB 261 disclosures are tied to “commercial transactions” and could be regulated as commercial speech. Justice Nguyen expressed concern that SB 261’s language is vague and broad, lacking clear guidance on the specific information required and potentially intruding into companies’ political views on climate issues.
- Overlap with securities disclosures.Justice Nguyen asked California to distinguish SB 261 disclosures from risk disclosures already required by the Securities and Exchange Commission and other laws. California acknowledged the overlap, describing the information as “quite similar,” but argued SB 261 goes beyond those required disclosures.
- Possible remand on SB 253 Scope 3.In an interesting exchange, Justice Nguyen asked California about the possibility of remanding this case to the district court to re-evaluate SB 253’s Scope 3 emission reporting requirements (scheduled to begin in 2027). The State responded it would not oppose that remand.
Practical Takeaways
The Court’s questioning suggests continued scrutiny of both statutes on First Amendment grounds and the commercial-speech framework, with particular focus on SB 261’s breadth and SB 253’s Scope 3 obligations. The Court provided no guidance on when it would issue its decision. Until then, the stay of enforcement of SB 261 remains in place. Potentially regulated parties should continue their preparations for compliance with these statutes.