Ongoing Legal Battle Over California’s Climate-Related Disclosure Laws: District Court Dismisses Supremacy Clause and Extraterritoriality Claims in U.S. Chamber of Commerce v. CARB

On February 3, 2025, the U.S. District Court for the Central District of California granted a partial motion to dismiss filed by the California Air Resources Board (“CARB”), dismissing the claims that SB 253 (the Climate Corporate Data Accountability Act) and SB 261 (the Climate-related Financial Risk Act) (collectively the “California Climate Laws”) violate the Supremacy Clause and limitations on extraterritorial regulation. But the First Amendment claim in Count I has not been dismissed, and thus litigation over the constitutionality of the California Climate Laws will continue.

Update

On February 25, 2025, the Chamber of Commerce and five co-Plaintiffs filed a motion for a preliminary injunction in U.S. Chamber of Commerce v. CARB—the suit challenging the California Climate Laws (SB 253 and SB 261). Plaintiffs seek to enjoin CARB from enforcing both SB 253 and SB 261. The parties have also submitted a joint proposal for a briefing schedule; under that schedule, CARB’s opposition to the preliminary-injunction motion would be due on April 7, 2025, and Plaintiffs’ reply would follow on April 21, 2025.

More specifically, the Plaintiffs seek a preliminary injunction as to Count I, which alleges that the California Climate Laws violate the First Amendment. Plaintiffs assert that they are likely to succeed on the merits of their First Amendment claim because SB 253 and SB 261 infringe on their right “to remain silent.” Plaintiffs also allege that, absent a preliminary injunction, they will suffer irreparable harm as they will be compelled to speak on the “controversial issue” of climate change. And Plaintiffs claim that both the balance of the equities and the public interest require a preliminary injunction to be issued.

Given the proposed briefing schedule, we anticipate that Judge Wright may rule on Plaintiffs’ motion at some point during the summer of 2025. Orders granting or denying preliminary injunctions are immediately appealable. This means that the aggrieved party could immediately appeal Judge Wright’s forthcoming ruling on Plaintiffs’ motion to the United States Court of Appeals for the Ninth Circuit.

In 2023, California enacted two climate-related disclosure laws, SB 253 and SB 261, which mandate that certain U.S. companies doing business in California publicly disclose their greenhouse gas (“GHG”) emissions and prepare climate risk reports. The U.S. Chamber of Commerce and five co-Plaintiffs representing a coalition of business groups filed a lawsuit in January 2024 challenging the California Climate Laws. The Complaint alleges that the California Climate Laws violate the First Amendment; the Supremacy Clause; and limitations on extraterritorial regulation, including the “Dormant Commerce Clause.”  In November 2024, the District Court denied the Plaintiffs’ motion for summary judgment on the First Amendment claims stated in Count I of their Complaint.

On February 3, 2025, the District Court issued an Order granting CARB’s motion to dismiss the two remaining Counts. The Court first found that Plaintiffs’ Supremacy Clause and extraterritoriality challenges to SB 253 are not yet ripe for review because the Plaintiffs had not shown a concrete plan to violate that law. The Court therefore dismissed the challenges to SB 253 without prejudice, pursuant to Federal Rule of Civil Procedure 12(b)(1). The Court then went on to hold that the Plaintiffs had failed to identify any language in either the U.S. Constitution or the federal Clean Air Act that would preempt SB 261. It therefore dismissed the Supremacy Clause challenge to SB 261 with prejudice, pursuant to Rule 12(b)(6). Finally, the Court found that the Plaintiffs failed to plausibly allege a significant burden on interstate commerce, and therefore dismissed the extraterritoriality claims as to SB 261 without prejudice under Rule 12(b)(6).

Although this Order represents an interim win for California, the legal challenge will continue with respect to Plaintiffs’ First Amendment claim. We expect that new motions for summary judgment on Count I will be filed later this year. Moreover, the recent order concerning Counts II and III dismissed some of Plaintiffs’ claims without prejudice, meaning that Plaintiffs can attempt to restate those claims in an amended Complaint, so long as they do so by February 24, 2025. The District Court’s orders in this matter could eventually be appealed to the U.S. Court of Appeals for the Ninth Circuit, but it is unlikely that any such appeal would be filed until the District Court renders final judgment on all of the claims in Plaintiffs’ Complaint, including the First Amendment claim that remains in active litigation.

In the meantime, CARB has until July 1, 2025, to adopt implementing regulations for the California Climate Laws. On December 16, 2024, CARB issued a notice requesting feedback on a number of topics, including what it means to “do business” in California and therefore be subject to the California Climate Laws. Comments are due to CARB by March 21, 2025.

We will continue monitoring this case and developments with respect to climate disclosure requirements generally. Please reach out to your Vinson & Elkins team to discuss these matters and their implications on your business.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.