Business Coalition Sues California to Block New Climate Disclosure Laws

On January 30, 2024, the U.S. Chamber of Commerce and five co-plaintiffs representing a coalition of business groups filed a lawsuit against the California Air Resources Board (“CARB”), an agency of the State of California focused on reducing air pollution, seeking to block the state’s new climate disclosure laws, the Climate Corporate Data Accountability Act (SB 253) (the “Data Accountability Act”) and the Climate-Related Financial Risk Act (SB 261) (the “Financial Risk Act”).¹ CARB is responsible for enforcing the two laws and for issuing regulations to implement the Data Accountability Act. The plaintiffs filed suit in the U.S. District Court for the Central District of California, arguing that the two laws violate the U.S. Constitution.

The plaintiffs claim that the laws compel companies to “publicly express a speculative, noncommercial, controversial, and politically-charged message that they otherwise would not express,” in violation of the First Amendment to the U.S. Constitution.

The plaintiffs also claim that California lacks the authority to require companies to disclose greenhouse-gas emissions and climate-related financial risks everywhere they operate, particularly outside the state of California, therefore rendering the laws in violation of the Supremacy Clause of the U.S. Constitution.

The plaintiffs further claim that the laws are invalid under the U.S. Constitution’s limitations on extraterritorial regulation, including the Dormant Commerce Clause, because the laws impose significant burdens on interstate and foreign commerce, heavily intruding on Congress’s authority to regulate foreign commerce, with little benefits to California.

The plaintiffs have requested that the court declare the two laws “null, void, and with no force or effect” and enjoin CARB from implementing, applying, or taking any action to enforce the laws.

This lawsuit is the first of many that California may face over its new climate disclosure laws. We also anticipate that additional litigation will be filed once CARB issues its implementing and enforcement regulations related to the climate disclosure laws. We believe this lawsuit is a development worth monitoring not only because of the sweeping nature of California’s new climate disclosure laws, but also because this lawsuit foreshadows some of the expected legal challenges that will be brought against the pending SEC climate disclosure rules when and if those pending regulations are finally adopted.

The case is captioned Chamber of Com. of the U.S., et al. v. Cal. Air Res. Bd., et al., C.D. Cal., No. 2:24-cv-00801.