On February 3, 2025, the U.S. District Court for the Central District of California granted a motion to dismiss filed by the California Air Resources Board (CARB), dismissing plaintiffs’ claims that SB 253 (the Climate Corporate Data Accountability Act) and SB 261 (the Climate-related Financial Risk Act) (each amended by SB 219) violate the Supremacy Clause and limits on extraterritorial regulation. 

In January 2024, the U.S. Chamber of Commerce and a coalition of business groups filed a lawsuit against the state of California in Los Angeles federal court challenging SB 253 and SB 261 (each amended by SB 219), alleging that the climate disclosure laws violate the First Amendment (Count I), are preempted by the Constitution and federal law and violate the Supremacy Clause (Count II), and violate the Constitution’s limits on extraterritorial regulation, including the dormant Commerce Clause (Count III). 

As a reminder, SB 253 will require certain large businesses doing business in California to annually disclose detailed information on their carbon emissions beginning in 2026 and SB 261 will require certain large businesses doing business in California to disclose their climate-related financial risks and measures adopted to reduce these risks on a biennial basis, with the first report due on or before January 1, 2026.

The court first dismissed the challenges to SB 253 without prejudice, finding that plaintiffs’ Supremacy Clause and extraterritoriality challenges to SB 253 are not yet ripe for review. The court noted that SB 253, on its own, does not mandate any action from any of plaintiffs’ members or any other reporting entity. Instead, SB 253 requires CARB to develop and adopt regulations to require a reporting entity to annually disclose all of its scopes 1, 2, and 3 emissions within the framework required in the legislation. Because CARB has not yet published regulations imposing these obligations (CARB has until July 1, 2025 to adopt regulations), it was not clear to the Court that any possible regulations CARB issues would impermissibly burden interstate commerce or violate the Supremacy Clause. The court also found that plaintiffs had failed to show a concrete plan to violate SB 253 where the law, on its own, does not obligate plaintiffs’ members to take any action.

Next, despite finding that plaintiffs did have standing to challenge SB 261 on Supremacy Clause and extraterritorial grounds, and that the claims are ripe, the court dismissed the Supremacy Clause challenge to SB 261 with prejudice, finding that plaintiffs had failed to identify any language in either the U.S. Constitution or the federal Clean Air Act that would preempt the disclosure required by SB 261, noting that SB 261 does not set emissions limits and imposes no liability for failure to reduce emissions; only for failure to disclose climate-related financial risk and measures adopted to reduce such risk. The court also dismissed the extraterritoriality claims regarding SB 261 without prejudice, finding that plaintiffs could not allege that SB 261 discriminates (or has a discriminatory purpose) against interstate commerce because SB 261 contains no “differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter.” The court also found that plaintiffs failed to plausibly allege a significant burden on interstate commerce that would be caused by SB 261. Plaintiffs have until February 24, 2025 to restate these claims in an amended complaint should they choose to do so.

As we previously reported, the district court denied plaintiffs’ motion for summary judgment with respect to the First Amendment claims raised in plaintiffs’ complaint in November 2024, finding that further development of the facts were needed for the court to evaluate plaintiffs’ motion for summary judgment. Accordingly, the litigation over the constitutionality of the California Climate Laws will continue.

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