February 2, 2024

Climate Disclosure: U.S. Chamber Takes California to Court

Earlier this week, the U.S. Chamber of Commerce announced that it had teamed up with other business organizations to file a lawsuit against the state of California over its new climate disclosure laws. Here’s what my colleague Zach Barlow shared about this development on (also see this WSJ article):

California Climate Disclosure Bills SB 253 and SB 261 are being challenged in a new lawsuit brought by the American Chamber of Commerce. The lawsuit argues that the bills are unconstitutional on two main grounds:

1. The laws violate the First Amendment by compelling speech.

2. The federal government preempts California through the Clean Air Act and the Dormant Commerce Clause.

The 30-page complaint states in part:

“Both laws unconstitutionally compel speech in violation of the First Amendment and seek to regulate an area that is outside California’s jurisdiction and subject to exclusive federal control by virtue of the Clean Air Act and the federalism principles embodied in our federal Constitution. These laws stand in conflict with existing federal law and the Constitution’s delegation to Congress of the power to regulate interstate commerce. This Court should enjoin the Defendants from carrying out the State’s plan.”

This case is not only important to the California laws, but could also shed light on what a challenge to the SEC’s upcoming Climate Related Disclosures could look like. In a case against the SEC’s rule, compelled speech will certainly be raised as an issue and this case could give us an idea of how persuasive that argument will be for the courts. Additionally, point number 2 is likely to be inverted in a future SEC challenge. Instead of arguing that the state is preempted because the federal government has the sole power to regulate emissions, the argument could invoke the Major Questions Doctrine and argue that the SEC as a federal agency doesn’t have statutory authority to regulate emissions – an argument made in comments to the SEC proposal.

The arguments here are interesting and success on either point could mean the end of SB 253 and SB 261 and introduces more uncertainty about the future of the laws. In January, it was revealed that a budget shortfall would hamstring funding for the bills’ implementation. It’s unlikely that we’ll have concrete answers about the bills’ future anytime soon as the legal challenge will take time. Whatever the initial outcome, the losing party is likely to appeal.

Liz Dunshee