Business groups challenge state's climate disclosure laws

The U.S. Chamber of Commerce challenged two new California disclosure laws in federal court on Tuesday, saying they "unlawfully attempt to regulate speech related to climate change."

"Senate Bills 253 and 261 impermissibly compel thousands of businesses to make costly, burdensome, and politically fraught statements about 'their operations, not just in California, but around the world,'" wrote Bradley J. Hamburger, a partner with Gibson, Dunn & Crutcher LLP in Los Angeles. Chamber of Commerce of the United States of America et al. v. California Air Resources Board, 2:24-cv-00801 (C.D. Cal., filed Jan. 30, 2024).

According to an Assembly Natural Resources Committee analysis of SB 253, beginning in 2026 it would require companies with over $1 billion doing business in California to report on two types of greenhouse gas emissions. The analysis said the law covers companies' global operations.

SB 261, by Sen. Henry Stern, D-Sherman Oaks, would require companies making $500 million or more annually to submit "a climate-related financial risk report" to the state every two years beginning in 2026.

In a statement, SB 253's author, Sen. Scott Wiener, D-San Francisco, called The Chamber's complaint "straight up climate denial." He also said the group was making "bogus arguments about cost and implementation" in order to "block basic transparency."

The Chamber and its co-plaintiffs -- including the California Chamber of Commerce and the American Farm Bureau Federation -- claim that both laws would impose massive costs on businesses and should be enjoined. The complaint argued that California seeks "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."

"While federal law may permit California to regulate greenhouse-gas emissions within the State's own borders, California has no right to regulate emissions in other states or in other parts of the world, let alone to do so through a novel program of speech regulation," Hamburger wrote. "S.B. 253 and 261 violate the First Amendment. Both laws are also precluded by federal law and run headlong into the Dormant Commerce Clause and broader federalism principles."

Wiener's statement said, "The Chamber is taking this extremist legal action because many large corporations -- particularly fossil fuel corporations and large banks -- are absolutely terrified that if they have to tell the public how dramatically they're fueling climate change, they'll no longer be able to mislead the public and investors." He added, "The Chamber and large corporate polluters don't want the public to know how much they're strangling the planet with carbon emissions -- that's why they filed this baseless lawsuit."

Wiener also said, "While corporate lobby groups continue to wage an unhinged misinformation campaign against these laws, investors and consumers are being deprived of vital information to navigate our rapidly warming planet."

Hamburger wrote in the complaint that each law purports to be a simple disclosure bill but actually does far more. For instance, SB 253 would require companies to estimate their emissions and share emissions figures from "others it does business with, such as customers, suppliers, and contractors."

The complaint also quoted a Senate analysis that found SB 253 would encourage "companies to conform their behavior to the policy preferences of the state" and Wiener's comment during a committee hearing that businesses would be "embarrassed" once their data came out.

The complaint ends speculation that the California Chamber of Commerce might allow SB 253 to go into effect without a legal challenge. It worked with other business groups in an unsuccessful attempt to defeat it in the Legislature, but left SB 253 off its annual "Job Killer" list of priority bills. Reached in September after the bill landed on Gov. Gavin Newsom's desk, spokeswoman Denise Davis said she was "not aware" of any pending legal challenges.

In a news release, Tom Quaadman, executive director of the U.S. Chamber of Commerce Center for Capital Markets Competitiveness, said the laws would force businesses to engage in "subjective speech" and to disclose "out-of-state emissions" from their entire supply chain.