Ninth Circuit Hears Oral Argument in Challenge to California Climate Disclosure Laws SB 261 and SB 253; No Ruling Yet

On January 9, 2026, a three-judge panel for the U.S. Court of Appeals for the Ninth Circuit heard oral argument in a challenge to California Senate Bills (SB) 261 and 253 in Chamber of Commerce v. Sanchez, No. 25-5327 (9th Cir. 2025).¹ SB 261, the “Greenhouse gases: climate-related financial risk” law, requires covered entities to prepare a biennial climate-related financial risk report. SB 253, the Climate Corporate Data Accountability Act, requires reporting entities to annually report Scope 1 and 2 greenhouse gas emissions beginning in August 2026 and Scope 3 greenhouse gas emissions beginning in 2027. 

Previously, the Ninth Circuit issued an order staying enforcement of SB 261 (though not SB 253), pending appeal. The panel did not issue a decision during Friday’s hearing.

Principais conclusões

• SB 261 enforcement remains stayed pending a decision from the Ninth Circuit. As discussed in our prior alert, Ninth Circuit’s order staying SB 261 pending appeal, SB 261 reports are required by statute as of January 1, 2026. However, the Ninth Circuit stay pauses CARB enforcement of SB 261, so continuation of the stay means that there is still no indication of timing for when SB 261 reporting may be enforced.
• The Ninth Circuit stated it will issue a decision in due course, taking the parties’ arguments under further consideration. As discussed below, several questions were raised by the court regarding the scope of both SB 261 and SB 253.

See our previous client alerts for more information on the California Air Resources Board’s (CARB) proposed SB 261 and 253 rulemaking, CARB’s SB 261 enforcement advisory, and the Ninth Circuit’s order staying SB 261 pending appeal.

Argumento oral

The three-judge panel was comprised of Judges Jacqueline Nguyen (appointed by President Obama), Mark Bennett (appointed by President Trump), and Kiyo Matsumoto (appointed by President W. Bush). 

Counsel for the Chamber argued that both SB 261 and 253 violate the First Amendment, arguing that their reporting requirements constitute compelled speech; that the state of California would therefore need to demonstrate that the laws are narrowly tailored to meet a compelling state interest; that California has failed to do so; and that applying a less stringent standard of review would be inappropriate. 

Counsel for CARB argued the laws regulate the disclosure of commercial speech and are therefore subject to a less demanding standard of review, especially given that, according to CARB, the reporting requirements only concern factual and uncontroversial disclosures. 

The panel asked counsel for each party numerous questions regarding the purpose and effect of the two laws. The Chamber’s counsel argued that because the required disclosures are not related to a specific advertisement or sale, the laws compel speech in a non-commercial manner. Further, the Chamber’s counsel argued that the speech required by the laws concerns political opinions in a non-factual and controversial manner. CARB’s counsel argued the laws require only information to assist investors in decision-making and to help standardize the voluntary disclosures that many companies are already making.

Judge Nguyen asked CARB’s counsel if the Ninth Circuit has “concern on the Scope 3 emission disclosure requirements” of SB 253, whether it would be appropriate to ask the District Court, on a potential remand, to consider whether the law could be severed. CARB’s counsel agreed that such a severability analysis would be appropriate.

The panel indicated it would issue a decision in due course, but did not provide further insight into the timing for a decision. 

Se tiver dúvidas sobre a SB 261, a SB 253 ou a regulamentação proposta pela CARB, entre em contacto com os autores deste artigo ou com o seu advogado da Foley & Lardner.