“Learn to Let Go”: The Ninth Circuit Partially Blocks California’s Climate Laws

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Kesha taught us in her 2017 hit “Learn to Let Go” that even if I have “been a prisoner of the past, [and] had a bitterness when I looked back,” it isn’t too late to “learn to let it go.” Following California’s enactment in October 2023 of Senate Bill 253 (The Climate Corporate Data Accountability Act) and SB 261 (The Climate-related Financial Risk Act), we have spent the last few years following the development of implementing regulations by the California Air Resources Board (“CARB”) and tracking the legal challenges to California’s climate laws. Please see our prior client alerts for additional background on the initial summary of the California climate laws, the adoption of initial implementing regulations, and updates to the initial regulations and proposed concepts for subsequent regulations. While all of that time and effort certainly wasn’t wasted, as subject companies’ initial SB 253 reports disclosing their Scopes 1 and 2 emissions still were due on November 10, 2026, the Ninth Circuit’s decision on November 9^th likely renders meaningless the preparation for the other requirements of SB 253 and SB 261. As Kesha said, though, “live and learn and never forget it…[we] gotta learn to let it go.”

Background on the Ninth Circuit’s Decision

In January 2024, several chambers of commerce and business associations (the “Chambers”) filed suit in California, alleging that SB 253 and SB 261 are facially unconstitutional under the First Amendment. The Chambers sought to enjoin both laws, arguing that they compel noncommercial speech, fail strict scrutiny, and violate the First Amendment. The district court disagreed with the Chambers, finding that the laws regulate commercial speech and, therefore, are not subject to strict scrutiny. Concluding that the Chambers had not shown a likelihood of success on the merits of their First Amendment claims, the district court denied the Chambers’ motion for a preliminary injunction as to both SB 253 and SB 261.

In November 2025, the Ninth Circuit enjoined the enforcement of SB 261 pending appeal but denied the Chambers’ motion for a similar injunction as to SB 253. The Ninth Circuit heard oral arguments on January 6, 2026, but subject companies were still required to prepare for and submit initial SB 253 reports disclosing their Scopes 1 and 2 emissions by November 10, 2026, as SB 253 was not enjoined pending the Ninth Circuit’s decision.

The Ninth Circuit Upholds Certain Aspects of SB 253, Rules Against SB 261

On November 9, 2026, the Ninth Circuit announced that it was affirming the district court’s denial of an injunction as to the Scopes 1 and 2 emissions disclosure requirements of SB 253. These disclosures regulate commercial speech because they compel disclosure of factual emissions information, and California had adequately demonstrated interests in mitigating information asymmetries for investors and reducing emissions. The Ninth Circuit also found that the Scopes 1 and 2 disclosure requirements directly advanced the state’s interests and were no more extensive than necessary.

In contrast, the Ninth Circuit reversed the district court’s denial of an injunction as to SB 253’s Scope 3 emissions disclosure requirement. The Ninth Circuit held that Scope 3 emissions did not qualify as commercial speech, as that information concerned “diffuse third-party conduct in the value chain” and was “insufficiently tethered to the reporting entity’s own operations and capital transactions.” Accordingly, SB 253’s Scope 3 disclosure requirement was subject to strict scrutiny and failed, likely violating the First Amendment. The Ninth Circuit remanded the case to the district court for it to decide whether the Scope 3 disclosure requirement is severable from the rest of SB 253. 

Finally, the Ninth Circuit also reversed the district court’s denial of an injunction as to SB 261, which requires subject companies to disclose climate-related financial risks. The Ninth Circuit found that “SB 261 compels noncommercial speech by requiring covered entities to disclose, among other information, subjective ideological assessments.” Accordingly, SB 261 was subject to strict scrutiny and failed, with the court finding that the disclosure requirements were not sufficiently narrowly tailored to California’s interests and that California could have employed less restrictive means to accomplish its goals.

We will continue to monitor developments in the litigation, including the district court’s decision as to whether the Scope 3 emissions disclosure requirement is severable from the rest of SB 253. In addition, California may seek rehearing or U.S. Supreme Court review. These developments will likely impact CARB’s ongoing rulemaking concerning SB 253 reports due in 2027 and beyond. In the meantime, subject companies are still required to submit their SB 253 reports covering Scopes 1 and 2 emissions. Initial reports covering Scopes 1 and 2 emissions were due by November 10, 2026. 

For additional information about any of the above developments, or to discuss any questions that you may have, please contact a member of Maynard Nexsen’s Public Company Advisory Group.

This Client Alert is for information purposes only and should not be construed as legal advice. The information in this Client Alert is not intended to create and does not create an attorney-client relationship.