In the federal lawsuit challenging the constitutionality of California's Senate Bills 253 and 261, Judge Wright of the Central District of California narrowed the constitutional claims the court will consider at trial.
SB 253 requires companies doing business in California whose total revenues exceed $1 billion to disclose emissions related to their own operations, emissions generated by their energy consumption in carrying out business activities, and all other emissions in their operations and supply chains. SB 261 requires companies doing business in California with total revenues exceeding $500 million to disclose risks arising from climate-related phenomena.
The California Chamber of Commerce is the lead plaintiff in a federal lawsuit challenging various elements of the two bills on grounds they violate the First Amendment and the Supremacy Clause.
Judge Wright determined that some of the plaintiffs' claims are untimely and not properly before the court under the Supremacy Clause and related extraterritoriality claims challenging SB 253 and SB 261. Here are the key points from the ruling:
Judge Wright determined SB 253 is not ripe for review because the plaintiffs' failed to establish that their challenge to SB 253 is timely despite there being no published CARB regulations imposing any obligation on covered entities, and that the plaintiffs did not identify an "enforcement threat" or establish that SB 253 imposes any obligations on the plaintiffs' members.
Judge Wright determined SB 261 does not violate the Supremacy Clause, noting that SB 261 regulates speech and is not a de facto regulatory scheme subject to preemption. The court distinguished liability for failure to reduce emissions from failure to disclose climate-related financial risk, thus rejecting the plaintiffs' claims that federal laws like the Clean Air Act preempt SB 261.
Judge Wright also held that SB 261 does not violate the dormant Commerce Clause, granting the State's motion to dismiss the plaintiffs' extraterritoriality cause of action. The court found that the plaintiffs' failed to establish that California enacted SB 261 with a "discriminatory purpose" and that the law treats in-state and out-of-state actors equally. In addition, the court did not find that SB 261 created a burden on interstate commerce that clearly exceeds the local benefits, as the plaintiffs did not plausibly allege a significant burden on interstate commerce.
SB 253 and SB 261 continue to be of interest in the European Union, across the county and certainly among businesses with a presence in California. Manatt will continue to provide updates as the litigation plays out.
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