A divided panel of the Ninth U.S. Circuit Court of Appeals partially granted a stay on Nov. 9 in the challenge to California's two climate disclosure laws. The order pauses enforcement of SB 261, the Climate-Related Financial Risk Act, and of the Scope 3 value-chain reporting requirement in SB 253, the Climate Corporate Data Accountability Act. It allows the Scope 1 and Scope 2 requirements in SB 253 to proceed. The first reports under those provisions were due on Nov. 10.
The order is interim. It lasts until the court issues a final decision on the merits, and it is not a final ruling on whether the laws are constitutional. But the panel's reasoning draws a clear First Amendment line between two kinds of climate disclosure: direct emissions data, which the court treated as commercial speech, and value-chain and risk narratives, which it treated as compelled ideological or predictive speech. That line will shape the litigation and may influence challenges to other climate disclosure regimes.
The laws
California enacted both laws in 2023. SB 253 requires companies with more than $1 billion in annual revenue doing business in California to report their greenhouse gas emissions. Scope 1 covers direct emissions from company operations. Scope 2 covers emissions from purchased energy. Scope 3 covers indirect emissions across the value chain, including suppliers and customers. SB 261 requires companies with more than $500 million in revenue to report climate-related financial risks.
The laws were among the most ambitious state-level disclosure regimes in the country. They applied to thousands of companies, including many headquartered outside California. Business groups challenged them almost immediately, arguing that the reporting requirements compelled speech in violation of the First Amendment. The U.S. Chamber of Commerce, the American Farm Bureau Federation, and California business groups brought the case, U.S. Chamber of Commerce v. Sanchez, in the Central District of California.
The district court declined to stay the laws while the case proceeded, finding the challengers unlikely to succeed on the merits. The Ninth Circuit partially reversed that decision on Nov. 9.
The ruling
The panel split two to one. Judge Jacqueline Nguyen wrote for the majority, joined by Judge Kiyo Matsumoto. Judge Mark Bennett partially dissented, arguing that both laws should be blocked in full.
The majority blocked SB 261 entirely for the duration of the litigation. It reasoned that the law compels companies to make subjective assessments about climate-related financial risks, including predictive judgments about future conditions and the political and economic responses to them. That kind of compelled statement, the panel suggested, is not commercial speech and must survive strict scrutiny. The court found that it likely does not. SB 261 applies to about 2,675 companies with revenue above $500 million.
The panel also blocked the Scope 3 requirement in SB 253. Scope 3 emissions are indirect and depend on assumptions about suppliers, customers, and value-chain boundaries. The court found that the requirement is insufficiently tethered to the company's own operations to count as commercial speech, so it also faces strict scrutiny. Scope 3 is the most contested part of the law because it requires companies to estimate emissions they do not directly control.
The panel allowed Scope 1 and Scope 2 reporting to proceed. Those categories are tied to the company's own operations and purchased energy, and the court treated them as commercial speech subject to intermediate scrutiny. The laws are expected to require about 1,971 companies with revenue above $1 billion to report under SB 253. The first reports were due on Nov. 10.
The panel remanded the case to U.S. District Judge Otis Wright in Los Angeles to decide whether the Scope 3 provision is severable from the rest of SB 253. If it is, the Scope 1 and Scope 2 requirements can continue even if Scope 3 is permanently blocked. If it is not, the entire law could be affected. The district court will also preside over the merits case.
The First Amendment question
The legal heart of the case is the distinction between commercial speech and compelled ideological speech. Commercial speech receives intermediate scrutiny under the First Amendment. The government can require factual disclosures that are reasonably related to a legitimate interest, such as investor protection or consumer information. But the government cannot compel a person or company to endorse a particular viewpoint or to make speculative judgments about contested political questions.
The panel treated Scope 1 and Scope 2 data as the first kind of speech. The numbers are factual, tied to the company's own operations, and useful to investors and the public. The reporting requirement is a disclosure, not an endorsement. The court treated SB 261 and Scope 3 as the second kind. A climate risk report requires judgments about future physical risks, transition risks, and the political response. A value-chain emissions estimate requires assumptions about suppliers and customers that the company does not control. Those judgments can be characterized as ideological or predictive, and the court found that the state's interest does not justify compelling them at this stage.
The distinction is not absolute. A company's Scope 1 emissions are also an estimate, and the line between direct and indirect emissions can be contested. But the panel found the difference significant enough to treat the categories differently for purposes of a stay. The dissent would have gone further and blocked the entire law.
The reaction
The Chamber of Commerce called the order an "important victory." It has said it will seek permanent injunctions against the laws. California Attorney General Rob Bonta's office said it is evaluating next steps and noted that Scope 1 and Scope 2 reporting can proceed. Environmental groups had mixed reactions. The Environmental Defense Fund, which filed an amicus brief, said the ruling means "investors, consumers, and the public will have access to important information," and argued that the laws are consistent with the First Amendment.
The reactions reflect the stakes. Supporters see the laws as a response to a gap in federal climate disclosure and as a tool for investors who need comparable emissions data. Opponents see them as an attempt to force companies to adopt a particular view of climate risk and to impose costly reporting requirements that vary by state. The Ninth Circuit's order does not resolve that debate. It decides which parts of the laws can be enforced while the debate continues in court.
The practical impact
For companies covered by SB 253, the immediate task is the Scope 1 and Scope 2 report due Nov. 10. The order allows that requirement to proceed, and the state can enforce it while the case is pending. The Scope 3 requirement is paused, but companies may still report voluntarily, and the district court's severability decision will determine whether it returns.
For companies covered by SB 261, the risk report is paused entirely. The law applies to a broader set of companies than SB 253, including many with revenue between $500 million and $1 billion. Those companies no longer face the reporting deadline while the stay is in place. The district court could lift the stay, and the state could appeal the Ninth Circuit's order.
The ruling also affects how companies prepare. Many had already built systems to collect emissions data and assess climate risk. The order may slow some of that work, but it does not eliminate the underlying demand from investors, lenders, and customers. Companies with operations in Europe may still face the EU's corporate sustainability reporting rules. Companies with federal contracts may face other requirements. The California laws are one part of a larger disclosure landscape.
The broader context
California's laws were a state-level response to the slow progress of federal climate disclosure. The SEC adopted a climate disclosure rule in 2024, but it was stayed by litigation and later weakened. Several other states have considered their own disclosure laws. The Ninth Circuit's order may give opponents of those laws a template: challenge the predictive and value-chain requirements as compelled speech, while accepting the direct emissions data as commercial speech.
The order may also influence how regulators design disclosure rules. A requirement that is framed as a factual data report is more likely to survive than a requirement that asks companies to assess future risks or make value judgments. That distinction could shape the next generation of climate disclosure rules, at the state and federal level.
The case is also a reminder that the First Amendment is a powerful tool for challenging disclosure requirements. The Chamber and its allies have used it before, and they are likely to use it again. The Ninth Circuit's order gives them a partial win and a roadmap for the rest of the case.
What to watch
The district court's severability decision is the next milestone. If Scope 3 is severable, the Scope 1 and Scope 2 requirements can continue even if the value-chain rule is permanently blocked. If it is not, the entire SB 253 scheme could be at risk. The district court will also handle the merits case, including the permanent injunction requests.
The Ninth Circuit could revisit the order en banc or in a final merits decision. The California attorney general could seek further review. Other states with climate disclosure laws will watch the case closely. The SEC's climate rule remains in litigation, and the Ninth Circuit's reasoning may be cited in that case.
The first Scope 1 and Scope 2 reports are due on Nov. 10. That deadline will show how many companies comply and how the state enforces the requirement while the case is pending. The order is interim, but the reporting obligation is real.
The ruling is about who must say what, not whether climate risk is real. The line between data and doctrine is the issue, and the courts are still drawing it.
Primary sources
- The Ninth Circuit's Nov. 9, 2026 order in U.S. Chamber of Commerce v. Sanchez, No. 25-5327, for the partial stay, the panel, and the First Amendment reasoning.
- The Environmental Defense Fund's statement for the provisions that proceed, the provisions that are paused, and the reaction.
- Corporate Disclosures for the Scope 1, Scope 2, and Scope 3 breakdown, the company counts, and the reporting deadlines.
- Reuters for the ruling, the company thresholds, and the reactions from the Chamber and California.
- Courthouse News for the panel vote, the severability remand, and the district court posture.
- CourtListener for the case docket and the lower-court record.