On November 9, 2026, the U.S. Court of Appeals for the Ninth Circuit issued its preliminary injunction ruling in Chamber of Commerce v. Sanchez, No. 25-5327 (9th Cir. 2026). The Chamber of Commerce, along with the California Chamber of Commerce and other plaintiffs (“Plaintiffs”), appealed the Central District Court of California’s prior denial of a request for a preliminary injunction as to SB 253 and SB 261 on First Amendment grounds. Plaintiffs contend that SB 253 and SB 261 compel noncommercial speech and fail the “strict scrutiny” standard of review.
What You Need to Know:
- SB 253’s Scope 1 and 2 disclosures survive preliminary review, leaving the November 10, 2026, reporting deadline in effect. Slip op. at 24-32.
- SB 253’s Scope 3 disclosures and SB 261 likely violate the First Amendment. Slip op. at 22-40.
- On remand the district court must decide whether SB 253 Scope 3 is severable.
In August 2025, the District Court disagreed, reasoning that SB 253 and SB 261 regulate commercial speech. The District Court applied “intermediate scrutiny” for SB 261, because the statute involves subjective and predictive judgments by requiring companies to assess “the effect of current and future events on a company”; it applied deferential Zauderer review to SB 253 because the statute requires disclosure of “purely factual and uncontroversial information.” Applying these standards of review, the District Court held that neither SB 253 nor SB 261 violates the First Amendment. Plaintiffs subsequently appealed the District Court decision, with the Ninth Circuit enjoining enforcement of SB 261 pending appeal, but denying injunction of SB 253 (see Saul Ewing’s November 20, 2025, Client Alert). The court held oral argument on January 9, 2026.
The Ninth Circuit’s preliminary injunction ruling is not a final judgment and does not invalidate or affirm either law. It remands to the district court to reconsider its prior ruling based on the Circuit Court’s finding SB 253’s Scope 3 disclosures and SB 261 disclosures regarding climate-related financial risk are likely unconstitutional. The Ninth Circuit ruling states, “for purposes of preliminary injunctive relief, the State demonstrated substantial interests in mitigating information asymmetries for investors and reducing emissions, as well as a likelihood that the Scope 1 and 2 disclosure requirements directly advance those interests and are no more extensive than necessary.” Following the Ninth Circuit’s decision, SB 253’s Scope 1 and 2 GHG disclosure reporting requirements remain in place with a compliance deadline of November 10, 2026.
For SB 253’s Scope 3 GHG disclosure requirement, the Ninth Circuit found that “because SB 253’s Scope 3 disclosures concern diffuse third-party conduct in the value chain, they are insufficiently tethered to the reporting entity’s own operations and capital transactions to qualify as commercial speech. As such, this provision is subject to strict scrutiny, which it fails.” SB 253’s Scope 3 GHG disclosure requirements are expected to be enjoined by a future court as “likely unconstitutional” under the First Amendment. The district court also appears to be interested in addressing whether SB 253’s Scope 3 GHG disclosure requirements can be severed from the rest of the statute via SB 253’s severability provision.
For SB 261, the Ninth Circuit found that “SB 261 compels noncommercial speech by requiring covered entities to disclose, among other information, subjective ideological assessments.” Applying strict scrutiny, the Ninth Circuit concluded that “even assuming overcoming information asymmetries and reducing emissions are compelling state interests, SB 261 fails on tailoring grounds.” SB 261’s disclosure requirements are expected to be enjoined by a future court as “likely unconstitutional” under the First Amendment. Since SB 261 is subject to a preliminary injunction and its future is uncertain, now does not seem to be an appropriate time for companies to plan on devoting resources to SB 261 compliance.
Following the Ninth Circuit’s decision, companies should devote resources into complying with SB 253’s Scope 1 and 2 GHG disclosure requirements which still have a deadline of November 10, 2026. The California Air Resources Board (“CARB”) has published final regulations regarding compliance requirements which companies can review to assess whether they qualify as “reporting entities” under SB 253, first-year report required content, how to submit first-year reports to CARB, and safe harbors. With respect to SB 253’s Scope 3 GHG disclosure requirement, CARB still needs to issue subsequent regulations for SB 253 reporting in 2027 and beyond. Further, a future court appears to be open to enjoining SB 253 as to Scope 3 GHG emissions, or potentially severing Scope 3 from the rest of the statute. It stands to reason that until there is additional certainty from CARB and the courts, companies can postpone Scope 3 work. Companies can similarly postpone devoting resources to SB 261 compliance until the district court rules on remand. However, it should be noted that US-based multinational companies remain subject to overlapping reporting requirements under EU’s Corporate Sustainability Reporting Directive (See Saul Ewing’s November 6, 2026 Client Alert).
