Ninth Circuit Declines to Halt CARB’s Scope 1 and 2 Disclosure Requirements, Finds Scope 3 and SB 261 Likely Unconstitutional

The Ninth Circuit issued a ruling on November 9, 2026 upending important parts of California’s climate change reporting laws. The court allowed the state to move forward with its SB 253 requirements for Scope 1 and 2 reporting; the November 10 deadline for disclosures regarding direct greenhouse gas (GHG) emissions and GHG emissions from purchased energy is thus still in effect.

It found the requirements for Scope 3 disclosures and SB 261 disclosures regarding climate-related financial risk likely unconstitutional, remanding for reconsideration on that basis. On remand, the district court will determine whether Scope 3 is severable from the remainder of SB 253. Slip Opinion at 8, 42–43. This is a preliminary-injunction ruling, not a final judgment invalidating or upholding either law. Only First Amendment claims were at issue in the appeal. Id. at 12 n.3, 13–14.

Background

California enacted SB 253 and SB 261 in 2023, later amended by SB 219. SB 253 requires annual GHG emissions disclosures by public and private U.S. businesses doing business in California with annual revenues exceeding $1 billion. SB 261 requires biennial climate-related financial risk reports from such businesses with revenues exceeding $500 million, subject to applicable exclusions. For details on requirements under these laws, see our prior alert.

The U.S. Chamber of Commerce and other trade associations challenged the laws as compelled speech in violation of the First Amendment. As discussed in our September 2025 alert, the district court denied preliminary injunctive relief on August 13, 2025. The plaintiffs appealed, and the Ninth Circuit granted a stay pending appeal of enforcement of SB 261 against the plaintiffs in November 2025, but left SB 253 in place. CARB subsequently announced that it would not enforce SB 261’s January 1, 2026 deadline against any covered entity, allowing voluntary reporting and promising further information after the appeal. The Ninth Circuit heard oral argument on the appeal in January 2026.

CARB recently finalized implementing regulations for SB 253 and 261, with the initial SB 253 Scope 1 and 2 reporting deadline set for November 10, 2026. As this reporting deadline neared, plaintiffs submitted letters to the court advising of recent developments and reminding it of the pending injunction request.

The Ninth Circuit’s Decision

Scope 1 and 2: The majority classified Scope 1 and 2 disclosures as commercial speech because they require standardized, factual emissions information about a company’s own operations that bears directly on capital transactions. They do not compel companies to endorse California’s climate-policy positions or express normative views about their emissions. Id. at 16–24.

The court concluded that the disclosures are likely to survive intermediate scrutiny by directly advancing California’s substantial interests in reducing investor information gaps and GHG emissions without being more extensive than necessary. Therefore, it did not decide whether the more deferential Zauderer standard applies.

Scope 3: The majority treated Scope 3 (value chain) GHG emissions disclosures as noncommercial speech because they concern independent third parties and are insufficiently connected to the reporting company’s own operations and capital transactions. Applying strict scrutiny, it found inadequate tailoring, including insufficient justification for compelled reporting over voluntary reporting or state-generated estimates, an attenuated connection to investor needs, and inadequate evidence that mandatory Scope 3 reporting would reduce emissions. Id. at 32–36.

SB 261: The majority likewise applied strict scrutiny to the requirement that companies disclose climate-related financial risk. It reasoned that the required reports compel predictive and normative judgments on a politically fraught subject rather than merely factual commercial disclosures. It found that less restrictive alternatives are available, such as encouraging voluntary disclosures or directly regulating emissions. It also found insufficient evidence that the required reports would reduce emissions. Id. at 36–40.

The court concluded that the remaining preliminary-injunction factors also favored relief for Scope 3 and SB 261: the likely First Amendment violations established irreparable injury, and the balance of hardships and public interest favored protecting constitutional rights. Conversely, those factors favored California for Scope 1 and 2 disclosures. Id. at 40–42. Judge Bennett concurred in part and dissented in part, arguing that both laws compel noncommercial speech, warrant strict scrutiny, and should be preliminarily enjoined in full. Id. at 43–46 (Bennett, J., concurring in part and dissenting in part).

Implications and Next Steps

The Opinion does not itself provide relief from Scope 1 and 2 reporting, and thus the November 10, 2026 Scope 1 and 2 disclosure deadline remains in effect pending any further judicial or administrative action. However, the district court’s severability analysis remains important: the majority noted that, absent severance, Scope 3’s constitutional defect would exist in every application of SB 253. Id. at 41, 43.

The decision supports preliminary relief for SB 261 and Scope 3 but should not be described as permanently striking down those requirements. Id. at 8, 36, 43. Companies should monitor the mandate, district court proceedings and implementing injunction orders, CARB’s response, and any requests for rehearing or further review to evaluate future compliance activities.

Crowell & Moring continues to monitor these developments. Please contact the authors with questions.