Federal District Court Rejects Challenge to California's Climate Disclosure Law

On August 13, 2025, the challenge to the State of California's mandatory climate disclosure regulations was resoundingly rejected by Judge Wright (C.D. Cal.).  The preliminary injunction-- sought by the U.S. Chamber of Commerce, among others, on the grounds that this regime of mandatory climate disclosures compelled speech in violation of the First Amendment--was denied.  So, unless this judgment is successfully appealed, the climate disclosures promulgated by California, which mandate disclosures of climate risk for companies with over $500 million in revenue, and the disclosure of Scope 1, Scope 2, and Scope 3 greenhouse gas emissions for companies with over $1 billion in revenue, shall enter into force as of January 1, 2026.  And as these regulations apply to any company “doing business” in California (and satisfying the revenue thresholds), these disclosures may well become de facto national regulations in the United States due to the size and impact of California's economy.  

This decision, as a legal matter, is not especially surprising.  The court had already dismissed two other legal arguments advanced by the Chamber of Commerce to invalidate these laws--namely, that California's regulations were preempted by federal law and that they constituted an improper extraterritorial applications of California's authority.  And, with respect to the First Amendment, not only have these mandatory climate disclosures been determined to be commercial speech (of which courts are less protective), but plaintiffs also elected to undertake a facial challenge to the regulations (rather than waiting for a possibly more potent “as applied” challenge)--and, as noted by the court, “facial challenges [are] hard to win.” 

More significant than the legal reasoning in the decision, however, is the practical impact that this ruling will have on companies across the United States.  The SEC's climate disclosure rule has been abandoned by the Trump Administration--and is, moreover, subject to a legal stay by the Eighth Circuit--which relieved the anticipated compliance burden on companies.  However, the expansive scope of California's regulatory regime means that these regulations will likely apply to most large companies across the United States, inflicting a regulatory burden--and one that is, in many respects, more onerous than the regulations propounded by the SEC (e.g., California's rule applies to private companies as well as public companies, and compels the disclosure of Scope 3 greenhouse gas emissions, which was not demanded by the SEC).  Companies will need to expend resources in order to devise and enact the necessary processes to achieve compliance with California's legal efforts to achieve mandatory climate disclosures.