On August 13, 2025, the District Court for the Central District of California (the District Court) denied plaintiffs’ motion for preliminary injunction in the ongoing litigation over California’s SB 253 and SB 261. As a reminder, this litigation is expected to extend well into 2026, the first year for compliance under both laws. For more information on these laws and the overall litigation, see our posts here, here, and here.
After a cursory recitation of ripeness and applicability of the First Amendment to the laws in question, the District Court’s order focuses on the first factor in determining whether to grant a preliminary injunction: the likelihood of the plaintiff’s success on the merits.
The analysis is broken into two prongs: (1) determining the scope of the laws and (2) weighing what portion of applications of the laws would violate the First Amendment. For scope, the District Court noted that all covered companies are subject to the same statutory obligations. However, it devoted significantly more attention to the second prong, where it introduces several distinctions in the treatment of SB 253 and SB 261. That said, many of the parties’ underlying arguments were the same between the two laws.
The District Court determined that SB 253’s requirement to disclosure GHG emissions metrics in conformance with the GHG Protocol was focused on factual and uncontroversial information, and thus subject to the lower level of Zauderer scrutiny. The District Court noted that the legislation does not require a statement on causality or responsibility for indirect emissions and, leveraging broader Ninth Circuit precedent, stated that just because a fact is related to a controversial issue does not make the statement itself controversial.
As such, the District Court determined that the requirements of SB 253 need only be “reasonably related to a substantial government interest.” California proffered three potential interests: (1) providing reliable information for investors and customers to make informed choices; (2) achieving GHG emissions reductions to mitigate climate risks; and (3) protecting investors, consumers, and others from fraud or misrepresentation.
The District Court ultimately found that the first (at least with regard to investors) and second governmental interests would be likely to survive the pertinent level of scrutiny in the majority of applications. As such, the District Court determined that the plaintiffs had not shown a likelihood of success on the merits as to their facial challenge to SB 253.
Unlike with SB 253, the District Court noted that SB 261 required an assessment of risks that, by definition, is speculative and cannot be purely factual. As such, the District Court determined it could not apply the lower threshold of Zauderer scrutiny and instead must assess whether SB 261: (1) directly advances a substantial government interest (2) in a manner not more extensive than necessary to serve that interest.
California proffered the same set of government interests. Given the higher level of scrutiny, the District Court primarily focused on the interests that survived under its analysis for SB 253. In doing so, it found that the state’s interest in reducing GHG emissions would not survive this intermediate level of scrutiny because the state offered no evidence that climate risk disclosure would result in fewer GHG emissions. However, the District Court found that California’s interest in reliable information for investors would likely survive a challenge in most situations at this level of scrutiny.
The District Court also briefly addressed the remaining factors courts evaluate when considering preliminary injunction motions; however, these portions generally followed with the District Court’s rationale on the first prong — noting that there was no showing of irreparable harm without the First Amendment violation and that the balance of equities favored advancing the public interests for which California adopted the laws.
Plaintiffs may appeal the District Court’s denial of their motion for preliminary injunction. However, in the meantime, the California Air Resource Board (CARB) is expected to continue to work to implement both laws. The merits briefing schedule set by the District Court in this case extends well into 2026, which would go beyond the initial compliance deadline for SB 261 reporting on January 1, 2026. The deadline for SB 253 reporting will be determined in CARB’s forthcoming regulations, but must be sometime in calendar year 2026.
CARB has announced a virtual workshop for August 21, 2025, which may provide additional insights on various aspects of the laws, the regulatory development timeline, and related applicability and substantive considerations.
Companies should consider the extent to which they may need to engage outside support, such as to address GHG accounting and related technical assessments. Companies also should evaluate whether and how to strategically incorporate SB 253 and 261 analysis and reporting into their existing risk and disclosure processes, particularly for entities potentially subject to various overlapping disclosure regimes.
Latham will continue to monitor the implementation of the California climate disclosure laws. For any questions, please contact one of the authors below or the lawyer with whom you normally consult.