On August 13, 2025, the U.S. District Court for the Central District of California denied a motion for preliminary injunction to enjoin California Senate Bills 253 and 261. For background information on SBs 253 and 261, see our previous insight.
The Chamber of Commerce and five co-Plaintiffs sought a preliminary injunction to halt California’s landmark climate reporting laws on three separate grounds: (i) the laws violate the First Amendment, (ii) the Constitution and federal law preempt SB 253 and SB 261 and (iii) the two laws violate the dormant Commerce Clause of the U.S. Constitution. As we discussed here, in February 2025 the district court granted a motion to dismiss in part filed by CARB with respect to the latter two claims. Plaintiffs then filed a motion for a Preliminary Injunction on First Amendment grounds. Specifically, Plaintiffs alleged that the laws are not tailored to the interests of investors because they are not limited to companies seeking investments; absent a preliminary injunction, Plaintiffs claim they will suffer irreparable harm as they will be compelled to speak on the “controversial issue” of climate change.
In denying the motion for preliminary injunction, the district court determined that SB 253 and SB 261 regulate commercial speech, and thus the laws are subject to lower levels of scrutiny. The district court then determined that, applying these lower levels of scrutiny, the Plaintiffs did not show a likelihood they would succeed in their First Amendment challenge. With respect to SB 261, the district court found that the California legislature sufficiently tailored the law to the State’s interest in providing investors with climate-related risk information by seeking reliable information from companies in order for investors to make informed judgments about the impact of climate-related risk in their investing decisions.
Notably, the district court’s dicta suggested that SB 253 might not have survived a First Amendment challenge as-applied to Plaintiffs, since the law is not tailored to the State’s interest when applied to entities with no investors. However, Plaintiffs litigated the case as a facial challenge of the law, and the district court determined that covered entities, including both public and private companies, were likely to have at least some California investors. As a result, the district court found the constitutional applications of SB 253 against companies with California investors outweighed the potentially unconstitutional applications against companies without California investors, and determined Plaintiffs were unlikely to succeed in their challenge. Furthermore, while the district court agreed with Plaintiffs that SB 253 is overbroad, unduly burdensome and not reasonably related to the State’s interest in protecting consumers from misleading speech, the State’s other prevailing interest with respect to investors forced the district court to deny Plaintiff’s motion for preliminary injunction.
Orders granting or denying preliminary injunctions are immediately appealable. This means that co-Plaintiffs could immediately appeal Judge Wright’s denial of their motion for preliminary injunction to the U.S. Court of Appeals for the Ninth Circuit, which could potentially accelerate clarity as to the applicability of the two laws, although as of now, companies that may be subject to the laws are cautioned to proceed under the assumption that reporting under SB 261 will remain due January 1, 2026 and reporting under SB 253 will also be required in 2026.
