Ninth Circuit Enjoins Enforcement of California Climate Disclosure Law SB 261

On November 18, 2025, the U.S. Court of Appeals for the Ninth Circuit granted an injunction blocking enforcement of SB 261, the California law requiring certain companies to biennially report their climate-related financial risks, just weeks ahead of the January 1, 2026 reporting deadline. SB 261 is one of two landmark climate disclosure laws enacted as part of the state’s “Climate Accountability Package.” The Ninth Circuit’s order, issued without explanation, halts implementation of SB 261 pending appeal in Chamber of Commerce of the United States, et al. v. Randolph, et al. This ruling comes three months after the U.S. District Court for the Central District of California declined to enjoin either SB 261 or its companion law SB 253.

SB 261 applies to companies with more than $500 million in annual revenue that “do business in California,” requiring them to prepare and publicly post biennial reports assessing their “climate-related financial risk” and describing measures for risk mitigation. SB 253, which was not affected by the Ninth Circuit’s injunction, requires billion-dollar companies to annually disclose greenhouse gas emissions beginning as early as 2026. For additional background on both laws, see our prior client alert.

The Chamber of Commerce’s Motion for Injunction Pending Appeal

The U.S. Chamber of Commerce, joined by several business associations, sought an injunction pending appeal after the district court denied its preliminary injunction motion. The Chamber argued that SB 253 and SB 261 compel “ideological” and “judgment-laden” speech on a contested policy issue, in violation of the First Amendment. According to the Chamber, the laws force companies to publish speculative and politically charged narratives, rather than factual, commercial disclosures.

The Chamber urged the Ninth Circuit to apply strict scrutiny and argued that the state could pursue its goals, such as preventing “greenwashing” or promoting transparency, through existing anti-fraud laws or by publishing information itself. The Chamber also emphasized irreparable harm, noting that SB 261’s disclosure deadline of January 1, 2026, and the state’s reporting portal opening on December 1, 2025, required companies to “speak now” and incur unrecoverable compliance costs.

California’s Opposition

The California Attorney General’s Office countered that the laws regulate commercial speech and are subject to a more deferential standard. According to the state, SB 253 and SB 261 merely require factual, noncontroversial disclosures that serve legitimate state interests: providing investors with reliable information, reducing market confusion about voluntary corporate climate claims, and encouraging emissions reductions through transparency.

The state also contended that these objectives are consistent with traditional financial reporting requirements and that the Chamber failed to show imminent or irreparable harm, since rulemaking under SB 253 remained incomplete and SB 261’s reporting requirements would not take effect until the start of 2026.

The Chamber’s Reply

In reply, the Chamber maintained that the compelled disclosures are not “commercial speech” because they are untethered from any product, service, or transaction. Both laws, the Chamber argued, aim to “embarrass” companies and pressure them to conform to California’s preferred climate policies rather than to prevent deception or inform consumers.

The Chamber further challenged the state’s asserted interests as speculative and unsupported. It argued that investor “curiosity” is not a valid basis for compelled speech, that no evidence shows the laws will meaningfully reduce emissions, and that the record contained no proof of widespread corporate deception.

The Ninth Circuit’s Order

On November 18, 2025, the Ninth Circuit granted the Chamber’s motion for an injunction pending appeal as to SB 261, without issuing an opinion. The panel’s brief order left open key questions regarding the scope and reasoning of the injunction, including whether the court viewed the Chamber as likely to succeed on its First Amendment claims or simply found the balance of equities favored a temporary pause. The injunction halts implementation of SB 261 while the appeal proceeds.

The court did not enjoin SB 253, which remains on track for phased implementation beginning in 2026, following the California Air Resources Board’s completion of its rulemaking process.

Takeaways

The Ninth Circuit’s injunction is a significant development in the ongoing constitutional challenge to California’s climate disclosure laws and represents a win for the Chamber of Commerce and its co-plaintiffs. While it leaves SB 253 unaffected, the injunction suspends the first major reporting deadline under SB 261 and injects uncertainty into California’s broader climate disclosure regime.

Absent further clarification from the court, companies should continue monitoring developments closely. Depending on the outcome of the appeal, compliance timelines under SB 261 could shift, while SB 253 remains set to proceed for now.

MoFo’s environmental and climate teams continue to monitor this litigation and related state and federal disclosure developments and are available to assist clients in evaluating compliance strategies, assessing disclosure frameworks, and preparing for potential implementation of these or similar requirements across jurisdictions.