LOS ANGELES (CN) — The U.S. Chamber of Commerced claims that two recent California laws requiring large businesses to disclose their greenhouse gas emissions and to report their climate-related financial risk amount to "compelled speech" in violation of the First Amendment.
On Tuesday the chamber, joined by several other business associations, sued the California Air Resources Board, the agency tasked with enforcing Senate Bills 253 and 261, which were signed into law by Governor Gavin Newsom this past October.
"This lawsuit challenges two novel California laws that unlawfully attempt to regulate speech related to climate change," the chamber says in the complaint filed in Los Angeles federal court. They "impermissibly compel thousands of businesses to make costly, burdensome, and politically fraught statements about their operations, not just in California, but around the world, in order to stigmatize those companies and shape their behavior."
California's so-called Climate Accountability Package imposes unprecedented reporting requirements on large U.S. public and private companies doing business in the state, attorneys with Sidley Austin observed last year, and it has the potential to reach "every part of a company’s value chain."
Both laws, according to the Chamber of Commerce, unconstitutionally compel speech in violation of the First Amendment and seek to regulate an area that is outside California’s jurisdiction and exclusively subject to federal control per Clean Air Act.
Noting that the chamber and the other plaintiffs support policies that reduce greenhouse-gas emissions as much and as quickly as reasonably possible, they say that neither businesses or consumers benefit from "a patchwork of inconsistent state-by-state regulatory regimes."
The two California laws run roughshod over those considerations in violation of the Constitution, according to the complaint.
SB 253, known as the Climate Corporate Data Accountability Act, requires businesses with more than $1 billion in annual review to disclose their greenhouse gas emissions to a reporting organization. SB 261 requires that businesses with more than $500 million in annual revenue report their climate-related financial risk biannually.
The laws attempt to promote accountability through what the chamber said is an unconstitutional mechanism in the form of regulation of speech. SB 261 requires businesses to prepare a detailed report on the risks of climate change and to post that report on their websites.
SB 253 requires them to estimate and publicly disclose their greenhouse gas emissions, including the emissions of others that it does business with, such as customers, suppliers and contractors.
"The purpose of these speech compulsions is to 'encourage' companies to conform their behavior to the policy preferences of the state," the plaintiffs say in their complaint.
Newsom, in signing the two bills last year, noted the deadlines for implementation likely weren't feasible and that they could result in inconsistent reporting by businesses. The governor was also concerned about the costs for businesses to comply with the statutes and instructed CARB to closely monitor the financial impact.
Representatives of CARB declined to comment citing its policy not to comment on active litigation.
The plaintiffs claim the two laws violate the First Amendment, the supremacy clause and constitutional limitations on extraterritorial regulation. They want a federal judge to declare the regulations null and void and to bar their enforcement.
The Chamber of Commerce is represented by Eugene Scalia, Katherine Moran Meeks and Brian Richman of Gibson, Dunn & Crutcher.
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