California’s climate disclosure law, SB 253, and its climate risk disclosure law, SB 261, face new legal challenges brought by ExxonMobil. The lawsuit alleges that the laws are unconstitutional, arguing that they violate the First Amendment and the National Securities Market Improvement Act. Responsible Investor summarizes the arguments:
“The rules ‘compel ExxonMobil to produce reports on a topic of intense political debate that it would otherwise not produce and with which it fundamentally disagrees’, the firm said. As a result, it argued, SB 253 violates its First Amendment rights… On SB 261, the firm claims the rules violate the National Securities Markets Improvement Act, which preempts state laws from imposing enhanced investor reporting requirements over federal disclosures.
More broadly, Exxon disputes the idea that the requirements would be useful for consumer or investor protection. ‘California has no constitutionally adequate justification for the speech burdens SB 253 and SB 261 impose,’ it said.”
The First Amendment argument is very similar to the argument made by the California Chamber of Commerce in its ongoing lawsuit challenging the laws. First Amendment claims were also successful in fighting the SEC conflict minerals rule a decade ago. However, the National Securities Markets Improvement Act argument was not featured in previous litigation. So far, the California laws have fared well in the courts. In November of last year, the courts chose not to enjoin the law pending the outcome of litigation, which means that both laws are set to go into effect next year. Additionally, of the Chamber’s three original arguments, only one survived dismissal. We’ll see if and how the Exxon litigation differs and if Exxon will have more success stopping the laws than the Chamber of Commerce.
Our members can learn about SB 253 and SB 261 here.
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