[00:00:00] Speaker 02:
Good morning, counsel.

[00:00:02] Speaker 01:
Good morning. May it please the court. Eugene Scalia, representing the plaintiffs. I've reserved five minutes for rebuttal, and Judge Wynne, I'll keep an eye on the clock.

[00:00:10] Speaker 02:
Thank you.

[00:00:13] Speaker 01:
There is a well-established framework for evaluating speech regulations such as the laws at issue in this case. Applying that framework here, it is clear that the district court should be reversed and directed to enjoin both laws. So to do so, first, these laws compel speech. That means they are content regulation, which means that they are presumptively unconstitutional. Second, this puts the burden on the state. The state bears the burden to demonstrate these laws' constitutionality.

[00:00:46] Speaker 01:
And third, The state stakes all on its claim that these laws compel commercial speech.

[00:00:54] Speaker 01:
That is their case.

[00:00:57] Speaker 01:
The laws involved here involve compelled speech that meets no definition, no recognized definition of what constitutes commercial speech. It's been articulated by any court, and it's just not true. As the state says a dozen times in its brief that the compelled speech here provides parties to transactions information about those transactions. It's just not so.

[00:01:24] Speaker 02:
Well, counsel, let me ask you this, because the analysis actually may differ as to 253 versus 261. I think it's certainly harder on one statute versus the other. Is it your position that compelled disclosure of anything that has to do with misjudgment is non-commercial, or do we have to look at the fact that the compelled disclosure really calls for expression on sensitive matters, political or ideological matters?

[00:01:54] Speaker 01:
Your Honor, the second part is not a necessary part of the threshold determination of whether or not this court is reviewing commercial speech. The question is, does it propose a commercial transaction? That is the core definition that's been recited by the Supreme Court time and again. In close cases, which I would submit this is not, but in close cases, courts look at the Not one of the three bulger factors is met here. These are not advertisements.

[00:02:24] Speaker 01:
The compelled speech does not concern products. And the companies forced to make the speech certainly have no economic motivation to do so. So the bulger factors are not met.

[00:02:35] Speaker 02:
And again, the state has... Right, and I think that's the difficulty, right? You anticipated where I was going to go with this line of questioning, which is how closely tethered to commercial transactions does it have to be. And we have a case that's very recent, the Farmer versus Dolphy case. And here, you know, this relates to stock and capital purchases, which seem to be commercial transactions. So maybe the tethering under the Bolger factors aren't close enough. And I take it that you would want us to more strictly apply the Bolger factors then.

[00:03:08] Speaker 01:
Your Honor, the state certainly embraces tethering. the Pharma case, but it's actually quite unhelpful to them. Pharma, which did draw a dissent, nonetheless was quite insistent that the speech there was, quote, closely tethered to specific transactions. It said the speech compelled was product-specific. And it said it concerned transactions. It said that it was very close to the core in central Hudson of speech proposing a commercial transaction, because after all, it involved prices for drug products.

[00:03:43] Speaker 01:
So here, we have no identified transactions. We have no identified products. And we don't have any information that is being provided about any product or any transaction. Instead, it's wholly unrelated. Farmer Judge Wynn, as I think you mentioned, talks about closely tethered to a transaction. How could that be? There is no transaction requirement here, and there's certainly no close tethering. So in other contexts, are companies required to make certain disclosures?

[00:04:17] Speaker 01:
They are. Nothing like the extraordinarily voluminous reports here. In almost every single case before the court, A company has been required to disclose a few words or, in the CTI case, a few sentences. Here, just the incorporated documents are 100 pages in one instance and 70 pages long in the other, telling you what you have to say. So different in kind. Judge Wynn, the other thing I would really underscore in responding to your question about other kinds of company disclosures is what this court and the Supreme Court have been emphatic about.

[00:04:57] Speaker 01:
which is that the courts must be very cautious about marking off new areas of speech for reduced constitutional protection. And there is no doubt that this standard, well, holy lack of standard that is being proposed by the state here, is a far, far extension beyond what's been recognized in any prior case as commercial speech, and the Supreme Court says can't do it.

[00:05:23] Speaker 04:
Counsel, I'm going to ask your friend this question, too. Has the state ever argued in this case that any portions of either of these statutes is justifiable as an incidental regulation of conduct?

[00:05:40] Speaker 01:
I think it might have made a half-hearted effort at that in the district court, which it gave up, Your Honor. But your use of the word incidental reminds me that in Pharma, that was another point this court made in footnote 18. It's incidental to a transaction. Here, just not the case. So I don't believe they – I know they've not made that argument in this court, Your Honor. Yes. So it's waived. I know that. So it's waived.

[00:06:04] Speaker 04:
I know that as well, but we're at a preliminary stage. And there's no doubt that in some areas California regulates emissions.

[00:06:17] Speaker 01:
That's correct, Your Honor, and these reporting requirements are not tied at all to any particular California emissions requirements. California can regulate emissions. That is a better way to achieve one of the three purposes it's identified for this law. But, of course, California's regulation of emissions within its own borders can't license its attempts to regulate emissions beyond its borders, or for that matter, And here's another important point when we talk about tethering.

[00:06:49] Speaker 01:
This law, neither one of them is even about transactions within the state of California. They've tried to liken the statutes here to the securities laws and their many differences, which I'd be happy to address with the court.

[00:07:08] Speaker 01:
They're not even addressing investors in California or consumers in California. It applies globally without that narrowing point either. But again, what I would underscore centrally is first, it's not commercial speech under any recognized definition. And second, as the Supreme Court also said in NIFLA, that its precedents do not permit states to engage in regulation of speech without persuasive evidence, persuasive evidence that that regulation stands in a long history of of regulation of that nature.

[00:07:47] Speaker 01:
And again, the state has no prior speech regulation remotely like this one, which can come for discord.

[00:07:54] Speaker 02:
Let me ask you this, because I think that the closed feathering is an important issue in this particular case. Why can't we view, in particular, the Scope 1, Scope 2, and even the Scope 3 disclosures in 253 akin to product warnings to those engaging in stock and other capital transactions.

[00:08:17] Speaker 02:
Is that an inapt analogy? And if so, in what way?

[00:08:21] Speaker 01:
Your Honor, I think it's a great analogy to ask about, and it utterly fails because there's no identified product. Every other compelled speech case is about one product, It's about your cell phone and CTIA. It's about drugs and drug pricing in the pharma case. It's a long list that this court is familiar with. This is every product. This is you buy a handbag anywhere, and supposedly you need to know how many hydrofluorocarbons a company emits and how many pair fluorocarbons that company emits.

[00:08:55] Speaker 01:
Again, there's zero tethering, and there's no relationship whatsoever. to a product. In that regard, I also want to underscore the complete lack of tailoring of this law, which also sets it apart from any compelled speech requirement that's ever been reviewed by this court, any other court. There was literally zero tailoring by the state. The Supreme Court has said in the Greater New Orleans broadcasting case that the statute should indicate that the regulator has carefully weighed the costs and burdens that are being placed on speech by a statute.

[00:09:35] Speaker 01:
California never did that because it took two voluntary frameworks that are international, and for both reasons have no consideration of First Amendment rights, and simply required everything that's in them, lock, stock, and barrel. So, Judge Wynn, if For example, the state of California did want to engage in product-specific disclosure requirements, such as, in the other cases we've talked about, it should identify the product, should identify what needs to be said about that product, and should then make sure that it is closely tethered and meets all the necessary tests.

[00:10:15] Speaker 01:
It's just done absolutely nothing like that.

[00:10:20] Speaker 01:
And so that lack of...

[00:10:23] Speaker 01:
That lack of any tailoring is yet another reason that it can't, even if this court were to adopt a lesser scrutiny, it simply can't survive. I also want to emphasize both in NIFLA and this court's decisions and CTIA and other cases, ex corp, net coalition, how important it is that if you're going to claim that it's related to a product disclosure or the like, It needs to be provided in the context of the provision of that product. What NIFLA says is that Zadar involved speech that was required in the commercial speech of the advertiser.

[00:11:02] Speaker 01:
In other words, there's not merely a product requirement. It's that the speech be presented in the context of presenting that product.

[00:11:09] Speaker 02:
Let me ask you this, Mr. Skigal. If we were to disagree with you that it's not just compelling advertising, on business judgments, but the focus and the concern really is compelling businesses to express a policy view or express some normative view through language that's dictated by the state. That has to be part of the analysis. In that instance is GHG emissions data, just the data alone, scope one, scope two disclosures, for example, in any way political or controversial or ideological?

[00:11:48] Speaker 01:
Your Honor, I believe it is, and if I could explain that in a moment, but I want to underscore again that there is a simple framework. It's compelled speech. It's presumptively unconstitutional. If it's going to be commercial speech, it has to meet the commercial speech definition. If it doesn't, this court need go no farther. But it is true, in fact, that the 253 disclosures do not meet the Zauderer test in a number of ways. It is not purely factual and uncontroversial. Companies are being required under what's called a corporate climate accountability law to report emissions by other people as, quote, their emissions, the emissions of the reporting company.

[00:12:28] Speaker 01:
That is what the statute says. That is a false attribution. That's the scope three? That's scope two also, which companies have to provide reports on in August. That is not purely factual, Your Honor. It's also controversial because what this law tries to do is to force companies to own responsibility for other companies that they interact with so that they will press those other companies to reduce their emissions. And so that's not purely factual, and it's not uncontroversial.

[00:13:01] Speaker 01:
But again, it's so entirely removed from any statement that a company makes.

[00:13:09] Speaker 01:
when we briefed this, finally got around to identifying the speech that it said was being made that these disclosures were intended to address. And that speech, they identified seven so-called indicators of greenwashing, which when the district court looked at it, it was clear they were actually potentially all true. statements. But if the state thought it had a genuine interest to address statements being made by companies about the climate, it should focus on those statements, not require that you report what your emissions of hydrocarbons are, and also other companies do so.

[00:13:46] Speaker 01:
So I hope that addresses the question, Judge Wynn, but in a nutshell, it's not necessary for this court to conclude that these laws are unconstitutional, or rather that the state has failed to carry its burden on to find that they are not purely factual and uncontroversial, but indeed they are, and they are also not made in conjunction with presenting or offering a product to the market.

[00:14:11] Speaker 03:
It's just merely a reporting of operations, correct, factual data that derives from the company's operations. When we report the emissions data, Without any regard to any judgments or values concerning climate change, correct? It's just these are our admissions.

[00:14:33] Speaker 01:
Well, with respect to SB 261, in fact, a lot of opinions, judgments, predictions about the climate, about regulators need to be made. With respect to 253...

[00:14:43] Speaker 01:
Your Honor, it's actually not just about a company's operations. It's about other companies' operations. And again, it's in a total absence of this threshold requirement that there be a product or a service. If I could maybe wrap up for the moment, unless there are further questions, and remind you again of what the state has insisted a dozen times in its brief relying on pharma, that this is information. about a transaction being provided to the parties to that transaction. I only ask, what is the transaction?

[00:15:15] Speaker 01:
What is the transaction-linked information? They can't satisfy their own standard.

[00:15:20] Speaker 02:
All right, thank you. Before you sit down, I know you wanted to sit down for a bit, but let me see if my colleagues have any questions at this point. Thank you.

[00:15:27] Speaker 01:
Okay, thank you.

[00:15:44] Speaker 00:
Good morning, your honors. May it please the court, Caitlin McLoone for Pelley's.

[00:15:51] Speaker 00:
Plaintiffs started with the definition of commercial speech. I think that's a good place to start here because they've identified a very narrow definition that's not reflected in the case law. We know from Central Hudson that the commercial speech test is a common sense inquiry that focuses on how closely the relevant expression relates to, quote, the economic interests of the speaker and its audience. We also know from pharma, which this court was discussing, in synthesizing the court's fact-driven analysis as applied to compelled speech scenarios, that whether the compelled disclosure provided parties, that the test is whether the compelled disclosure provide parties to actual or potential commercial transactions with information about those transactions.

[00:16:36] Speaker 04:
Well, we said recently in X Corp, commercial speech is usually defined as speech that does no more than propose a commercial transaction. Yes? Yes.

[00:16:47] Speaker 00:
That's correct, Your Honor. But other courts have articulated it as, again, a common sense inquiry that's not tied to one bright line standard. And courts are clear when identifying that as sort of the core definition that there are other definitions that have been used, including the one articulated in PhRMA most recently, where they were looking at this type of compelled disclosure and whether or not to the panel's discussion, there's a close tether between the speech-compelled and the transactions.

[00:17:18] Speaker 00:
And here, CalPERS testified and numerous studies and surveys before the court confirm that uncertainty about the physical and transition risks facing companies from climate change can lead to market distortions and misallocation of resources and significant volatility in financial markets.

[00:17:36] Speaker 04:
What's the specific commercial transactions at issue, for example, in 261?

[00:17:42] Speaker 00:
The specific, well, looking just at the interest that the district court found was substantial and fully supported, it's the investment product and the California investors and other stakeholders, lenders, insurers, evaluating how to price and how to evaluate the riskiness of that particular investment decision.

[00:18:08] Speaker 00:
The evidence here shows that some 85% of North American institutional investors analyze the emissions of their investments, including, per CalPERS declaration, the state itself. And somewhere between 86% to 98% of the largest companies...

[00:18:25] Speaker 00:
doing business in the state, attract investors and other commercial counterparties by publishing voluntary emissions or risk reports. But the information that these companies choose to voluntarily disclose is not standardized, and it's often selective, fragmented, and unverified. And so the state was filling the gap.

[00:18:43] Speaker 04:
And so what would be the commercial transaction with regard to, for example, Scope 3 disclosures in 253?

[00:18:53] Speaker 00:
Commercial transaction for looking just at the 253 component.

[00:18:56] Speaker 04:
Scope three.

[00:18:57] Speaker 00:
Scope three is the evaluation of the overall risk that the company faces, specifically transition risk in economy that's facing climate change. If there's going to be certain taxes on emissions or cap and trade programs that's going to impact a company that has a large emissions burden, it would impact investor or lender's assessment of the risk of that product, depending on what the overall emissions load of that company is.

[00:19:30] Speaker 02:
But this may have to gather from third parties.

[00:19:34] Speaker 00:
Yes, Your Honor. Under the GHG protocol, which is integrated into the law, there's a standardized accounting protocol for determining a sort of comparable, consistent way of measuring the emissions, the overall emissions that a company is facing. And that number is directly relevant to the risk assessment that California Investors, and other lenders, insurers are making daily in order to determine whether or not their money is safe in that product, whether or not they want to invest in a particular company or not.

[00:20:12] Speaker 00:
That is closely tethered to the transaction that they are considering making, and there is ample evidence in the record that the district court relied on to find that both investors are actively interested in this information, and in fact, that when you look at the overall emissions of a company, including scope one, two, and three, that is tied to the price of investment products and that investors do demand a premium.

[00:20:43] Speaker 02:
Kind of in a general fashion, so you're relying on the same evidence in the record to support scope one and two emissions for scope three, or is there additional evidence that would really show that the disclosures from third parties would materially advance the emissions reduction interest?

[00:21:01] Speaker 00:
Your Honor, the evidence in the record suggests that it's the overall emissions burden, so scope one, two, and three, that a company faces that impacts the sort of risk premium that investors assign to companies with high emissions burdens. So it is directly tied. It's the scope, the full scope of emissions that a company is facing. And you could see why that is, because a company that who has a large emissions burden in their supply chain, the pricing of their commercial products will be impacted by various regulatory programs that might increase the burden of sort of high emissions companies within the stream of their business.

[00:21:48] Speaker 02:
In your view, if a company doesn't already have access to Scope 3 emissions data, can they comply with the statute merely through secondary sources, or do they have to affirmatively seek that from the third parties?

[00:22:02] Speaker 00:
Your Honor, the protocol under the GHG protocol that's integrated into the law provides for various methods for determining the Scope 3 value. Right.

[00:22:14] Speaker 02:
Are those methods satisfied through secondary sources or other ways, or does it have to be? a direct engagement with the third parties to seek their information?

[00:22:22] Speaker 00:
No, Your Honor. They could directly engage, but they can also use various methods of estimation that are integrated into the protocol.

[00:22:31] Speaker 03:
And would those methods involve a great burden, expense, and volume of data and an obligation on the part of the reporting entity?

[00:22:42] Speaker 00:
No, Your Honor. There are any number of both entities and computer programs that exist to assist companies in doing this. And in fact, a large percentage, I want to say a 50%. It's less than the 98% that are doing some amount of emissions calculation and putting that information into the market. But a significant percentage of them are already analyzing their Scope 3 data because, again, investors are seeking this information now.

[00:23:13] Speaker 00:
The problem is that companies are trying to meet that need by providing voluntary data into the marketplace. That's just inconsistent. It's not verified yet. And there are gaps. So it's that gap of information that the legislature was seeking to respond to in passing these laws.

[00:23:33] Speaker 04:
Counsel, California regulates emissions, yes?

[00:23:37] Speaker 00:
Yes, Your Honor.

[00:23:38] Speaker 04:
And is your friend correct that at one point California made an argument that some of these disclosures were justified as the incidental regulation of conduct but then abandoned that?

[00:23:55] Speaker 00:
Your Honor, it's correct that the state made the argument in the court below that there's an incidental regulation, but the argument was not hinged on emissions regulation. Again, the focus is on regulation of information in the marketplace, so it had to do with the state's long-standing ability to regulate and protect consumers and investors in the state.

[00:24:20] Speaker 04:
So the state has never argued that these disclosures could be justified as an incidental regulation of the state's ability to regulate emissions.

[00:24:31] Speaker 00:
No, Your Honor, because neither SB 253 nor SB 261 are emissions regulation. And that was litigated in a separate proceeding with the motion to dismiss because there were various arguments about extraterritoriality and preemption. And the district court agreed with the state that this is about regulating information. It's about transparency to the market of decision-necessary data about companies that allows investors and others to evaluate risk.

[00:25:03] Speaker 00:
It's also, again, to the other interests, about correcting the sort of inconsistent or incomplete data, which allows companies right now to provide selective emissions disclosures that companies are using to sort of mislead through omission the marketplace. The state has never contended, and it would be incorrect to say that this is an emissions regulation because there's no penalty on a company if they are disclosing that their emissions go up.

[00:25:39] Speaker 00:
There's no penalty on a company tied to whether or not they're a high emitter or a low emitter.

[00:25:48] Speaker 02:
Can I have you turn, Council, before your time runs out, to 261, because I'm concerned on the potential breadth of the disclosures that would be mandated, in particular because in order to comply, the disclosures would have to be very specific and very complete. How is this not calling for companies to express policy views on the impact of climate change, which some would consider to be controversial?

[00:26:17] Speaker 00:
For SB 261, Your Honor, there's no normative view expressed. A risk assessment is a commercial metric and it's not a political one. That a company believes, as an example, that the war in Ukraine will affect their supply chain does not impart a view on the war itself. A company saying we anticipate that our

[00:26:39] Speaker 02:
Well, the devil is somewhat in the details, and that's why I asked the question, right? The way that the statute mandates disclosures in very broad language, complete and specific information, including scenario analysis involving developing strategic plans that are more flexible, robust on a range of plausible future states, and Governance issue, R&D priorities, I don't know how, and it requires not only disclosure of specific metrics and targets may seem a little more factual, describing the board's oversight.

[00:27:16] Speaker 02:
How do you provide the scope of information that seems to be required or mandated by the state without injecting or commenting on your policy views on these issues of climate change? I can't tell what the limits are. So if you say, okay, risk disclosure, what does that really mean when you have to describe and provide scenario analysis?

[00:27:43] Speaker 00:
Yes, Your Honor. The disclosures required under SB 261 are, there are numerous categories, but all of them have to do with whether or not the company has assessed or has done that particular type of analysis, and if so, what that analysis is. It doesn't ask a company either explicitly or implicitly to weigh in on anything that sort of hinges on their normative view of climate policy.

[00:28:14] Speaker 02:
But the discussions, it's hard to see how the discussions and evaluation and analysis wouldn't. involve an expression of normative views on these issues. Let me ask it another way, and maybe this will help me better understand the scope of, or the government's view of the scope of disclosure. How is the information that the companies are required to disclose under 261 the same or different than the types of information that the companies already provide through SEC reports or other securities reporting schemes?

[00:28:51] Speaker 00:
Your Honor, in many instances, it will be quite similar.

[00:28:55] Speaker 00:
The core question of is there a material risk to the company from climate change may produce overlapping disclosures, and we provided examples.

[00:29:06] Speaker 02:
But to the extent it's similar, then why does the state need these additional disclosures to be made in order to mitigate risk to financial transactions? That just seemed very broad and very vague. Very ill-defined.

[00:29:21] Speaker 00:
That's correct. Not ill-defined, Your Honor, but there are categories of disclosure.

[00:29:24] Speaker 02:
In terms of its breadth, right? Correct. So what it takes to comply, how much you have to comment or express your policy views. Your Honor, nothing... Because it just says describe and evaluate. That, to me, is pretty comprehensive.

[00:29:37] Speaker 00:
There are disclosures required under the TCFD protocol, which is integrated into the law, that go beyond what companies may be disclosing in their SEC. For example...

[00:29:50] Speaker 00:
how often the board of the company is being advised about climate risks.

[00:29:58] Speaker 02:
Can you give me a few more examples of the compelled disclosures that would go beyond what would be required in terms of disclosures to the SEC?

[00:30:08] Speaker 00:
Yes, Your Honor, and we've provided example disclosures, voluntary disclosures that have been produced. in the record. Those can be found at 7 SER 1877 and 7 SER 1926, among some other places. There are sort of four main categories of disclosure. The governance disclosures is the example that I was just giving.

[00:30:35] Speaker 00:
One example that you'll see is that our executive management team sets our sustainability and business strategies, approves goals, provides resources to meet performance targets, and has oversight of our sustainability practices, including our approach to climate. Again, it is providing the public with what the company internally has already done or is assessing in terms of how they analyze risk. And the TCFD disclosure that includes these categories, or that selected these categories, was created by sort of industry and investors and rating agencies to identify the information that is most useful to investors and lenders and insurers in determining the overall climate risk.

[00:31:22] Speaker 04:
Like, for example... describing the resilience of the organization's strategy, taking into consideration different climate-related scenarios, including a two-degree centigrade or lower scenario.

[00:31:35] Speaker 00:
Correct, Your Honor. So the company would not need to have done that analysis, but they would need to disclose if they have. And if they have analyzed under a particular scenario that the company faces certain risks to its supply chain, that would be disclosed within the SB 261 disclosure. That this doesn't sort of go over into sort of implicitly endorsing a political position is clear from an example. So if a company believes that climate change is a significant issue, is spending their commercial money investing in political action to address climate change, they may nevertheless have determined that their company does not face material risk from climate change.

[00:32:24] Speaker 00:
And so their disclosure, despite what they're doing and despite their view about climate change being a significant issue facing the society, they might disclose, quote, we do not believe climate change poses a material business risk. So there's no tie, even implicit, between how a company has assessed the impact of climate on the overall financial success of their company or their sort of future thinking and what their political or policy view is.

[00:32:56] Speaker 00:
The TCFD is designed by industry, by companies, by rating agencies and insurers who came together to say, how can we avoid the next financial crisis? What are the things we need to know to determine whether a company is situating itself to respond to potential economic risks, volatility in the market from a pretty significant change in the regulatory landscape, in what consumers might be interested in, in physical impacts to the company, perhaps from increased flooding.

[00:33:33] Speaker 00:
And we do see examples in the disclosures at 6 SER 1714. I have an example disclosure that shows, for example, to avoid the effects of climate-related events impacting our data centers, ServiceNow implements a policy, where possible, of locating our redundant data center pairs with a minimum radial distance of separation to act as a backup. ensuring we can deliver a product to our customer. This is the type of disclosure. It is business-related.

[00:34:04] Speaker 00:
It is risk assessment, which companies are used to doing, and to Judge Nguyen's point, companies are already doing for the purposes of public companies, for the purposes of SEC disclosure. This is both has that close tether to commercial transactions because it's related to the risk assessment of the corporation, And there's a gap in information. There are companies out there saying these things, but they're not doing so in a way that's sort of standardized, complete, from which investors can properly make the assessment.

[00:34:39] Speaker 00:
And in fact, we have on the record statement that investors are spending sometimes millions of dollars attempting to fill the gaps and reverse engineer this climate emissions for SB 253 and climate risk for SB 261 information. But such costly attempts are not accurate or reliable. with the information that is currently on the marketplace.

[00:35:06] Speaker 00:
I see that I'm running low on time.

[00:35:08] Speaker 02:
Let me ask you this, counsel, to the extent that, assuming we haven't discussed the case, so I don't know how the panel is going to go, but to the extent that there's concern on the scope three admission disclosure requirements, should we send it back for severability analysis? Did you advance a severability analysis below or argument below?

[00:35:29] Speaker 00:
Yes, Your Honor. I would think it would be appropriate to allow the district court to reevaluate that if that's how the panel proceeds. I'll just note in closing that the district court's conclusion that each law serves a substantial state interest in providing California investors, lenders, and other stakeholders with information allowing them to accurately price risk is supported by voluminous factual findings, and it's well within that court's reasonable discretion on the basis of those facts.

[00:36:00] Speaker 00:
Thank you, Counsel.

[00:36:12] Speaker 01:
The State has framed its argument almost exclusively in terms of purported investor interest or potentially investor risk. There was scarcely a mention of consumer interest, much less the State's purported interest in reducing emissions.

[00:36:28] Speaker 01:
I'll come to that in a moment, and I want to begin by making clear that even supposing the state were able to establish that this is commercial speech, it simply could not place this within the Zadarer framework because that very loosely defined description of what the transaction was that you heard from the state's counsel doesn't fit the Zadarer requirement that compelled speech be provided in the commercial speech, which is what NIFLA says. In the commercial speech, this is not speech required at the time that an advertisement is being placed.

[00:37:02] Speaker 01:
It's not even speech being required when you present your product to a customer, as in the CTIA case. Instead, regardless of any transactions or any products, it has to go on your website. It has to be publicly reported with no connection to any transaction. That can't meet the nexus and context requirement required for Zauderer. In NIFLA, the Supreme Court said that in Zauderer, if the speech required there had not been in an advertisement, it would have been unconstitutional.

[00:37:32] Speaker 01:
And the speech here is not being required as part of an advertisement, nor in the presentation of a product. Even supposing that Zauderer were applicable here in any event, the state would need to show that the disclosures required by 261 are no more extensive than reasonably necessary.

[00:37:51] Speaker 01:
and for 253 as well. The governor, when he signed 253, said, this is too much. He said, this is costly. And Judge Wynn, in answer to your question, there's evidence to the record, scope three and two are extraordinarily costly, millions of dollars at times for individual companies. And the SEC's is the agency that's entrusted by Congress to regulate investor interest. The SEC took a look at this very issue.

[00:38:22] Speaker 01:
It adopted a rule that, although quite problematic and itself constitutionally suspect, did not go nearly as far as the laws required here. So how can 253 and its costly GHG disclosures that the governor himself condemned in signing the law be no more extensive than necessary under his outerer, much less meet the higher standard. The securities laws and commercial speech regulation requires that there be a harm which is going to be addressed.

[00:38:57] Speaker 01:
fraud, deception, the state has not identified that real harm, nor has it shown, as it has to do under Central Hudson, that the requirements here will materially advance the harm that they've identified as a real harm. They simply have not explained those fundamental requirements. What's quite striking is that the state time and again expressed the need for 261 in terms of investor interest.

[00:39:29] Speaker 01:
They did not talk about the materiality of this to investor decisions, which is a core consideration when you're talking about protecting investors. If you're going to be no more extensive than necessary, you're going to require materiality.

[00:39:42] Speaker 02:
Well, investor interest and informational asymmetry is the other big one.

[00:39:46] Speaker 01:
Well, Your Honor, and that was raised in the Pharma case where the court said there was going to be unfairness in transactions because proper information regarding specific transactions wouldn't be disclosed. If investors' interest in having additional information were sufficient to compel speech, there would be no end. There is no limiting principle. Judge Nguyen, in your dissent, In the American beverage case, you said, no, Zauderer should be limited to correcting deceptive disclosures.

[00:40:20] Speaker 01:
If we go beyond that, we are going to have a proliferation of laws infringing speed with only a tenuous connection to legitimate state interests.

[00:40:32] Speaker 01:
Court, nonetheless, extended its outer, but nowhere nearly as far as this, and what you predicted in that opinion is what you see here. Mere interest, customer curiosity, which this court has already rejected, is being given as the reason. And last point, the state has said, well, different companies are saying different things. It's inconsistent. That is not just an improper basis for state regulation. It's chilling. We have a marketplace of ideas. That is free speech. Different companies can say different things. They have not carried their burden to show that they can infringe and compel speech in that way as required under this court's precedence and those of the Supreme Court.

[00:41:11] Speaker 02:
All right. Do you have any additional questions?

[00:41:15] Speaker 02:
Thank you very much, counsel, to all counsel for your very helpful arguments in this challenging case. The matter is submitted and we'll issue our decision in due course.

[00:41:24] Speaker 02:
That concludes today's calendar and the argument for the week, so court is adjourned.