USA – CALIFORNIA Trends and Developments Contributed by: Bahram Seyedin-Noor, Jared Kopel, Joshua Korr and Monica Eno, Alto Litigation
ic pressure on companies to “encourage” them to conform their behavior to the political wishes of the State” (Complaint at 04:18-21). Plaintiffs also argue that the laws violate the Dormant Commerce Clause of the US Constitution and are precluded by the federal Clean Air Act. At the time of writing, the parties’ dispositive motions are submitted and await the court’s ruling. Meanwhile, on 27 September 2024, California Governor Gavin Newsom signed SB 219, which made a number of amendments to both SB 253 and SB 261. Most notably, SB 219 delays until 1 July 2025 the deadline for the California Air Resources Board (CARB) to implement regula- tions for SB 253. SB 219 also grants the CARB discretion with regard to setting disclosure deadlines for Scope 3 emissions, which the US Environmental Protection Agency describes as “the result of activities from assets not owned or controlled by the reporting organi[s]ation, but that the organi[s]ation indirectly affects in its value chain”. To the extent California’s laws survive challenge, they are expected to spawn new lawsuits by reg- ulators and private plaintiffs alike. These actions may be divided into two categories, as follows. • First, plaintiffs will allege that the company misstated or omitted material facts concern- ing climate-related risks, including potential regulation. This has already been seen at the federal level. By way of example, the SEC charged Vale SA (a publicly traded Brazil-based mining company) with making materially false and misleading statements about the safety of its dams prior to the 2019 collapse of a dam that killed 270 people. In March 2023, Vale SA agreed to settle the action by paying USD55.9 million in disgorge- ment, prejudgment interest, and penalty (SEC
v Vale SA, Case No 22-cv-2405 (EDNY 28 April 2022)). In a private securities class action, plaintiffs accused Exxon Mobil Corp of misleading inves- tors about the company’s proxy carbon costs – a toll that internalises the environmental, social and economic costs of emitting one met- ric tonne of carbon dioxide. Although the claim survived a motion to dismiss, the federal court denied a motion for class certification, holding that defendants had rebutted the presumption of reliance through evidence showing that there was no statistically significant negative market reaction to the alleged corrective disclosure (Ramirez v Exxon Mobil Corp, 2023 WL 545315 (ND Tex 21 August 2023)). • The second category of lawsuits entail allega- tions that a company materially exaggerated its commitment to environmental standards and policies – a policy sometimes called “greenwashing”. In October 2024, the SEC charged investment adviser WisdomTree Asset Management Inc (“WisdomTree”) with “making misstatements and for compliance failures relating to the execution of an invest- ment strategy that was marketed as incorpo- rating ESG factors”. Despite WisdomTree’s representations in prospectuses that three ESG-marketed exchange-traded funds would not invest in certain companies or activities, the SEC found that these funds invested in companies involved in activities such as coal mining, natural gas extraction, and retail sales of tobacco products. Without admitting or denying the SEC’s findings, WisdomTree agreed to a cease-and-desist order and cen- sure and to pay a USD4 million civil penalty. In September 2024, the SEC charged Keurig Dr Pepper Inc (“Keurig”) with making inac-
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