May 3, 2002
PR Campaigns Lose Speech Protection: In 4-3 vote, state Supreme
Court says Nike can be sued over its corporate policy statements.
By Mike McKee
The Recorder PR Campaigns Lose Speech Protection In 4- 3 vote, state
Supreme Court says Nike can be sued over its corporate policy statements
By MIKE MCKEE RECORDER STAFF WRITER In a ruling that's sure to send
a chill wind down Madison Avenue, the California Supreme Court ruled
Thursday that companies can be sued for false advertising over policy
statements made in public relations campaigns.
Voting 4-3 in a case involving Nike Inc., the justices, relying
on U.S. Supreme Court case law, said statements by the Oregon-based
shoemaker denying allegations that some overseas factories are sweat-shops
were a form of commercial speech not protected by the First Amendment.
"Because in the statements at issue here Nike was acting as
a commercial speaker, because its intended audience was primarily
the buyers of its products and because the statements consisted
of factual representation about its own business operations,"
Justice Joyce Kennard wrote, "we conclude that the statements
were commercial speech for purposes of applying state laws designed
to prevent false advertising and other forms or commercial deception."
The court's ruling did not decide whether Nike's ads were false
or misleading, instead leaving that for the trial court, which had
sided with Nike at the demurrer stage.
Chief Justice Ronald George and Justices Kathryn Mickle Werdegar
and Carlos Moreno concurred with Kennard.
Justices Ming Chin, Marvin Baxter and Janice Rogers Brown sharply
dissented, accusing the majority of trammeling on constitutional
freedoms by effectively silencing one party to the debate.
"Handicapping one side in this important world-wide debate
is both ill considered and unconstitutional," Chin wrote. "Full
free speech protection for one side and strict liability for the
other will hardly promote vigorous and meaningful debate."
Ann Brick of the ACLU, which filed an amicus brief in the case
on Nike's behalf, said the majority's analysis was "very disappointing."
"It essentially shuts business speakers out of the public
debate on any issue that directly affects them. That kind of analysis
is absolutely antithetical to the basic First Amendment principle
that we let the people, not the government, decide who's right and
who's wrong on an issue of public dispute."
Kasky v. Nike Inc., 02 C.D.O.S. 3790, began when Marc Kasky filed
a private attorney general action claiming that Nike violated California
laws prohibiting unlawful business practices and false advertising
by issuing press statements refuting claims that workers in Nike's
Southeast Asian factories toiled in slave-like conditions. Kasky
said those statements were deliberately deceptive.
Two years ago, San Francisco's First District Court of Appeal agreed
with the trial court and tossed the case, saying that Nike's public
relations campaign was protected because it was non-commercial speech
that dealt with a topic of great public interest.
Several groups filed amicus curiae briefs with the court, and the
dispute resulted in some odd bedfellows: the conservative Pacific
Legal Foundation, for example, stood alongside the ACLU in backing
In reversing the appeal court, the Supreme Court fashioned a "limited
purpose test" aimed at helping trial court judges determine
whether allegedly false advertising is commercial, as opposed to
non-commercial, speech. The speaker must be someone engaged in commerce,
the majority held, the intended audience should be actual, or potential
customers, and the content of the message must be commercial in
Even under the new test, Chin wrote in his dissent, Nike should
"Nike's speech, in an attempt to influence public opinion
on economic globalization and international labor rights and working
conditions, gave the public insight and perspective into the debate,"
he wrote. "This speech should be fully protected as 'essential
to free government.'"
The majority saw otherwise, saying Nike had stepped across a fine
"To the extent Nike's speech represents expression of opinion
or points of view on general policy questions such as the value
of economic 'globalization,' it is noncommercial speech subject
to full First Amendment protection," Kennard wrote. "Nike's
speech loses that full measure of protection only when it concerns
facts material to commercial transactions here, factual statements
about how Nike makes its products."
The difference in treatment is justified, she held, because commercial
speech which is more readily verifiable by its speaker and more
"hardy" than non-economic speech can be effectively regulated
to suppress false and actually or inherently misleading messages
without undue risk of chilling debate."
In her separate, 30-page dissent, Justice Brown making references
to Harry Potter, Lord of the Rings, and King Arthur's Court -said
Nike's statements should have been protected because the commercial
and non-commercial aspects were "inextricably intertwined."
"Nike's commercial statements about its labor practices,"
she wrote, "cannot be separated from its non-commercial statements
about a public issue, because its labor practices are the public
Brown also called on the U .S. Supreme Court to re-examine its
60-year-old position on commercial speech, saying the court's current
doctrine "fails to account for the realities of the modern
world -a world in which personal, political and commercial arenas
no longer have sharply defined boundaries."
Coming up with any such new doc- trine, she commented, might require
"Unfortunately," she added, "Merlin and Gandalf
are busy, so the United States Supreme Court will have to fill the
Nike's attorney, David Brown of Brobeck, Phleger & Harrison,
said it was likely his client would seek review at the U.S. Supreme
Court. As for the grounds, he said: "They're well expressed
in the two dissents."
Deborah La Fetra of the Pacific Legal Foundation said the majority
ruling could set "a very bad policy of dampening debate on
really important public issues."
"What this decision means," she added, "is that
one side of the debate gets full free speech protection, but a corporation
trying to defend itself is subject to strict liability."
Alan Caplan, one of the plaintiffs lead attorneys, saw a different
message in Thursday's ruling. "Every company is going to have
to meet the standard now," the Bushnell & Caplan LLP
partner said. "If you're going to put statements out about
[corporate policies], you're going to have to tell the truth."