Nike brings commercial speech to Supreme Court

From the Spring 2003 issue of The News Media & The Law, page 25.

By Wendy Tannenbaum

Marc Kasky does not own Nike shoes and probably never will, his lawyer told the U.S. Supreme Court last month. But Kasky has a bone to pick with the giant sports apparel company, and he wants to litigate his grievances on behalf of the general public before a California court.

Kasky, a consumer activist in San Francisco, sued Nike in 1998, claiming the company misled the public about labor conditions for its Vietnamese, Chinese and Indonesian workers. The lawsuit alleged that Nike’s Asian laborers endured sweatshop conditions, working excruciating days for unlivable wages and enduring physical and sexual abuse.

But the legal issue debated before the Supreme Court on April 23 was not about employment practices. It was about free speech.

In the mid-1990s, Nike began to suffer public criticism over allegations about sweatshops in Asia. The company fought back, launching a large publicity campaign aimed at clearing the company’s reputation. As part of the campaign, Nike issued press releases, posted statements on its Web site, and sent out letters and pamphlets denying the charges.

Taking advantage of an unusual California business fraud law, Kasky sued the company for false advertising. Acting under the statute as a “private attorney general” on behalf of the public, he identified six statements from Nike’s publicity campaign that he said misled the public.

Nike shot back with a motion to dismiss the lawsuit, claiming the company had a First Amendment right to speak out about its business practices without fear of being sued. Nike claimed its statements fell into the category of pure, political speech, which is generally protected from federal or state regulation.

The trial court and an appellate court decided that the case should be dismissed, but the California Supreme Court disagreed. In May 2002, the state high court held that Nike’s statements could constitute business fraud under the state statute if the statements were misleading. The court’s decision treated Nike’s statements as “commercial speech,” a form of speech that has been granted less protection than political speech by the U.S. Supreme Court.

In January, when the high court agreed to hear the case, corporations, activists, scholars and media advocates geared up for what some say could be the Court’s most important free-speech decision in years.

“Not since New York Times v. Sullivan has this Court been confronted with a lower court ruling as profoundly destructive of free speech,” wrote Harvard legal scholar Laurence Tribe in a brief for Nike. He said California’s business fraud law, which punishes corporations for responding to allegations of misconduct, has an “extraordinary chilling effect” with “profoundly harmful consequences.”

“Nike, Inc. v. Kasky promises to clarify the line between commercial speech and other forms of expression by merchants and entrepreneurs,” wrote Pepperdine University law professor Bernard James in an article previewing the case. “Assuming the Court agrees to reach the merits of the case, the justices must decide whether public relations statements regarding the business interests of a corporation are subject to ordinary commercial speech regulations.”

The case attracted friend-of-the-court briefs from 39 different groups and coalitions, including one composed of 40 media organizations.

The media amici, which included The Reporters Committee for Freedom of the Press, argued that removing protections from speech by companies engaged in public controversies will inhibit the news media’s ability to cover these topics.

“The California Supreme Court’s decision — which for the first time treats press releases, letters to the editor, and other types of submissions to the press as ‘commercial speech’ that is subject to consumer protection law — seriously jeopardizes the media’s ability to report on important issues regarding corporate America,” wrote Bruce E.H. Johnson, the attorney who represented the media coalition.

Stripping businesses of First Amendment protection, the media argued, will deter business employees from speaking to the press, which ultimately will result in one-sided and narrow coverage of important corporate issues. Moreover, if journalists consistently receive “no comment” responses from corporate executives, they are likely to refrain from covering such issues at all.

In the media’s brief, Johnson listed a number of important public issues involving corporations that would not be brought to light if businesses were forced to refrain from speaking. Among the recent events used as examples were a controversy in Oregon over companies’ labeling of genetically engineered foods, a spate of accidents involving Ford Explorers and Bridgestone/Firestone tires, and debates regarding corporations’ environmental practices.

“If the decision below is not reversed,” Johnson wrote, “business representatives will be deterred from speaking to the press about these and other public issues. This chilling effect will deprive the public of access to important news stories and the clash of competing viewpoints that undergirds the First Amendment.”

The media amici said some businesses already have begun to decrease their communications with the press. According to their brief, corporate employees at several companies are currently being advised not to defend themselves to the media when their companies come under attack.

The media coalition urged the Court to reaffirm its previous definition of “commercial speech” set forth in the case Pittsburgh Press Co. v. Pittsburgh Commission on Human Relations. That case treated as “commercial” only that speech, such as traditional product advertising, which “does no more than propose a commercial transaction.”

At oral arguments on behalf of Nike, Tribe argued that regardless of the wording the Court chooses to define “commercial speech,” the statements Nike made in the mid-1990s did not fall in that category. He said Nike’s statements about its foreign labor were motivated not by a desire to sell sneakers but by a need to participate in a “lively political dialogue about the realities of the third world and Nike’s role in it.”

Kasky’s lawyer, Paul R. Hoeber, said Nike had simply been “making representations to consumers about its own practices for the purpose of convincing those consumers that they should buy the company’s products.” Those representations, motivated by economic interests, were “commercial speech,” he told the Court.

Several of the justices voiced concern that creating a definition of “commercial speech” that allowed companies to participate in public debates without fear of liability would be extremely hard.

“If it’s very difficult to define commercial speech, then isn’t it true that under this scheme companies are chilled in speaking?” Justice Anthony Kennedy asked.

“I don’t think anyone would say defining commercial speech is easy,” Hoeber conceded.

Hoeber said it would be wrong to limit “commercial speech” to pure advertising, because such a definition would leave out “a lot of promotions and a lot of communications that consumers rely on.”

“It’s not a perfect world,” commented Justice Antonin Scalia.

Justice Clarence Thomas, who did not speak during oral arguments, has argued in the past that there is no legal justification for the “commercial speech” distinction. He wrote in a 1996 case, 44 Liquormart, Inc. v. Rhode Island, that he does “not see a philosophical or historical basis for asserting that ‘commercial’ speech is of ‘lower value’ than ‘noncommercial’ speech.”

The justices might find a way to pass on defining “commercial speech.” At oral argument, they spent a significant amount of time asking the attorneys about procedural considerations concerning the Court’s ability to hear a case that has not gone to trial and the plaintiff’s standing to sue for false advertising.

Several of the justices seemed particularly interested in the validity of a provision in California’s false advertising statute that allows any private individual to bring suit as a “private attorney general” acting on behalf of the general public.

U.S. Solicitor General Theodore B. Olson, who was given ten minutes in court to argue the executive branch’s position in the case, said the state law gives individual plaintiffs like Kasky too much power to advance their own agendas in court. He said allowing a citizen who has suffered no injury to bring suit on behalf of the public violates the U.S. Constitution.

Justice Ruth Bader Ginsburg voiced concern that the case was not ripe for review.

“The problem with this case is that it comes to us at such a preliminary stage,” she said.

Tribe disagreed. He said forcing the parties to go to trial would be “making the courts pawns in a public debate.” Any trial in the case would amount to nothing more than a “show trial” for Kasky and his supporters, he said.

If the Court decides that some aspect of the case involved a technical defect, it could order dismissal of the suit without confronting the First Amendment issue.

Media attorney Johnson, who attended the oral arguments, said he is “reasonably optimistic” that the Court will not dismiss the case on procedural grounds and will rule in favor of Nike. He said predicting a decision from the tone of the justices’ questioning at arguments is always difficult, but he sensed enough skepticism of Kasky’s position from the Court to hope for a media-friendly outcome.

Johnson said that in his experience with the Supreme Court, the justices have shown special sensitivity to cases involving the potential violation of free speech rights and have not allowed important questions to languish unresolved.

An editorial in the Washington Post, which agreed with the media’s friend-of-the-court brief in Nike, advocated reversal of the California decision: “The way to deal with corporate spin or even overt corporate lies is not to haul companies into court but to encourage aggressive scrutiny of corporate claims by journalists, public interest activists and other citizens. This is just what was happening in the Nike debate. It would be ironic if that debate produced a precedent under which future give-and-take over corporate conduct could no longer take place.”

A decision in the case is due by the end of the Court’s term in late June.