WASHINGTON — Nike Inc. experienced a legal setback Thursday that could eventually signal a new era in corporate-speak when the U.S. Supreme Court dismissed a case in which the activewear company sought free-speech protections for its defense against sweatshop allegations.
The case was widely watched for its potential implications on consumer product manufacturers, advertisers, public relations and media firms, and their First Amendment rights.
A majority of justices on the court said they didn’t have enough information about the facts in the Nike case, which never made it to trial, and thus they shouldn’t have agreed to hear the matter in the first place. It now goes back to a California trial court where in 1998 a judge sided with the world’s largest sneaker maker and dismissed the matter brought by San Francisco activist Marc Kasky.
At issue is whether Nike, in defending antiglobalization critics, misrepresented working conditions at its Southeast Asian contractors in press releases, letters to the editor and advertorials and thus violated California’s strict law regulating unfair competition and false advertising.
Nike has argued its defense of its corporate practices should be protected by the First Amendment and treated differently from commercial speech, like what is said about the nature of its products in advertising.
The Supreme Court dismissed the Nike case in a one-sentence declaration. However, three of the six justices who agreed to turn back the case appeared to find some merit in Nike’s free speech protection claims.
“This case presents novel First Amendment questions because the speech at issue represents a blending of commercial speech, noncommercial speech and debate on an issue of public importance,” wrote John Paul Stevens, with Justices David Souter and Ruth Bader Ginsburg concurring.
The three justices who voted to proceed with the case, Sandra Day O’Connor, Anthony M. Kennedy and Stephen Breyer, wrote there was enough information to base a decision and expressed some urgency to do so. Writing for the minority, Breyer said he could “find no good reason for postponing a decision in this case. And given the importance of the First Amendment concerns at stake, there are strong reasons not to do so.”
Breyer noted that the wide-ranging group of companies and concerns supporting Nike’s position with court briefs, including organized labor, 40 media companies and the American Civil Liberties Union, reflected “a famous sentiment in the writing of Voltaire: ‘I do not agree with what you say, but I will fight to the end so that you may say it.’”“A case that implicates that principle,” Breyer wrote, “is a case that we should decide.”
Bruce Raynor, president of apparel union UNITE, said, “They ought to have to stand trial on the facts that they have falsely been saying they have been monitoring their factories when they haven’t, they have falsely been saying they paid workers in China and Vietnam a living wage when they haven’t, they have falsely been saying they guarantee freedom of association when they don’t. They should be made to stand trial when they make those claims. I look forward to the trial.”
Kasky, the activist, sued Nike after reading in the New York Times about a leaked 1997 Ernst & Young audit, commissioned by the company, which found employees in a large Vietnam contractor were exposed to cancer-causing toulene and suffered a high rate of respiratory ailments. Kasky saw the audit as contradicting Nike’s claims of addressing conditions at its contractors, and sued under state truth-in-advertising rules.
However, a state trial court judge sided with Nike and dismissed the case. Kasky appealed, but a state appeals court also sided with the company.
Kasky appealed again to the California Supreme Court. That court rejected Nike’s First Amendment defense and ordered the Kasky lawsuit to proceed. In siding with Kasky, the state justices drew no distinction between a company’s rebuttal of critics and product advertising.
“Its intended audience was primarily the buyers of its products,” the court’s majority concluded. Nike then appealed the case to the U.S. Supreme Court.
Both sides found something good to say about the high court, which after hearing arguments in late April and reading stacks of briefs in the case, decided not to issue an opinion.
“We have some good language in the opinion,” said Jim Carter, general counsel at Nike, in a conference call from the firm’s Beaverton, Ore., headquarters. The justices “are having real difficulty calling this pure commercial speech…that is helpful to us [as the case proceeds].”
Marc Caplan, an attorney for Kasky, said he is pleased the case will finally go to trial. Caplan said, “Maybe the business community will wake up and realize that all corporations should be held to a high standard of representing the truth to consumers. If someone is speaking about how their product is made and they’re speaking to a commercial audience for the purpose of selling their product, what they say has to be true. It’s a simple test. It’s really not an earth-shattering concept.”Meanwhile, the field of corporate communications and public relations awaits further legal action that could ultimately be precedent-setting. Some think the outcome could have a chilling effect on corporate speech, making executives reluctant to say anything that hasn’t been vetted by counsel and slowing down a company’s response to crises and public attacks. Others counter that most executives will refuse to stand still and watch their brand and corporate image take hits.
“Companies will be less apt to spring to an immediate defense,” said Howard Rubenstein, president of the public relations firm that bears his name. “I think you’ll find a rise in the crisis and litigation defense fields. Public relations firms are going to insist on being held harmless with any company they deal with and they will insist on the ceo signing off on what they do. The free-swinging defense of a company will be subdued and you might find that answers to any claims against a company — sweatshop abuses, say — might not be done in a timely way. Even then, with the delay, the image of a company will be damaged.”
Eben Moglen, a professor of law at Columbia University, said: “The relationship between corporations like Nike and the public is essentially too complex to be addressed solely on the basis of this, whatever this turned out to be. Nike is a…21st century company. It doesn’t make anything. Nike is solely an image. What Nike says is the only thing Nike does. From their point of view, how they talk about themselves is the only thing they have and how society talks back to them is the only way their value changes.”
Bob Liodice, president and ceo of the Association of National Advertisers, said his group “and others in the business community will now turn our focus to the proceedings in the state courts to do everything we can to protect the First Amendment rights of all commercial speakers. Companies should be free to voice their opinions through p.r. or advertising on major issues that impact their business.”
Bruce P. Keller, an attorney representing the Council of Public Relations Firms and other p.r. concerns who filed a friend-of-the-court brief supporting Nike, said that, with no decision in the case, a chilling effect will linger among corporations about how to defend themselves against critics without risking Kasky-like lawsuits.“However, Keller took solace in the court’s action because, in his view it “didn’t, in any way, shape or form, endorse Kasky’s view.” He added, “Now we’re just going to have to wait for the next case to reach the Supreme Court to get further guidance on just how chilling lawsuits like Kasky’s will ultimately be.”
A Nike spokesman, in the conference call, said the company continues to be watchful about its public discourse in light of the case and last year decided not to release its Corporate Responsibility Report. He said, “There is still a very open question whether we can go forward and issue that report.”
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