High court appears ready to side with Nike in free-speech dispute

Thursday, April 24, 2003

WASHINGTON — The case of Nike, Inc. v. Kasky, once viewed as a potential landmark in the battle to expand the free-speech rights of corporations, may instead end in a meaningful but narrow victory for Nike without broad implications for commercial speech.

At the end of 70 minutes of oral argument yesterday, the Supreme Court appeared ready to agree that under the First Amendment, Nike should not be subjected to a lawsuit by California activist Marc Kasky, who claims that the company’s defense of its global labor practices amounted to false advertising.

But it was less clear whether such a ruling would protect companies in the future from challenges by government agencies — or by individuals who claim they were harmed — for statements they make in political debates with commercial overtones.

Much of the argument was devoted to the oddities of the California law, which in effect gives private citizens like Kasky the power to become a “private attorney general” and to challenge corporations’ commercial practices without having to show they suffered any harm.

“Is anyone in California hurt by this?” asked Justice Anthony Kennedy at one point. Justice Stephen Breyer suggested that this problem could be cured by finding someone in California who bought Nike sneakers in reliance on the company’s statements — enough “harm” to support a tort claim. If that person sued instead of Kasky — who never contended that he was harmed — Breyer implied the lawsuit would be on firmer footing.

Justices also expressed concern about the peculiarities of the California Supreme Court ruling that triggered Nike’s appeal. Though the California court ruled that Nike’s public relations campaign amounted to commercial speech, no trial has yet been held to weigh the statements Nike made. “There has been no trial, no narrowing,” said Justice Ruth Bader Ginsburg. “It comes to us at such a preliminary stage.”

The Nike case, with its implications for the current debate over globalization, as well as its First Amendment significance, drew widespread attention. Protesters outside the Court building attacked the athletic apparel maker by displaying a large mock-up of a Nike shoe trampling on the Constitution. The Court itself appeared unusually interested in the case, with Chief Justice William Rehnquist announcing at the start that each side would have an extra five minutes to argue, on top of the customary 30 minutes.

Anti-globalization groups criticized Nike, among other large companies, in the late 1990s for what were described as sweatshop conditions in its factories worldwide. When Nike fought back with a public relations campaign — including letters to the editor, op-ed columns, image advertisements and written reports — Kasky invoked state laws against commercial fraud in challenging Nike’s statements. Consumer advocacy groups joined Kasky, fearing that a ruling against him would insulate companies from accountability for claims they make in advertising.

Companies, media organizations, and the Bush administration joined Nike in challenging the California ruling. Some First Amendment advocates expressed hope that the case would be a vehicle for expanding corporate free-speech rights. But yesterday, it appeared the Court was no closer than it has been in the past to expanding or even clearly defining the category of corporate noncommercial speech that deserves full First Amendment protection, as opposed to commercial speech or advertising, which gets less protection. The lack of a final judgment in the case from the California courts also seemed to be a possible obstacle to a broad ruling from the Supreme Court.

“If they get through the jurisdictional thicket, I think Nike wins,” said Ronald Collins, a scholar at the First Amendment Center in Arlington, Va., who attended the argument. “But I am not sure I see five votes for any one rationale, which could mean that commercial-speech doctrine will get muddier, not clearer.”

Nike’s lawyer in the case, Harvard Law School professor Laurence Tribe, told
the Court that the company’s statements “don’t come close” to commercial speech, since they were made in connection with a “lively political dialogue” and mentioned products only incidentally. Asked about a letter sent by Nike to school athletic directors, who make purchasing decisions about athletic equipment, Tribe said that came the closest to commercial speech, but he added that Kasky “doesn’t have standing to sue for athletic directors.” California has improperly given Kasky a “free-floating power to correct speech,” Tribe said.

This aspect of the California law was also underlined by Solicitor General Theodore Olson, who also argued on Nike’s behalf. The last time Olson and Tribe argued in the same case before the Supreme Court, they were on opposite sides of the Florida presidential election dispute in 2000.

Olson said that California consumer-protection laws allow “unelected, unaccountable private enforcers” to sue companies at random. He also said anyone with a whim or grievance against a company could become a “government-licensed censor.”

But Olson, protecting the prerogatives of the Federal Trade Commission which has the power to regulate advertisers, also implied that government agencies could have used Nike’s statements as the foundation for an enforcement action.

Kasky’s lawyer, Paul Hoeber of San Francisco’s Bushnell, Caplan & Fielding, readily acknowledged to the Court that his client had never bought Nike sneakers “and never will.” As a result, Hoeber said, Kasky’s suit would not have met federal standards as a viable suit, but under California law it was permitted.

Hoeber insisted that Nike’s statements amounted to commercial speech that makes verifiable claims about its products. The Nike statements are about “what is going on in the shoe factories,” said Hoeber, which is not the same as “debate over larger issues.” Chief Justice William Rehnquist responded by expressing doubt about whether the distinction Hoeber made is significant “for First Amendment purposes.”

Hoeber did not fare well during one portion of the oral argument, when Breyer proclaimed that Nike’s campaign was a combination of both commercial and noncommercial speech. Nike was trying to “sell products” as well as to contribute to an important “public debate,” Breyer said. Hoeber started to respond that to protect consumers, the Nike campaign should be regarded as commercial speech. Breyer asked, sounding skeptical, “That trumps the First Amendment?”

Kennedy then intervened to ask whether the Court had ever upheld a statute that “chilled speech.”

Hoeber replied, “Oh, yes,” but when Kennedy asked him to name a case, Hoeber paused for a long time and finally said, “You caught me there.”

Tony Mauro covers the Supreme Court for American Lawyer Media and is a legal correspondent for the First Amendment Center.

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