Supreme Court agrees to consider Nike commercial-speech case

Monday, January 13, 2003

After years of equivocating over the meaning and value of commercial speech, the Supreme Court has added to its docket a case that could force it to give commercial speech a narrower definition or else broader First Amendment protection.

On Jan. 10, the Court agreed to review Nike Inc. v. Kasky, an appeal of a controversial California Supreme Court ruling that said the athletic shoe company could be sued for false advertising for the statements it made seven years ago in defense of its labor practices.

After news reports and columnists accused the company of tolerating sweatshop conditions at the Asian factories where its shoes are made, Nike fought back with press releases, advertisements and letters to the editor that refuted the allegations.

California activist Marc Kasky sued Nike over its responses, invoking state laws that prohibit false or misleading advertising and fraudulent business practices. Nike replied that its statements in the debate over its labor practices were completely protected by the First Amendment.

But the California Supreme Court sided with Kasky, finding that Nike’s statements fit the U.S. Supreme Court’s definition of commercial speech because they were aimed at affecting the buying choices of potential customers. “Speech is commercial in its content if it is likely to influence consumers in their commercial decisions,” the California ruling stated. “For a significant segment of the buying public, labor practices do matter in making consumer choices.”

Having defined the Nike statements as commercial speech, the California court said there was no First Amendment bar against applying the business fraud laws to the statements. Under the U.S. Supreme Court’s precedents, commercial speech is accorded less than full constitutional protection, though the precise level is under debate. If Nike’s speech had been defined as noncommercial, there is little question that it would be immune from being sued under the business fraud laws.

Nike, joined by news media, business and public relations organizations, was alarmed by the state court ruling and asked the Supreme Court to overturn it. If California’s definition is allowed to stand, they argued, then corporations would be chilled from participating in policy debates out of fear of being sued. “Not since New York Times v. Sullivan has this court been presented with a lower court ruling as profoundly destructive of free speech,” wrote Harvard Law School professor Laurence Tribe in the brief for Nike.

“No company should feel impeded from engaging in the marketplace of ideas just because they operate in the marketplace of goods,” said Walter Dellinger, another of Nike’s lawyers, in a statement on Jan. 10.

In its brief, Nike reminds the Supreme Court that in its most recent cases, the Court has defined commercial speech as “speech that does no more than propose a commercial transaction.” Nike argues, “This is not a close case. Whatever the exact margins of the category of ‘commercial speech’ subject to lesser First Amendment protection, the statements at issue here fall well outside them.” It would have been impossible to respond to the activists’ allegations, Nike claims, without mentioning its products, but that does not transform the responses into commercial speech.

Nike’s second main argument is that, even if its statements are classed as commercial speech, the First Amendment bars using the California laws against them for other reasons. Noting that Nike’s accusers were fully protected by the First Amendment, the company claims that the California ruling amounts to impermissible discrimination on the basis of viewpoint. Quoting from the Supreme Court’s 1992 ruling R.A.V. v. St. Paul, Nike claimed that the California ruling had permitted “one side of a debate to fight freestyle, while requiring the other to follow Marquis of Queensberry rules.”

Nike stops short, however, of asking the Supreme Court to broaden First Amendment protection for commercial speech and place it on the same constitutional plane as noncommercial or political speech, deserving the full shield of the First Amendment. But based on past rulings, it seems possible that Justice Clarence Thomas will use the case to do just that, especially because the statements at issue clearly have political as well as commercial content. Thomas has argued that there is no reason to distinguish between commercial and noncommercial speech.

More than 30 news media organizations joined Nike in seeking high court review, asserting that the California ruling “poses a serious and immediate threat to the media’s ability to report on important issues regarding corporate America.” The brief was authored by Bruce Johnson of the Seattle firm Davis Wright Tremaine. Citing recent stories ranging from the role of soft drinks in causing obesity to the rollovers of Ford Explorers with Firestone tires, the news media groups say “there can be no doubt … that Kasky threatens to transform the way that the media report on a vast array of public issues.” Companies, fearing lawsuits, will either not comment on such stories or respond with “only bland, indisputable claims.”

Kasky’s response to the Nike claims is that in fact, the company’s statements about its labor practices fit the definition of commercial speech every bit as much as any advertisement for its shoes. “Nike’s statements proposed commercial transactions by conveying to consumers that they should buy its athletic shoes because, for example, the shoes are made by factory workers whose working conditions comply with applicable local laws,” wrote Paul Hoeber of San Francisco, Kasky’s lawyer.

Hoeber also argued in his brief that because Kasky’s suit had not gone to trial before the California Supreme Court ruled, the dispute was not yet ripe for review by the U.S. Supreme Court. By agreeing to consider the case, the high court implicitly rejected that argument and underlined the importance of dealing with the California ruling sooner rather than later. The case is to be argued in April, with a decision due by the end of June.

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