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Nike Takes Ad Liability Case to High Court

In arguing its appeal of a California ruling, the shoe firm claims full free-speech rights in advertising without fear of being sued for false or misleading statements.

October 15, 2002|David G. Savage | Times Staff Writer

WASHINGTON -- The Supreme Court was urged Monday to give California businesses full free-speech rights to defend themselves and their business practices without fear of being sued.

Lawyers for Nike Inc. appealed a 4-3 ruling by the California Supreme Court in May that said the Oregon-based maker of athletic shoes could be held liable for false and misleading statements that appeared in advertisements, press releases or newspaper opinion columns.

They said California was the only state that had stretched its law against false advertising to include private suits that attack a company's public statements.

Harvard law professor Laurence Tribe and former Clinton administration Solicitor Gen. Walter Dellinger filed the appeal on Nike's behalf, portraying the case as a potential landmark in 1st Amendment law and in the fight over globalization.

They said companies that are attacked over their business practices should be entitled to vigorously defend themselves.

"Uttering even a word would become far more risky than keeping silent, if this ruling stands," Tribe said.

In the past, the court had said that advertising and purely "commercial speech" was not entitled to free-speech protections. But in recent years, the justices have struck down a series of state laws that restrict advertising.

For example, they voided laws in Rhode Island and 10 other states that forbade advertising of beer prices. They struck down a Massachusetts law that prohibited cigarette billboards near schools or parks.

In those decisions, the court said the 1st Amendment protects commercial speech, but the justices have not agreed on whether this form of speech deserves the same constitutional shield as other public and political statements.

The California court said the key issue is truthfulness.

"Our holding in no way prohibits any business enterprise from speaking out on issues of public importance or from vigorously defending its own labor practices," wrote Justice Joyce Kennard in May. "It means only that when a business enterprise makes factual representations about its own products or its own operations, it must speak truthfully."

The decision revived a lawsuit filed by San Francisco resident Marc Kasky that asserts that Nike issued deceptive statements about working conditions and wages in its overseas factories.

The dispute began with a 1996 report by CBS News that said workers at Nike's factories in Asia were poorly paid, exposed to toxic chemicals and subjected to physical abuse.

A year later, Nike responded with a report that its factories met health, safety and labor standards, and that the shoe maker was "operating morally."

Kasky's suit contends that those assertions are false and misleading.

He is seeking a court order that would force Nike to turn over the profits it has earned in California.

"If a company is going to issue press releases, they are going to have to tell the truth," said Alan Caplan, Kasky's lawyer. "That shouldn't upset any corporation."

The suit has yet to go to trial.

In their appeal, Nike's lawyers said California courts have set a double standard that is unfair to business.

Critics are free to allege that Nike relies on Asian "sweatshops" and virtual "slave" labor to make its products. Those statements, whether entirely accurate or not, are fully protected as free speech.

However, if Nike defends itself by asserting that its factories comply with all health, safety and labor laws, it can be sued in California by those who allege that Nike's assertions are "misleading."

It "is entirely one-sided," Tribe said.

"The decision grants favored treatment to accusations against companies," but handicaps the defenders, he said.

Under the court's rules, Kasky's lawyers have 30 days to file a brief in response to the appeal in Nike vs. Kasky.

Generally, the court acts on the appeal several weeks after receiving the response.

Under the court's rules, Kasky's lawyers have 30 days to file a brief in response to the appeal in Nike vs. Kasky.

Generally, the court acts on the appeal several weeks after receiving the response.

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