One of the most watched and anticipated free speech cases in the last twenty years came to an unexpected conclusion on June 26, 2003, when the Supreme Court, in its very last decision of the 2002-2003 term, in a one-sentence, unsigned opinion, dismissed the writ of certiorari in Nike v. Kasky, as "improvidently granted."  The case involves a civil lawsuit brought in state court in California by an individual named Marc Kasky against footwear giant Nike.  

In his lawsuit, Mr. Kasky charged Nike with making false and misleading statements concerning its overseas labor practices. The statements at issue were made by Nike in response to attacks made against it by various interest groups and organizations concerning the treatment of workers in Nike's manufacturing facilities in Southeast Asia. These interest groups made Nike the target of media attention as part of a larger debate about corporate globalization. In an effort to respond to the criticism levied against it, Nike issued press releases, wrote letters to the editors of a number of newspapers and to university presidents and athletic directors and participated in media interviews. In addition, Nike commissioned former U.N. Ambassador Andrew Young to conduct an independent investigation of its manufacturing facilities, and then published an advertisement drawing attention to Ambassador Young's conclusions. The advertisement quoted Ambassador Young as saying:  "It is my sincere belief that Nike is doing a good job . . . but Nike can and should do better." The advertisement, as well as the other statements issued by Nike, made no claims as to the price or quality of Nike's products.

Mr. Kasky, on behalf of himself, and, on behalf of the citizens of the State of California, acting as a private attorney general, which is allowed under the California statutory scheme, alleged that Nike's statements constituted false advertising under California's unfair competition laws because the statements were likely to mislead the public.  In his request for relief, Mr. Kasky asked that Nike be ordered to, among other things, disgorge its profits attributed to the statements and publish "corrective" advertising. Under the California statutes that Mr. Kasky relied upon in his lawsuit, he was not required to establish that he was in any way harmed by Nike's statements. In fact, in his complaint, Mr. Kasky specifically alleged that he was not harmed in any way, and, indeed, he had not even bought a pair of Nike sneakers as a result of any of the statements that he claimed were misleading.

Nike moved to dismiss Mr. Kasky's lawsuit before discovery or trial on the basis that Nike's statements were protected under the First Amendment and thus were not subject to California's false advertising statutes. The California trial and appellate courts agreed with Nike, finding that Nike's speech was not commercial speech, and thus deserving of full Constitutional protection, and dismissed the lawsuit. However, on appeal, in a 4 to 3 ruling, the California Supreme Court reversed this decision, reinstated the complaint, and remanded the case back to the trial court for discovery and trial. The slim majority of the California court held that Nike's statements were commercial speech and thus subject to regulation. Nike appealed the California Supreme Court's decision to the United States Supreme Court, asserting that the decision violated the company's First Amendment rights.

Concerned about the chilling effects the California Supreme Court's decision could have on the advertising community if the decision was to be upheld, the Association of National Advertisers, the American Association of Advertising Agencies, and the American Advertising Federation, represented by Davis & Gilbert LLP, submitted an amicus brief to the Supreme Court.  The amicus brief explained that if the California Supreme Court's decision were to be upheld, it would be practically impossible for corporate speech to ever be deemed fully protected by the First Amendment and advertisers and their advertising agencies will be creatively silenced for fear that their words may become the basis of a court action in California and subject advertisers to onerous litigation costs. To illustrate this point, along with the amicus brief, the advertising industry trade organizations submitted a "lodging" to the brief that contained examples of several advertisements that, under the California Supreme Court's definition of commercial speech, might not be fully protected under the First Amendment and thus could be challenged by any citizen of California in a California court. The lodging included advertisements concerning protecting the environment, promoting diversity and improving the health care system.

The Supreme Court's action in dismissing the writ is quite uncommon. In essence, the Supreme Court decided that it should not have agreed to hear the case in the first place. For practical purposes, the case was returned as it was when the California Supreme Court reversed the decision of the California Appellate Court: Kasky's complaint was effectively reinstated and the case was to continue in the trial court. On September 12, 2003, however, the parties to the lawsuit settled.  

As part of the settlement, Nike agreed to invest $1.5 million (in the form of a payment to the Fair Labor Association) into workplace programs including improving the quality of independent monitoring in manufacturing countries, creating worker programs focusing on education and economic opportunity, and collaborating to advance a global standard regarding corporate responsibility. Nike also agreed to maintain its existing funding commitment to its after hours worker education programs in its footwear facilities and micro-loan programs at a minimum of $500,000 over the next two years.  

Despite the settlement of the case and the Supreme Court's dismissal, several Justices, in concurring and dissenting opinions, indicated an interest and an inclination to find Nike's speech to be protected. Justice Stevens, joined by Justice Ginsburg and Justice Souter, concurred in the decision, citing mainly procedural reasons for the dismissal. However, the concurrence found that "[t]his 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." In addition, the concurrence stated that "[k]nowledgeable persons should be free to participate [in debates about important public issues] without fear of unfair reprisal." Justice Kennedy dissented, in a one-sentence opinion, and Justice Breyer, joined by Justice O'Connor, dissented in an opinion that implies that if the case had been heard, they would have reversed the decision of the California Supreme Court. Specifically Justice Breyer stated that "[I]n my view, . . . a true reversal [of the California Supreme Court's decision] is a highly realistic possibility."

The settlement of the Kasky case and the Supreme Court's failure to hear this important First Amendment issue now leaves in place a statutory regime in California that will likely have a severe chilling effect on all types of corporate speech throughout the country, putting one side at an extreme disadvantage in political and social debates. As Justice Breyer stated, "commercial speakers doing business in California may hesitate to issue significant communications relevant to public debate because they fear potential lawsuits and legal liability." Indeed, Nike has already determined to not issue its corporate responsibility report for 2002 and has decided to limit its participation in public events and media engagement in California. According to published reports, many corporations are concerned about the impact of this case.  

Nevertheless, because of the broad reach of the California laws, it is likely that there will be another private citizen of California who brings a claim that another corporation's press statements, letters, advertisements or other communications are likely to mislead the public and that corporation decides to challenge such an action under the First Amendment. If this happens, hopefully the Supreme Court will then finally hear the issue and rule in favor of protecting corporations' First Amendment rights. Until that time, commercial speakers would be wise to exercise caution in issuing corporate statements on issues of public debate.

© 2001 Davis & Gilbert LLP