December 22, 2002

The United States Supreme Court agreed to review an unprecedented California state court ruling, which effectively eliminates First Amendment protection for companies that speak out on public issues.

The U.S. Supreme Court's decision in Nike v. Kasky may help to clarify whether a company's public statements about its operations are entitled to the same constitutional protections that its critics enjoy.

Last May, the California Supreme Court held that because a company's public statements about its operations might persuade consumers to buy its products, those statements must be treated as run-of-the-mill advertising, thereby warranting only limited constitutional protection as "commercial speech."

In urging the Court to take the case because of the significant First Amendment implications, Nike was joined by a diverse group of public interest organizations, businesses, media outlets, and various associations including The New York Times Co., Pfizer, CNN, and the U.S. Chamber of Commerce.

Laurence Tribe, Harvard University's noted constitutional scholar and leading Supreme Court advocate, and former acting Solicitor General Walter Dellinger, head of the Supreme Court practice at O'Melveny & Myers, LLP, are leading Nike's legal efforts.

"We are pleased that the Court has agreed to review this case," said Professor Tribe. "The Justices are likely concerned that the California decision appears contrary to years of Supreme Court rulings encouraging free speech."

"No company should feel impeded from engaging in the marketplace of ideas just because they operate in the marketplace of goods," added Walter Dellinger.

Additional Background

In reaching its decision, the California Supreme Court expressly applied its ruling to statements that appear in op-eds and editorials, as well as to comments made to reporters -- not just to paid commercial ads. In Nike's case, the speech at issue included such communications as letters to the editor, in which the company responded to public criticism about alleged workplace conditions in Asian contract footwear factories.

The California decision added that courts could suppress such public statements and allow monetary awards when the statements are deemed misleading, without regard to a company's efforts to ensure that its statements were accurate when made.

Under the California ruling, everyone in California has the right to sue any corporation that happens to sell any product or service in that state, and under the relevant provisions of California law, allegations of actual deception, reasonable reliance, and damages are unnecessary.

As a result of the lower court decision, Nike announced in October that it would not publicly release its annual corporate responsibility report. The report reviews the initiatives and progress the company has made in its labor compliance, community affairs, sustainable development and workplace programs.

The company also has declined to participate in several media interviews as well as invitations to speak at various business and academic forums due to the decision.

The California Court's ruling, which overturned two lower court rulings, never addressed the truth or falsity of any of Nike's statements. In November, fearing that business representatives will be deterred from speaking to the press about a vast array of public issues, a group of media organizations including the New York Times Co., CNN, CBS, The Washington Post, and the Tribune Company urged the Court to hear the case. They wrote, "This chilling effect will deprive the public of access to important information and the clash of competing viewpoints that undergirds the First Amendment."

They continued, "Extending the definition of commercial speech to corporate statements about publicly debated business operations also is unnecessary. When a business practice becomes a matter of public concern, the media scrutinize corporate speech and typically place potentially misleading statements into context."

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