High Court Rejects Nike Appeal in Speech Suit

The Supreme Court on Thursday dismissed without deciding a closely watched free speech case brought by Nike Inc., with the majority of justices saying they had jumped too soon to take up an appeal by the athletic shoe company.

Nike had been sued under California’s false advertising law by Marc Kasky, a San Francisco activist who said the firm made false claims about labor practices at its factories in Asia.

Nike denied that its statements were false and also claimed they were protected as free speech under the 1st Amendment.

The court’s lack of a decision disappointed business groups, which had been looking for a quick resolution.

“We were hoping the court would take this opportunity to provide us with guidance regarding the scope of business’ protection under the 1st Amendment to speak out on public issues,” said Robin Conrad, senior vice president of the National Chamber Litigation Center, the legal arm of the U.S. Chamber of Commerce.

But a Sierra Club lawyer said he was pleased to see the case sent back to the lower court. “The full story of Nike’s behavior will get to trial,” said Patrick Gallagher, director of the Sierra Club’s environmental law program.

For its part, Nike issued a statement calling Thursday’s action technical and procedural and said it would continue to press its free speech defense.

Kasky’s suit challenged news releases and statements put out by Beaverton, Ore.-based Nike to defend itself against claims that its shoes were made under sweatshop conditions.

Last year, the California Supreme Court refused to throw out Kasky’s suit in a 4-3 ruling. “When a business enterprise makes factual representations about its own products or its own operations, it must speak truthfully,” the state court said.

U.S. Supreme Court justices voted in January to hear the case of Nike vs. Kasky. But Thursday, the last day of the term, the justices acknowledged that because the case had never gone to trial, they could not determine whether Nike’s statements were true or false.

Six of the nine justices voted to dismiss the appeal and to send the case back to San Francisco for a trial.

Justice John Paul Stevens explained that the case “presents novel 1st Amendment questions because the speech at issue represents a blending of commercial speech, noncommercial speech and debate on an issue of public importance.”

Although companies are not entitled to dupe consumers with false statements in their ads, they presumably are entitled to engage in a public debate about corporate practices, he said.

The right answer in this case “is more likely to result from the study of a full factual record than from a review of mere unproven allegations in a pleading,” Stevens said.

Justices Stephen G. Breyer, Anthony M. Kennedy and Sandra Day O’Connor dissented, saying the court should have clarified the law. “I can find no good reason for postponing a decision in this case,” Breyer said.

Dick O’Brien, executive vice president of the American Assn. of Advertising Agencies, said the false advertising suit against Nike was “sort of patently ridiculous” given that it did not involve advertising to sell products, but news releases defending the company’s position.

O’Brien said the Supreme Court missed a chance to draw clear lines between commercial speech and product advertising.

“If a corporation tries to defend itself in any form, and there is someone out there who disagrees with you, they can sue you for large amounts of money,” he said.

Some said the court’s decision could have a chilling effect on corporate communications.

“Our clients are vulnerable to the same kind of litigation that was filed against Nike. So from a freedom-of-speech standpoint, it’s inhibiting,” said Doug Dowie, senior partner at public relations firm Fleishman Hillard. “Our clients will have to carefully examine how they communicate.”

But Alan Morrison, director of Public Citizen Litigation Group, rejected that logic. “Despite Nike’s predictions that it will be forced to censor itself until this case is finally resolved in its favor, we doubt that Nike will shut down its public relations office and refrain from commenting on all matters of public controversy,” Morrison said.

“What we do expect is that Nike will be much more careful when it tries to influence consumers by making claims about how it treats its overseas workers, which is what this case is all about.”

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Savage reported from Washington and Kelly from Los Angeles.