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Court Won't Decide Nike Free-Speech Case

from Reuters, June 26, 2003

The U.S. Supreme Court on Thursday cleared the way for a suit against Nike Inc. (NKE.N) to proceed, refusing to decide whether the onstitution's free-speech rights protected a publicity campaign to counter accusations that Asian sweatshops made its footwear.

The high court, on the last day of its term, dismissed by a 6-3 vote Nike's appeal without reaching the merits of the dispute, disappointing those who had expected the case to produce a major ruling on the First Amendment.

The high court's ruling means the lawsuit against Nike, the world's largest maker of athletic shoes, can go forward, and the same arguments can be made later on appeal.

In the mid-1990s, Nike was criticized by opponents of globalization for exploiting workers, especially women and children, with sweatshop conditions at Third World factories used to make its footwear.

The company responded with the publicity campaign, saying in press releases, letters to the editor published in newspapers, other correspondence and postings on its Web site that it had adopted sufficient safeguards.

One critic, Marc Kasky, a San Francisco consumer activist, sued Nike in 1998 under a California consumer protection law aimed at eliminating unfair competition and false advertising.

The lawsuit claimed Nike misled the public about working conditions for its Vietnamese, Chinese and Indonesian laborers, and that its statements amounted to false advertising.

The lawsuit claimed Nike knew workers were subjected to physical punishment and sexual abuse, endured dangerous working conditions and were often unable to earn a "living wage," despite work days that could be 14 hours long.

'MODEL OF CORPORATE RESPONSIBILITY'

The lawsuit alleged the Beaverton, Oregon-based company falsely portrayed itself as a "model of corporate responsibility" in an effort to boost sales.

Nike denied the allegations and argued the case should be dismissed because all the statements cited in the lawsuit were protected as free speech. It said its statements were part of an international media debate on issues of public interest.

The California Supreme Court ruled Nike's corporate statements could be regulated as commercial speech and allowed the lawsuit to go to trial.

Justice John Paul Stevens, joined by Justices Ruth Bader Ginsburg and David Souter, issued a separate opinion explaining why he thought the court's decision dismissing the case was justified.

He said the California Supreme Court never entered a final judgment, that neither party in the case can invoke federal court jurisdiction, and the high court generally does not decide important constitutional issues without a full factual record. Such a record is usually developed at trial.

The dismissal of Nike's appeal allowed the case to go forward to trial. If Nike loses at trial, it can raise the free-speech argument again.

Justices Anthony Kennedy, Sandra Day O'Connor and Stephen Breyer dissented.

"In sum, I can find no good reason for postponing a decision in this case," Breyer wrote. "And further development of the record seems unlikely to make the questions presented any easier to decide later."

In a statement, Nike said, "Our fight to preserve the right to free and open debate moves forward."

"Today's procedural ruling returns the case to the California courts. A number of legal issues remain to be resolved that could have significant impact on the suit before the case could proceed to trial," the company said.