Edition: U.S. / Global

Nike, Fighting Trade Suit, Asks Justices for Free-Speech Protection

Published: April 24, 2003

Nike found a sympathetic audience at the Supreme Court today for the argument that its defense of its overseas labor practices was the kind of speech that the First Amendment protects to the fullest extent, regardless of whether the speaker is a corporation.

The company was asking the justices to dismiss a suit brought by a San Francisco man under California's unfair-trade-practices law, which permits an individual to sue as a ''private attorney general'' on behalf of all the state's residents without a need to show that anyone has been injured. The plaintiff, Marc Kasky, charged that during the mid-1990's, Nike misrepresented its record in letters, press releases and op-ed articles that amounted to false advertising.

The company's lawyer, Laurence H. Tribe, told the justices that this was not advertising but rather Nike's side of ''an intense debate on the pros and cons of globalization.'' Mr. Tribe said that Nike's critics had used various media to portray the company as an exploitative employer and that ''Nike used the same media'' to defend itself in what became ''a lively political dialogue about the realities of the third world and Nike's role in it.''

The California Supreme Court ruled last year that Nike's statements were merely ''commercial speech,'' entitled to only minimal First Amendment protection. It held that Mr. Kasky was entitled to take Nike to trial, where he could prevail if he showed that any of the company's communications had been misleading, either in what they asserted or in what they left out.

For noncommercial speech, by contrast, there can be no liability without proof of deliberate or reckless falsehood.

The case is thus an important test of the definition of commercial speech and of the constitutional leeway afforded to corporate speakers.

Paul R. Hoeber, a San Francisco lawyer representing Mr. Kasky, said that in various responses to its critics, Nike had simply been ''making factual representations to consumers about its own practices to get them to buy its products.'' This was not part of a debate over globalization or third-world labor practices but an assertion of facts ''that should fit under any definition of commercial speech,'' Mr. Hoeber said.

The justices were attentive to Mr. Hoeber but appeared unpersuaded.

''The truth of the matter is, I think it's both,'' Justice Stephen G. Breyer said. Nike was at the same time trying to sell its products and ''make a statement,'' Justice Breyer said, adding: ''I think the First Amendment was designed to protect all the participants in a public debate, and a debate consists of facts. Once you've tied a party's hands behind his back with respect to facts, you've silenced him.''

Under the Supreme Court's recent precedents, commercial speech is that which ''does no more than propose a commercial transaction.''

The California court's definition, by contrast, extended beyond a specific offer of sale to include speech by a person or organization ''engaged in commerce'' and ''likely to influence consumers in their commercial decisions.'' Given that the trend on the United States Supreme Court is to be more protective of commercial speech, not less, this broadened definition got the justices' attention and persuaded them to grant Nike's appeal, Nike Inc. v. Kasky, No. 02-575, despite some procedural uncertainties in the case.

But the procedural issues consumed long parts of the argument today, raising the possibility that the court's eventual decision, due by the end of June, would resolve neither the particular dispute nor the fundamental issues. Mr. Kasky's legal complaint cited six statements that Nike made on nine occasions, but in the absence of a trial, these have not been sorted out in any detail.

''The problem with this case is that it comes to us at such a preliminary stage,'' Justice Ruth Bader Ginsburg told Mr. Tribe, Nike's lawyer.

Any trial would be nothing more than a ''show trial,'' Mr. Tribe, a professor at Harvard Law School, replied, an effort to pin a ''scarlet letter'' on the company. What kind of trial could evaluate ''such a hopeless mix of fact and opinion?'' he asked.

The Bush administration entered the case on Nike's side to defend what Solicitor General Theodore B. Olson said was the federal government's regulatory interest in preventing deceptive advertising while remaining mindful of the First Amendment. The flaw in California's law, he said, is that it gives private plaintiffs like Mr. Kasky the power to ''advance their own agendas'' by bringing the type of lawsuit that should be reserved for government regulators.

''Anyone with a whim or a grievance or a filing fee,'' Mr. Olson said, ''can become a government-licensed censor,'' without a need to show that anyone relied on or was harmed by the information said to be misleading.

It was not clear that this argument actually offered Nike much assistance. ''In five minutes, they'll find someone who bought Nike shoes,'' Justice Breyer said, adding that Mr. Kasky or another plaintiff could easily maintain that he would not have bought Nike shoes if he had not believed what the company said.

''It seems to me your solution doesn't really get to the problem,'' Justice Ginsburg told Solicitor General Olson.

Mr. Hoeber, Mr. Kasky's lawyer, described the California law as ''admittedly unusual and maybe unique.'' Mr. Kasky is seeking a variety of remedies, including a requirement that Nike disgorge all its California profits attributable to the challenged statements. These included what Mr. Kasky has said were overly favorable descriptions of a report that Andrew Young, former ambassador to the United Nations, issued after investigating conditions at Nike's overseas factories, as well as claims that a Nike executive made at a shareholders' meeting in describing factory conditions.

Addressing Mr. Hoeber, Justice Sandra Day O'Connor observed that none of the challenged statements were ''advertising in the true sense.''

Mr. Hoeber agreed that they were not in an ''advertising format.'' But he said it would be a mistake to limit the definition of commercial speech to advertising, because ''that line would leave out a lot of promotions and representations that consumers rely on.''

''It's not a perfect world,'' Justice Antonin Scalia responded.

Justice Anthony M. Kennedy suggested that anything short of a clear definition would raise additional First Amendment problems. ''If it's very difficult to define commercial speech, isn't it true that companies will be chilled in speaking?'' he asked.

Mr. Hoeber replied: ''To the extent that the definition is unclear, it may be. It's plausible.''

The court extended the hourlong argument by 10 minutes. Professor Tribe made the most of the final three minutes he had saved for rebuttal.

''What we have here,'' he said, ''is a debate between the interests of labor and management'' in which the California court took the state's unfair-trade law and ''transformed it into a conversation stopper.''

He added, ''The power to do that is extraordinary.''

Photo: Antiglobalization demonstrators, replete with a cardboard image of a Nike shoe, took up positions outside the Supreme Court building yesterday. (Doug Mills/The New York Times)