Arranged by the Arthur W. Page Society and The Institute for Public Relations
Held at Golin/Harris International, Chicago, IL
4:30-5:30 p.m.

Kirk Stewart, vice president, corporate communications, NIKE, Inc., Beaverton, Oregon, was the invited speaker at the briefing. He spoke to a group of four reporters including the Chicago Tribune, Advertising Age, PR News and O'Dwyer's Newsletter. Stewart provided a summary of the Nike v. Kasky case and commented on the implications for all corporations selling a product or service in the state of California.

Recap:Under a unique statute in the state of California, Nike was sued in 1998 over allegedly making false and misleading statements (in news releases, letters to the editor, op-eds and advertorials) when responding to critics of its overseas labor practices. The statute allows any California resident to file a lawsuit without claiming any personal harm or injury, reliance on the statements or that the defendant acted with an intent to mislead. Ruling that the First Amendment protected NIKE's speech, two lower courts dismissed the case. Kasky appealed to the California Supreme Court. California's highest court ruled (by a 4-3 vote) that Nike's responses to critics who charge it with mistreating overseas workers should be classified as commercial speech that does not deserve full First Amendment protection. In fact, the court ruled that any statements made by a corporation about its operations are considered commercial speech and not entitled to First Amendment protection.

NIKE was engaged in a debate about social issues (labor conditions and employment practices), not about its products. Usually, any allegation of false or misleading advertising (commercial speech) specifically concerns a product or proposes a commercial transaction.

The California statue does not appear to recognize an "innocent mistake" as a defense. Even an unintentional inaccuracy may create liability. Truth itself is not even a defense - a lawsuit can be filed if a California citizen perceives something to be misleading or incomplete.

California statute affects all entities (including NGOs and labor unions) not just corporations. That is why the AFL-CIO submitted a brief in favor of NIKE to the Supreme Court.

For NIKE to appeal to the U.S. Supreme Court, it must lose the California case. Meanwhile, however, the California statue remains in effect and unchallenged.

News and media organizations (40 in total) filed amicus briefs (friend of the court) in support of NIKE. Their interest in the case and support of NIKE has to do with how the case would impact their ability to gather information. On the corporate side, there is the issue of open communication and a company's right to engage freely in public debate.

The Page Society and a number of other organizations in the public relation industry, including The Institute for Public Relations, the Council of Public Relations Firms, the Public Relations Society of America and the Public Affairs Council filed an amicus brief asking the United States Supreme Court to overturn the California Supreme Court's recent ruling because factual corporate communications, which are a vital component of unfettered debate on matters of public concern, will be chilled by this ruling, as will public relations campaigns that make important contributions to public debates. Also, this case represents a sea-change that restricts previously protected speech.

Other briefs that supported NIKE, essentially maintained that unless the California ruling is overturned, the ability of all corporations to speak out on public issues that are related to their businesses would be jeopardized.

Stewart asserted that Nike has made it clear that every company has a responsibility to be truthful. "But truthfulness is not the essence of this case. This case is about a company's right to engage in public debate and the potential restraint of free speech," Stewart said. "Public debate implies a level playing field - where both parties are allowed the space and the freedom to debate openly."

According to Stewart, the broad implications of this case are as follows:

"This is just the beginning," Stewart said. "I think going forward we can count on companies taking a closer look at how they communicate and begin considering making changes in policy that balance the need to communicate against potential risks of legal liability." At NIKE, the management team has redefined the way it communicates in California and has increased its collaborative processes with its internal legal team. Additionally it has decided not to release its 2002 social responsibility report.

We are several years away from a definitive ruling on the courts on this issue, which leaves companies open to vexatious litigation. Repealing or changing the statute in California is also unlikely because of strong and powerful interests in the legislature that support the statute.