Companies Can Be Sued for Content of Press Releases
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Companies Can Be Sued for Content of Press Releases

Corporate press releases that deal with controversial social issues are no longer protected by the constitution after the California Supreme Court ruled that corporate claims on sensitive issues are commercial speech.

Paul Holmes

SAN FRANCISCO, May 6—Corporate press releases that deal with controversial social or political issues are no longer protected by the United States constitution—at least in California, where the Supreme Court ruled this week that corporate claims on politically sensitive issues are commercial speech, and this not covered by the First Amendment.
 
The ruling came in the case of Kasky vs. Nike, in which a consumer activist sued Nike under California’s false advertising statutes. The case involved a press release issued by the company, defending its record against charges relating to its labor practices in overseas companies. The Supreme Court did not rule on the veracity of Nike’s claims, only on whether they were constitutionally protected.
 
The American Civil Liberties Union had sided with the corporation during the case, filing an amicus brief. But despite the fact that the case has serious ramifications for corporations involved in controversial public debates, neither the Public Relations Society of America nor the Council for Public Relations Firms took any public position on the case.
 
The decision was apparently a close one, with the judges ruling 4 to 3 in favor of the plaintiff. Lower courts had previously agreed with Nike, but Judge Joyce Kennard, writing for the majority of the Supreme Court, said that when a corporation makes “factual representations about its own products or its own operations, it must speak truthfully.
 
“Speech is commercial in its content if it is likely to influence consumers in their commercial decisions. “For a significant segment of the buying public, labor practices do matter in making consumer choices.” At the same time, she said, the ruling “in no way prohibits any business enterprise from speaking out on issues of public importance or from vigorously defending its own labor practices.”
 
Alan Caplan, attorney for the plaintiff, Marc Kasky, welcomed the decision: “If a company is going to issue press releases or any information to the consumer about their factories, they are going to have to tell the truth. That shouldn’t upset any corporation.”
 
But the California stature and the ruling apply only to corporate statements. Claims made by non-profit advocacy groups now receive constitutional protected that is not extended to corporations.
 
For the minority, Justice Ming Chine argued that the ruling unfairly protects the free speech rights of private critics of corporations but not corporations that defend themselves from attacks. “If Nike utters a factual misstatement, unlike its critics, it may be sued for restitution, civil penalties and injunctive relief,” wrote Chin. In a separate dissent, Judge Marvin Baxter said the decision failed “to account for the realities of the modern world—a world in which personal, political and commercial arenas no longer have sharply defined boundaries.”
 
She added, “While Nike’s critics have taken full advantage of their right to ‘uninhibited, robust, and wide-open debate…’ the same cannot be said of Nike, the object of their ire. When Nike tries to defend itself from these attacks, the majority denies it the same First Amendment protection Nike’s critics enjoy.”
 
The ACLU, meanwhile, said the biggest loser in the case was free speech. “Its impact could be very broad,” said Ann Brick, an attorney with the ACLU of Northern California. “If you are a business speaker, your ability to speak out on a public issue that directly affects your company is dramatically affected.” The public, rather than the government or the courts, should get to decide which side in a public debate is right, said Brick.
 
In a statement, Nike said it was “extremely disappointed” by the decision. Said the company, “The majority’s conclusion that Nike’s statements are commercial speech and subject to state court regulation… sets a dangerous precedent by restraining companies, such as Nike, from making public statements about their business practices when challenged in the arena of public debate.
 
“Nike believes it has the right to respond to criticism and inform concerned or interested parties about initiatives to improve the way it does business in the United States and abroad. Nike takes its manufacturing responsibilities seriously, as demonstrated by the company’s long-term commitment to improve working conditions for workers in its contract factories.”
 
David Brown, an attorney with the San Francisco law firm of Brobeck Phleger & Harrison, said that Nike is currently reviewing legal options and will make a determination about how it will move forward with challenging this ruling. Nike will fully explore all judicial review options at its disposal, including seeking review of the decision by the U.S. Supreme Court.
 
The original lawsuit was originally filed in 1998, and charged Nike with willfully misleading the public about working conditions for the Vietnamese, Chinese and Indonesian laborers who produce the company’s footwear. The suit charged that Nike knew that these workers were subjected to physical punishment and sexual abuse, endured dangerous working conditions, and were often unable to earn a “living wage” despite workdays that could be 14 hours long.
 
Those claims will now be considered again by the lower courts.
 
If Kasky prevails at trial, Nike could be ordered to turn over an unspecified portion of the profits it has made in California. The money then could be distributed either to charities or to consumers who bought Nike products.
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