NO. 02-575

IN THE

NIKE, INC., et al.,Petitioners,

v.

MARC KASKY,Respondent.

On Writ of Certiorarito the California Supreme Court

BRIEF OF AMICUS CURIAE PUBLIC CITIZENIN SUPPORT OF RESPONDENT

ALAN B. MORRISON Counsel of RecordALLISON M. ZIEVEMARKA PETERSONSCOTT L. NELSONDAVID C. VLADECKPUBLIC CITIZEN LITIGATION GROUP1600 20th Street, NWWashington, DC 20009(202) 588-1000

Counsel for Amicus CuriaeApril 2003 Public Citizen

i

QUESTIONS PRESENTED

Although not included by Petitioner in its questionspresented, this case presents a substantial jurisdictionalquestion. That question is as follows:

In this case, where there is no final judgment,does the Court have jurisdiction pursuant to thefourth exception in Cox Broadcasting to do anymore than determine whether one or more of thestatements alleged to be actionable in thecomplaint is not protected from suit under theFirst Amendment, as asserted by Petitioner?

Amicus believes the first question presented in thepetition is more properly stated as follows:

Does the First Amendment immunize acompany from a lawsuit alleging that thecompany made specific false factual representa-tions, as part of a campaign to persuadeconsumers that its labor practices were lawfuland proper, merely because those practices arealso the subject of public controversy?

Amicus believes that the proper answer to thejurisdictional question requires dismissal of Petitioner’s secondquestion presented.

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TABLE OF CONTENTS

QUESTIONS PRESENTED . . . . . . . . . . . . . . . . . . . . . . . . i

TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . iii

INTEREST OF AMICUS CURIAE . . . . . . . . . . . . . . . . . . 1

BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

SUMMARY OF ARGUMENT . . . . . . . . . . . . . . . . . . . . . . 5

ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

I. THIS COURT HAS JURISDICTION ONLYTO DECIDE WHETHER THE FIRSTAMENDMENT ISSUE RAISED ANDDECIDED BELOW DISPOSES OF THISCASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

II. NIKE MAY BE SUED FOR FALSE ORMISLEADING FACTUAL REPRESENTA-TIONS DIRECTED AT CONSUMERSABOUT ITS LABOR PRACTICES . . . . . . . . . . . 13

A. Respondent’s Suit Targets Specific FactualAssertions Directed at Consumers . . . . . . . . . . . . . 15

B. The First Amendment Does Not ProtectFalse Marketing Statements Simply BecauseThey Relate To Controversial Topics . . . . . . . . . . 19

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

iii

TABLE OF AUTHORITIES

CASES Page

Abney v. United States,431 U.S. 651 (1977) . . . . . . . . . . . . . . . . . . . . . . . . 11

Bates v. State Bar of Florida,433 U.S. 350 (1977) . . . . . . . . . . . . . . . . . . . . . 14, 21

Board of Trustees of State University of New York v. Fox,492 U.S. 469 (1989) . . . . . . . . . . . . . . . . . . . . . . . . 21

Bolger v. Youngs Drug Products Corp.,463 U.S. 60 (1983) . . . . . . . . . . . . . . . . . . . 15, 21, 22

Central Hudson Gas & Electrical Corp. v. PublicService Comm'n,

447 U.S. 557 (1980) . . . . . . . . . . . . . . . . . . . . . 14, 21

Christopher v. Harbury,536 U.S. 403 (2002) . . . . . . . . . . . . . . . . . . . . . . . . 13

Cox Broadcasting Corp. v. Cohn,420 U.S. 469 (1975) . . . . . . . . . . . . . . . . . . . . . . . . . 8

Edenfield v. Fane,507 U.S. 761 (1993) . . . . . . . . . . . . . . . . . . . . . . 1, 18

Florida Bar v. Went For It, Inc.,515 U.S. 618 (1995) . . . . . . . . . . . . . . . . . . . . . . . . 18

44 Liquormart, Inc. v. Rhode Island,517 U.S. 484 (1996) . . . . . . . . . . . . . . . . . . . . . 14, 21

iv

Jefferson v. City of Tarrant,522 U.S. 75 (1997) . . . . . . . . . . . . . . . . . . . . . . . . . 13

Korea Supply Co. v. Lockheed Martin Corp.,29 Cal. 4th 1134 (2003) . . . . . . . . . . . . . . . . . . . . . 12

Lorillard v. Reilly,533 U.S. 525 (2001) . . . . . . . . . . . . . . . . . . . . . . . . 21

New York Times Co. v. Sullivan,376 U.S. 254 (1964) . . . . . . . . . . . . . . . . . . . . . . . . 25

Ohralik v. Ohio State Bar Ass’n,436 U.S. 447 (1978) . . . . . . . . . . . . . . . . . . . . . . . . 23

Pierce County v. Guillen,123 S. Ct. 720 (2003) . . . . . . . . . . . . . . . . . . . . . . . 11

Posadas de Puerto Rico Associates v. Tourism Co. ofPuerto Rico,

478 U.S. 328 (1986) . . . . . . . . . . . . . . . . . . . . . . . . 21

Rubin v. Coors Brewing Co.,514 U.S. 476 (1995) . . . . . . . . . . . . . . . . . . . . . . . . 18

Swint v. Chambers County Commission,514 U.S. 35 (1995) . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Virginia State Board of Pharmacy v. VirginiaCitizens Consumer Council,

425 U.S. 748 (1976) . . . . . . . . . . . . . . . . 1, 14, 18, 21

Zauderer v. Office of Disciplinary Counsel,471 U.S. 626 (1985) . . . . . . . . . . . . . . . . . . . . . . 1, 21

v

STATUTES AND REGULATIONS

California Business & Professions Code § 17200 . . . . . . . . 4

Cal. Code of Civil Procedure § 425.16 . . . . . . . . . . . . . . . 25

Rule of the Supreme Court of the United States 14.1(i) . . 11

28 U.S.C. § 1257(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

62 Fed. Reg. 63756 (1997) . . . . . . . . . . . . . . . . . . . . . . . . 22

MISCELLANEOUS

K. Cottril, Global Codes of Conduct, J. Bus. Strategy,May 1, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

M.M. Hossain, Emerging Markets Database:The Debate on Labor Standards,The Independent, April 2, 2000 . . . . . . . . . . . . . . . 20

N. Morris, Saving The Brand Name, MacClean’s,Dec. 11, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

M. Scott, Can Consumers Change Corporations?,Executive Female, May 15, 1996 . . . . . . . . . . . . . 20

R. Stern, et al., Supreme Court Practice (8th ed. 2002) . . 12

Sourcing: Cheap v. Ethical, J. Am. ChamberCom. in Hong Kong, Sept. 1, 1997 . . . . . . . . . 19, 20

Pursuant to Rule 37.6 of this Court, amicus curiae states1

that no party had any role in writing this brief and that no oneother than amicus or its counsel made a monetary contributionto the preparation or submission of this brief. Letters from bothparties consenting to all amicus briefs are on file with theClerk.

INTEREST OF AMICUS CURIAE1

Public Citizen is a non-profit advocacy organization,with over 125,000 members nationwide and three offices,including one in California. Since its founding in 1971, PublicCitizen has been active before Congress, regulatory agencies,and the courts in matters relating to consumer protection,among other things. Public Citizen has been in the vanguard inpressing for the extension of First Amendment protection totruthful commercial speech. For example, Public Citizen’sattorneys represented the consumer plaintiffs in Virginia StateBoard of Pharmacy v. Virginia Citizens Consumer Council,425 U.S. 748 (1976), the first case to recognize that commercialspeech is entitled to significant protection under the FirstAmendment. Amicus’ counsel have also represented partiesseeking to invalidate commercial speech restraints in othercases, including Zauderer v. Office of Disciplinary Counsel,471 U.S. 626 (1985), and Edenfield v. Fane, 507 U.S. 761(1993), and Public Citizen has filed amicus briefs in numerousother cases before this Court involving commercial speechissues.

Although the interests of Public Citizen members andother consumers are served by truthful commercial speech,consumer interests are not served by marketing campaigns thatseek to influence consumer choice through false or misleadingstatements. Such false marketing speech has no FirstAmendment value, and Public Citizen is concerned that the

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legitimate concerns that gave rise to the protection ofcommercial speech not become a cloak for marketing abuses.

Public Citizen submits this brief for two reasons. First,whereas Nike presents the challenged speech as a unifiedwhole, without differentiating among the individual statementsat issue, our brief highlights that at least some of the statementsare specific, verifiable representations of fact intended topromote Nike’s products to consumers as “labor friendly.”These statements are indistinguishable from statements thisCourt has found to constitute commercial speech, and the Courtshould reaffirm that speech designed to induce consumers topurchase products may, if false or misleading, give rise toliability. Second, we file this brief to address the jurisdictionallimitations of the Court’s consideration of this case, an issuethat Petitioner’s merits brief does not discuss. Although theultimate resolution of the First Amendment issues may not bethe same for each statement, this Court should not attempt toresolve all of those issues at this time, for both jurisdictionaland prudential reasons. Distinct from the other briefs in thiscase, our brief argues that the Court should make no furtherrulings in the case once it has identified at least one allegedlyfalse commercial message that can serve as the basis forcontinuing this litigation in the California courts.

BACKGROUND

Petitioner Nike promotes its sports shoes, clothing, andequipment largely based on its brand identity. Its marketsuccess is thus closely tied to its corporate image. See FirstAm. Compl., Exh. A at 367 (Pet. Lodg. at 42) (1997 AnnualReport) (“we are a company . . . that is based on a brand, onewith a genuine and distinct personality, and tangible, emotionalconnections to consumers the world over”).

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In 1992, in the face of intense public criticism aboutconditions at its overseas factories, Nike initiated a publicrelations campaign to promote itself as labor-friendly. Nikeadopted a “code of conduct” that it promised would guide itsselection of and standards for the subcontractors whomanufacture its shoes and apparel. Id. at ¶26, Exh. U. Inaddition, Nike adopted a monitoring system under which itssubcontractors are required to sign a “Memorandum ofUnderstanding” certifying that they are complying with a set ofspecific standards. Id., Exh. V at 534-35 (Pet. Lodg. 206-07).Those standards include compliance with local minimum wage,overtime, health and safety, and other workplace laws,adherence to local environmental laws, and a promise not to useforced or child labor. Id., Exh. V at 535 (Pet. Lodg. at 207).After adopting its code and monitoring system, Nike frequentlyissued public statements making factual claims about policiesand practices affecting workers at its overseas factories. See,e.g., id. at ¶28, Exhs. P, V, Z.

College athletic departments are among Nike’s mostimportant market constituents. In addition to being customers,more than 200 colleges and universities have promotionalcontracts with Nike under which they agree that their teams willuse and endorse Nike products. Id. at ¶14. Accordingly, as partof its campaign to present itself as labor-friendly, Nike’sDirector of Sports Marketing sent a letter in June 1996 to thepresidents and athletic directors of more than 200 colleges anduniversities. Among other things, the letter labeled “completelyfalse” charges that “child labor is used in the production of[Nike] goods,” and stated that Nike subcontractors comply withthe labor requirements set forth in its Memorandum ofUnderstanding “in all material respects.” Id., Exh. R.

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In December 1996, as a further part of Nike’s publicrelations campaign, Nike sent a letter to the San FranciscoExaminer stating that Nike knows “consumers are savvy andwant to know they support companies with good products andpractices,” and that “[d]uring the shopping season, weencourage shoppers to remember” that Nike is a leader inimproving factory conditions. The letter went on to state thata recent study showed that Nike workers were able to devote 43to 47 percent of their wages to savings or discretionaryspending. Id., Exh. S.

Another Nike document, entitled “Please, consider this. . .,” id., Exh. P, explained that “we’d like to share ourperspective [about Nike labor practices] with you.” Amongother things, Nike stated: “No kids produce NIKE shoes andapparel,” and “Nike pays on average, double the government-mandated minimum wage in the countries where our footwearis produced. “

In keeping with these efforts to promote itself as alabor-friendly company, in February 1997, Nike announced thatit had commissioned former United Nations AmbassadorAndrew Young and his organization Goodworks Internationalto investigate and report on labor practices at Nike’s overseasfacilities. The Goodworks report concluded that Nike wasgenerally doing a good job enforcing its code and improvingworkers’ lives, id., Exh. EE, and Nike took out full-page ads infive national newspapers quoting that conclusion. Id., Exh. FF.

In 1998, respondent Marc Kasky sued Nike in statecourt. The complaint alleged that many of Nike’s statementsabout its labor practices were false or misleading and soughtrelief under California Business and Professions Code section17200 et seq., which prohibits unfair competition, false

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advertising, and consumer fraud and deception. Rather thananswering the complaint, Nike demurred, asserting, amongother things, that it would violate the First Amendment to applysection 17200 to any of Nike’s statements about its laborpractices. The superior court sustained Nike’s demurrer onFirst Amendment grounds and dismissed the complaint withprejudice. Pet. App. at 80a. The court of appeal affirmed onthe same ground. Id. at 66a. In so doing, it expressly declinedto address any other issue. Id. at 66a, 70a. The CaliforniaSupreme Court reversed in an opinion that addressed onlyNike’s First Amendment argument that none of its statementswere actionable under section 17200, and it remanded the casefor further proceedings. Id. at 1a.

SUMMARY OF ARGUMENT

The case before this Court properly presents onesubstantive question within the Court’s jurisdiction: whether acompany that makes specific, verifiable representations aboutits labor practices, as part of a campaign to promote its productsto consumers as “labor-friendly,” is protected from suit for falseor misleading statements merely because the representationsconcern a matter of public controversy. The answer to thatquestion is no.

Because this case was dismissed in the lower statecourts (and then reinstated by the California Supreme Court)solely on the issue whether the First Amendment provides Nikea complete defense for every statement it made about its laborpractices, the case lacks not only a final judgment, but also anyrecord showing how California law would apply to themultitude of statements identified by Kasky. Going beyond thethreshold question whether the First Amendment insulates Nikefrom liability to reach the numerous issues of statutory and

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constitutional interpretation raised by Nike would violate thefinal judgment rule and involve the Court in deciding, withoutthe benefit of a record, issues that were neither raised nordecided in the state courts below. Accordingly, once this Courtdetermines whether any single factual representation by Nikemay be subject to suit consistent with the First Amendment, itshould remand the case to the California Supreme Court.

As to the sole question properly before the Court, thisCourt has long recognized that the First Amendment does notprotect businesses from liability for false or misleading factualstatements that are directed at consumers and relate to mattersthat affect consumer choices in the marketplace. Because Nikehas made at least one specific, purely factual claim about itslabor practices, and because that claim was made to consumersfor the purpose of promoting Nike sales, Nike can be heldaccountable for that representation (if it is shown to be false ormisleading) without running afoul of the First Amendment. Asthe Solicitor General acknowledges, the First Amendmentwould not be a defense if a government agency—federal orstate—brought an action based on such statements. Likewise,it is not a defense in this private attorney general action.

Nike’s promotional speech about its labor practices iscommercial in the most important sense. Labor practices, aswith other intangible aspects of products, are an establishedbasis of consumer choice. To hold that companies have a FirstAmendment right to misrepresent facts about this subject toconsumers, but not to misrepresent other matters that affectpurchasing decisions, would be to infringe on consumer choicein exactly the way the First Amendment deems illegitimate.

The fact that a company’s products or practices havebecome controversial does not transform factual representations

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about those matters into non-promotional or political speech.This Court has long recognized that commercial speechreceives intermediate protection because it is important toconsumers. In that sense, all commercial speech involvesmatters of “public concern,” to use Nike’s phrase. Affordingprotection to false or misleading commercial speech would notonly be unjustified under the First Amendment, it wouldundermine the very public interests that support protectingtruthful commercial speech.

Accordingly, for the same reasons that other false ormisleading commercial speech receives no First Amendmentprotection—and can be prohibited to the extent that it is bothpurely factual and false or misleading—Nike’s factualrepresentations to consumers about its labor practices are notimmune from suit here. The Court should therefore affirm thedecision below and remand the case for discovery and trial.

ARGUMENT

I. THIS COURT HAS JURISDICTION ONLYTO DECIDE WHETHER THE FIRSTAMENDMENT ISSUE RAISED ANDDECIDED BELOW DISPOSES OF THISCASE.

Nike asserts that this Court has jurisdiction over thiscase under 28 U.S.C. § 1257(a), which confers jurisdiction over“final judgments or decrees rendered by the highest court of aState.” Because no final judgment has been entered in the case,Nike has the burden of showing that some exception to the finaljudgment rule applies.

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This Court has identified four categories of cases thatconstitute exceptions to section 1257(a)’s finality requirement.See Cox Broadcasting Corp. v. Cohn, 420 U.S. 469, 477-87(1975). Nike relies on the fourth exception, Reply on Pet. forCert. at 4, which has two requirements. First, the state courtjudgment must represent the final word within the state courtsystem on a federal issue, “with further proceedings pending inwhich the party seeking review here might prevail on the meritson non-federal grounds, thus rendering unnecessary review ofthe federal issue by this Court, and where reversal of the statecourt on the federal issue would be preclusive of any furtherlitigation on the relevant cause of action.” Id. at 482-83(emphasis added). Second, “a refusal immediately to reviewthe state-court decision” must present a risk of “seriouslyerod[ing] federal policy.” Id.

1. Although the question is not free from doubt, weagree that the fourth exception is applicable to the first questionpresented to the extent that Nike can show that its FirstAmendment defense is dispositive of the entire case and thatthe failure of this Court to decide the issue now would seriouslyerode federal values underlying that defense.

Nike cannot make that showing, and in fact makes noeffort to do so. As discussed in Point II below, some of thestatements at issue are purely factual, readily subject toverification by Nike, fully capable of being proven true or falsein a court of law, and integrally related to Nike’s efforts tomarket its products. If the Court agrees that even one of thosestatements is actionable, the case will go forward. Because thefourth Cox Broadcasting exception applies only insofar asresolution of the issue would dispose of an entire cause ofaction, not just some aspects of it, the Court will lackjurisdiction at that point to further consider the issues raised in

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Although this Court should not go through the allegedly2

false statements one by one to see which survive a FirstAmendment challenge on their face, the California courts canand should perform that task if this Court’s discussion of theapplicable legal standards differs from that of the CaliforniaSupreme Court.

Petitioner’s brief. Cf. Swint v. Chambers County Comm’n, 514U.S. 35, 50-51 (1995) (pendent appellate jurisdiction over non-final issues proper, if at all, only where such issues are“inextricably intertwined” with appealable issues).

Even if this Court has jurisdiction to address theapplicability of the First Amendment to each factual assertionmade in the complaint, it should exercise its discretion, as itwould on a petition for a writ of certiorari, to decline to pass onthe applicability of Nike’s First Amendment defense withregard to each and every statement. Nike has never attemptedto show that each statement alleged to be actionable is protectedby the First Amendment. Rather, Nike has litigated this case onan all-or-nothing basis. This Court need not and should nottake on the burden of sorting through the statements todetermine which are actionable and which are not.2

The fact that this case is still in its state-court infancyfurther counsels against this Court ruling on each statement.Nike has not yet filed an answer, let alone participated indiscovery or a trial, or obtained a decision from any Californiacourt as to whether any particular statement is true, false,misleading, or deceptive. Moreover, in many instances, thecomplaint alleges that Nike made a particular false ormisleading statement without describing the context in whichit was made. See, e.g. First Am. Compl. ¶28 (quoting Nike

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document entitled “The Nike Code of Conduct: What it is, Howit Works”). Indeed, Nike’s brief (at 26-27) makes much ofRespondent’s failure to consider the context of the speech. Seealso US Br. 27 (cautioning against addressing “commercialspeech issue in this abstract context”). The obvious importanceof context in deciding whether a given statement can give riseto liability provides an additional reason why the Court shouldhalt its consideration as soon as it determines that at least onestatement is actionable.

The Court’s limited role in this case at this juncture doesnot mean that—in the course of explaining why the FirstAmendment does not bar all of Respondent’s claims as to falseor misleading statements that are specific, factual, and made toinduce consumers to buy Nike products—the Court cannotcontrast those statements with other statements that would, inall likelihood, not be actionable (for example, that Nike is a“moral company”). Thus, the Court can give additionalguidance without attempting to resolve the constitutionalviability of every allegation.

2. The second question presented by Petitioner poseseven more troublesome jurisdictional problems. Most of Nike’sdiscussion of the second question is directed to what it contendsare unconstitutional burdens imposed by California law,including the use of what Nike terms “strict liability,” thepossibility that damages might be imposed for Nike conductoutside of California, the absence of a heightened standard ofproof, and the possibility of court-imposed disgorgement ofprofits to an uninjured plaintiff.

This set of issues has two unifying features. First, withone exception, discussed infra at 12, none of the issues isdispositive of the case as a whole, although rulings in Nike’s

11

That some of these issues were noted in passing by the3

(continued...)

favor might ease Nike’s burdens on remand. For example, ifthe Court were to conclude that Kasky must show more thanstrict liability to prevail, that holding might make this casemore difficult for him to win but would not end the litigation.Such issues do not fall within the fourth exception to CoxBroadcasting. And the fact that the first question presentedarguably falls within a Cox Broadcasting exception does notaffect the Court’s jurisdiction over the second question. SeePierce County v. Guillen, 123 S. Ct. 720, 728-29 (2003) (whereone portion of case fell within Cox Broadcasting exception andanother portion did not, Court had jurisdiction only to decideformer); cf. Abney v. United States, 431 U.S. 651, 662-63(1977) (where one issue appealable under collateral orderdoctrine, other issues not immediately appealable unless theyindependently fall within exception to final judgment rule).

Second, Nike did not present any of these issues to theCalifornia Supreme Court, and that court passed on none ofthem. As stated in Nike’s merits brief in this Court (at 14), theonly issue before the California Supreme Court was whetherNike’s false statements about working conditions at its ownfacilities meet the test for commercial speech. That issue isNike’s first question in this Court. Rule 14.1(i) of the Rules ofthis Court makes clear that when a case comes from a statecourt, the petitioner must show that the “federal questionssought to be reviewed were raised” below and how they were“passed on.” Nike has made no such showing here becauseNike did not raise the issues contained in the second questionin the court below and the issues were not considered by thatcourt. See Pet. App. at 1a, see also id. at 66a, 70a. Therefore,3

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(...continued)3

dissent satisfies neither the requirement that the petitioner havepresented them below nor the requirement that the court belowhave decided the issue. See R. Stern, et al., Supreme CourtPractice § 3.19 at 186 (8th ed. 2002).

Moreover, the issue is not independently worthy of review,4

especially in the context of this case. Even if Nike and theSolicitor General were correct that a proper plaintiff in this casemust allege that he purchased a Nike product and show

(continued...)

even if the final judgment rule were not a barrier to the Court’sreview of these objections, Nike’s failure to raise them belowprecludes their consideration now.

The only potentially case-dispositive issue presented aspart of Nike’s second question is the argument that the FirstAmendment does not permit a “private attorney general” actionunless it is brought by a plaintiff claiming personally to havesuffered harm. Although this issue arguably would satisfy thefourth Cox Broadcasting exception, it is not before the Courtbecause it was not raised or decided below. See Rule 14.1(i).Furthermore, Nike is asking this Court to declare a state statuteto be unconstitutional, at least on an as-applied basis, with nofactual record and no opportunity by the state courts to considerthe issue. In fact, the California Supreme Court’s recentdecision in Korea Supply Co. v. Lockheed Martin Corp., 29Cal. 4th 1134 (2003), indicates that California law does notpermit disgorgement of profits as a remedy to a plaintiff whosuffered no injury. Even if the Court has jurisdiction toconsider the issue, it should exercise its discretion to decline todo so in the absence of a full record and meaningfulconsideration by the California courts.4

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(...continued)4

detrimental reliance on Nike’s false statements, this litigationwould not end. Kasky’s counsel could amend the complaint toadd such an allegation or to add one of the thousands ofCalifornia consumers who could make such a claim.

Therefore, this Court has jurisdiction to decide, and inany event should decide, only whether there is at least oneallegedly actionable statement that is not barred by Nike’s FirstAmendment defense. As discussed below, several statementsreadily meet that standard. The remaining issues, “still subjudice in [California], [were] brought to this Court too soon.”Jefferson v. City of Tarrant, 522 U.S. 75, 77 (1997).Accordingly, the case should be remanded to the Californiacourts to decide the remaining issues presented in this case.

II. NIKE MAY BE SUED FOR FALSE ORMISLEADING FACTUAL REPRESENTA-TIONS DIRECTED AT CONSUMERSABOUT ITS LABOR PRACTICES.

Nike has made a number of specific, purely factualassertions to its customers about its labor practices. At thisstage in the litigation, the Court must accept as true Kasky’sallegation that these factual statements were false. Christopherv. Harbury, 536 U.S. 403, 406 (2002). Thus, Nike is claiminga right to disseminate false information to consumers about itsmanufacturing practices. Nike’s argument is flatly at odds withthe consumer and public interests that form the basis of theprotection afforded truthful commercial speech. The FirstAmendment has never afforded the protection that Nike seeks.

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In Virginia State Board of Pharmacy v. VirginiaCitizens Consumer Council, this Court recognized that truthfulcommercial speech is entitled to constitutional protectionbecause it permits consumers to serve their own self-interests,which may be more important to them than “the day’s mosturgent political debate.” 425 U.S. 748, 763 (1976). The Courtalso noted the public interest in consumers’ decisions being“intelligent and well informed.” Id. at 765. False informationonly frustrates these two constitutionally protected interests.As the Court has explained: “The First Amendment’s concernfor commercial speech is based on the informational functionof advertising. Consequently, there can be no constitutionalobjection to the suppression of commercial messages that donot accurately inform the public about lawful activity.” CentralHudson Gas & Elec. Corp. v. Public Serv. Comm’n, 447 U.S.557, 563 (1980) (citation omitted). Only regulation of truthfulinformation presents the possibility that the state is imposingpaternalistic goals on consumers and seeking to manipulateconsumer choice by keeping information from them. See Batesv. State Bar of Fla., 433 U.S. 350, 375 (1977); Virginia StateBd. of Pharmacy, 425 U.S. at 769-70; see also 44 Liquormart,Inc. v. Rhode Island, 517 U.S. 484, 497 (1996). Prohibitingfalse or misleading speech by businesses promotes informedconsumer choice and ensures that consumers are not “kept inignorance”—to borrow a phrase from Virginia State Board ofPharmacy, 425 U.S. at 769—by commercial speech itself.

Because the speech at issue is presumptively false, theinquiry performed in most commercial speech cases—whetherthe state regulation at issue is justified despite the barriers itcreates to consumers receiving truthful information—isinapplicable here. Thus, if the California Attorney General hadbrought this case, surely the First Amendment would not shieldNike from liability for any factual representations that were

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proven false. The same outcome follows here. The State ofCalifornia, by prohibiting false or misleading commercialspeech that misinforms consumers, seeks to serve the veryinterests identified in Virginia State Board of Pharmacy asworthy of constitutional protection.

A. Respondent’s Suit Targets SpecificFactual Assertions Directed at Consumers.

1. At least some of the speech identified in thecomplaint falls well outside the scope of Nike’s FirstAmendment defense. This speech was marked by the indicia towhich the Court has always looked in judging whether speechis commercial: It was directed to Nike customers, contained apromotional message, and was aimed at persuading consumersto buy its products. See, e.g., Bolger v. Youngs Drug Prods.Corp., 463 U.S. 60, 67-68 (1983). Moreover, Nike’s statementscontained a number of specific factual claims about its laborpractices that were readily verifiable by Nike and are fullycapable of being proven true or false.

One example is the December 1996 letter from Nike’sDirector of Sports Marketing to presidents and athletic directorsof more than 200 colleges and universities. Id., Exh. R. Nikemaintains endorsement contracts with more than 200 collegesthat agree to use—and thereby promote—Nike products. Id. at¶14. Sports endorsement contracts are so important that theyare the only marketing activity singled out for specific mentionin Nike’s annual reports year after year. See Nike, Inc., AnnualReports for the years 1997-2002, at Year in Review, availableat www.nikebiz.com.

In the letter to the college and university officials, Nikemade several specific claims about how its products are made

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to support its broader assertion that working conditions at itsoverseas factories meet established, identifiable standards:

First and foremost, wherever NIKE operatesaround the globe, it is guided by principles setforth in a code of conduct that binds its productsubcontractors . . . [and] strictly prohibits childlabor, and certifies compliance with applicablegovernment regulations regarding minimumwage and overtime, as well as occupationalhealth and safety, environmental regulations,worker insurance and equal opportunityprovisions. . . .

. . . [S]ome violations occur. However,we have been proud that in all material respectsthe code of conduct is complied with.

First Am. Compl., Exh. R (emphasis added).

The context in which these factual representations weremade—a letter from Nike’s marketing department to importantNike customers—indicates that Nike’s purpose was to promoteitself to customers, to persuade them to use Nike products. Therecipients of the letter were not prominent figures in the debateabout overseas labor practices. Rather, they were prominentNike customers and an important component in Nike’spromotional strategy. And Nike’s Marketing Director wasspeaking to them as part of the company’s effort to maintainand boost sales.

The complaint also cites a release entitled “Please,consider this. . . .” Id., Exh. P. Although the complaint doesnot explain how Nike used this document, the title andlanguage (e.g., “we’d like to share our perspective with you”)

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show that it was intended for consumers. Among other things,the document states: “Nike pays on average, double thegovernment-mandated minimum wage in the countries whereour footwear is produced.” A document making specificfactual assertions for consumers to “consider” is necessarilyintended to promote a commercial transaction.

Either of the above examples of allegedly false ormisleading speech is enough to maintain this suit. Otherallegedly false statements may be actionable as well, althoughthey are harder to assess at this early stage in the litigationbecause Nike’s use of the material and its intended audience isnot apparent from the face of the complaint. See, e.g., id., Exh.V at 549 (Pet. Lodg. at 220) (document entitled “NikeProduction Primer,” representing that average line-worker’swage in Nike’s Indonesia factory was double government-mandated minimum, that workers in Nike factories receivesubsidies for food and health care, and that they receiveovertime pay and paid leave).

These publications were prepared by Nike as part of acarefully-planned, sustained campaign to appeal to customersconcerned about Nike’s overseas labor practices. At thisthreshold stage, the Court could reasonably infer (and laterdiscovery may confirm) that they were prepared by Nike’smarketing department and released and promoted by its pressoffice in an effort to communicate directly with consumers.That is, Nike was not speaking merely to participate in a debateabout fair labor practices around the world or the value ofvarious worker benefits. It was speaking to promote andprotect its corporate image, an image that has long been at thecrux of its marketing campaign and its sales success. See, e.g.,Nike, Inc., 2002 Annual Report, Year in Review, available at

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www.nikebiz.com (“In communicating with consumers, wefocused on emotional expressions of the Nike personality.”).

Nonetheless, the most appropriate course given theposture of this case is for the Court not to sort through theseother statements. If the Court agrees that the letter from a Nikemarketing director to college and university officials or theNike release asking consumers to “consider this” is not subjectto Nike’s First Amendment defense, its jurisdiction is at an end.

2. The fact that Nike’s product marketing strategy isfocused on image marketing, rather than traditional productsales pitches, is of no constitutional significance. To be sure,many of the Court’s commercial speech cases have involvedstatements about price, as in Virginia State Board of Pharmacy,or ingredients, as in Rubin v. Coors Brewing Co., 514 U.S. 476(1995), or direct solicitation of clients, as in Florida Bar v.Went For It, Inc., 515 U.S. 618 (1995), or Edenfield v. Fane,507 U.S. 761 (1993). Nike, however, has consistently chosennot to focus its advertising on such features of its products butinstead to focus on creating and maintaining a strong brandidentity, which revolves around a swoosh and an image.Commercials showing Tiger Woods bouncing a ball on the endof a golf club, Pete Sampras stretching for a ball on the tenniscourt, or sweating athletes pushing themselves to “Just doit”—all are efforts to promote sales by associating Nike with animage that will attract consumers. These ads say nothing aboutprice and nothing about the materials used to manufactureproducts; they make no direct pitch that the viewer buy Nikegolf balls, shoes, or shirts. Rather, they ask consumers to buyinto the Nike image in the hope that they will then buy Nikeproducts. In Nike’s words, “We are here to inspire andmotivate the athlete in all of us and advocate the love ofsports.” First Am. Compl., Exh. A at 372 (Pet. Lodg. at 47).

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Presumably, not even Nike would argue that its imageadvertising was protected by the First Amendment if, forexample, the Federal Trade Commission could show that thegolf equipment used in a Tiger Woods commercial was notNike’s. Yet its “labor friendly” campaign is not meaningfullydistinguishable. Its value to Nike is its ability to enticeconsumers seeking labor-friendly products to purchase Nikeapparel and equipment and to forestall and negate criticism thatmight threaten sales. Any suggestion that Nike touted its laborpractices in full page advertisements in national newspapers(id., Exh. FF) only because it wanted to participate in a debateabout proper working conditions in Asia is disingenuous at bestand subject to being proven or disproven at trial.

B. The First Amendment Does Not ProtectFalse Marketing Statements Simply BecauseThey Relate To Controversial Topics.

No one, least of all Nike, contends that labor practicesdo not affect consumer choice. See Sourcing: Cheap v. Ethical,J. Am. Chamber Com. in Hong Kong, Sept. 1, 1997 (“Americanconsumers have shown that they are prepared to pay a fewdollars more for garments made in decent working conditions.Companies are realizing that it costs less to implement a codeof conduct than to regain consumer loyalty lost by badpublicity.”). A study by Marymount University revealed that78 percent of consumers would avoid stores that sell clothingmade under “sweatshop” conditions, and 84 percent would payfive percent more for clothing the manufacturer guaranteed wasnot made under such conditions. K. Cottril, Global Codes ofConduct, J. Bus. Strategy, May 1, 1996; see also US Br. 28 (“Intoday’s environment, the means used to produce goods, no lessthan the quality of the goods themselves, have profoundsignificance for some consumers, who are willing to pay more

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to achieve desirable environmental or social ends.”). And aplethora of business publications warn apparel retailers that apositive image regarding labor practices is essential formaintaining customer loyalty and market share. M.M. Hossain,Emerging Markets Database: The Debate on Labor Standards,The Independent, April 2, 2000; M. Scott, Can ConsumersChange Corporations?, Executive Female, May 15, 1996;Sourcing:Cheap v. Ethical, supra; N. Morris, Saving The BrandName, MacClean’s, Dec. 11, 1995, at 30. Thus, Nike has amarket-driven, economic incentive to promote itself as labor-friendly.

Nike’s own statements demonstrate that Nike wasspeaking for the purpose of influencing consumer purchasingdecisions. For example, Nike’s December 1996 letter in theSan Francisco Examiner spoke directly to “shoppers.” Nikestated that “consumers are savvy and want to know theysupport companies with good products and practices.” It alsostated that “during the shopping season, we encourage shoppersto remember” that Nike is a leader in improving factoryconditions and to “consider” that Nike established the sportsapparel industry’s first code of conduct “to ensure our workersknow and can exercise their rights.” First Am. Compl., Exh. S.

That the subject of Nike’s speech related to a matter ofpublic interest—the issue of what conditions should apply tocontracts for overseas production by American companies—does not affect the First Amendment analysis. Nike wasspeaking in the hope of inducing consumers to buy its products.The First Amendment presents no barrier to actions based onfalse factual statements in this context.

1. A connection to an issue of public interest does notmake otherwise commercial speech noncommercial and, a

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fortiori, does not immunize false speech from scrutiny. Bolger,463 U.S. at 68 (“We have made clear that advertising which‘links a product to a current public debate’ is not therebyentitled to the constitutional protection afforded noncommercialspeech.”); see Board of Trustees of State Univ. of N.Y. v. Fox,492 U.S. 469, 475 (1989). For example, the commercial speechat issue in Central Hudson was made by a utility, aboutelectricity regulation, during and because of a national debateon energy conservation. 447 U.S. at 561. Likewise, many ofthis Court’s most important commercial speech cases haveinvolved speech about controversial products or services. See,e.g., Lorillard v. Reilly, 533 U.S. 525 (2001) (cigarettes); 44Liquormart, 517 U.S. at 489 (alcohol); Posadas de Puerto RicoAssocs. v. Tourism Co. of P.R., 478 U.S. 328 (1986)(gambling); Zauderer v. Office of Disciplinary Counsel, 471U.S. 626, 629-30 (1985) (legal representation in drunk drivingcases and in product liability suits regarding Dalkon Shield);Bolger, 463 U.S. at 62 (contraceptives); see also Virginia StateBd. of Pharmacy, 425 U.S. at 764 (characterizing as “entirely‘commercial’” speech promoting artificial fur as alternative toextinction of fur-bearing animals and ad touting domesticallyproduced product as preserving American jobs).

Thus, Nike’s plea that the First Amendment protects itsfalse statements because they addressed a matter of publicconcern runs counter to the foundations of this Court’scommercial speech jurisprudence. Nike fails to appreciate thatthe protection afforded accurate commercial speech is based inpart on the importance of that speech to the public. VirginiaState Bd. of Pharmacy, 425 U.S. at 763-65. For this reason, theCourt has rejected the notion that a “line between publicly‘interesting’ or ‘important’ commercial advertising and theopposite kind could ever be drawn.” Id. at 765; see also Bates,433 U.S. at 364 (“Advertising, though entirely commercial,

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may often carry information of import to significant issues ofthe day.”). Public concern about Nike’s labor practices neitherdistinguishes this case from prior commercial speech cases norjustifies immunizing Nike’s allegedly false marketingrepresentations from judicial scrutiny.

In addition, to give full First Amendment protection toNike’s marketing speech merely because it appeals toconsumers based on social or political preferences wouldrequire the Court to engage in difficult and unjustified line-drawing concerning a vast array of consumer choices. Manyproduct characteristics that do not directly affect consumers areaccepted bases for marketing and purchasing products. Forexample, federal law requires that products bearing the label“Made in USA” must in fact have been made in the UnitedStates. 62 Fed. Reg. 63756, 63767-71 (1997) (FTC policyunder authority of 15 U.S.C. § 45). Consumers look for suchlabels based in part on a belief that U.S.-made products will beproduced in compliance with labor-friendly wage, labor, orhealth and safety laws. Surely, consumer purchasing choicesinfluenced by this label are no different from consumer choicesinfluenced by whether a product is made according to theproduction characteristics touted in Nike’s statements.

Similarly, a consumer’s choice when buying anautomobile may be influenced by concern about theenvironmental effect of vehicle emissions—for example, somepeople pay more for hybrid cars because they produce feweremissions. Under Nike’s theory, however, public debate overwhether vehicle emissions increase global warming wouldwarrant extending First Amendment protection to an automanufacturer’s false marketing claims about reduced emissionsfrom its vehicles. Other examples of product claims regardingcharacteristics that do not bear directly on tangible product

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characteristics, but unquestionably affect purchasing decisions,include “dolphin-free” tuna (tuna caught using nets that do notharm dolphins), “green” labels indicating products produced inways that meet certain environmental standards, productsbearing a “union label,” and representations that products werenot tested on animals.

The terms “public issue” and “controversy” have littlemeaning as tests for distinguishing between commercial andnoncommercial speech because so much of what corporationsdo is the subject of public interest or debate. Accordingly, fullyprotecting speech about any business practice that became asubject of public concern would mean that the morecontroversial or potentially hazardous a company’s products orpractices (e.g., cigarettes, pharmaceuticals), the greater licensethe company would have to make misrepresentations to thepublic. The Court should not countenance a theory underwhich the aspects of products or business about whichconsumers care most become those about which they are leastentitled to receive accurate information.

2. There is no principled basis under the FirstAmendment for distinguishing regulation through privateattorney general suits from regulation through actions broughtby state attorneys general or other government agencies.Therefore, granting full First Amendment protection to speechthat is related to controversy would sharply curtail the govern-ment’s traditional police power to regulate business conduct.See Ohralik v. Ohio State Bar Ass’n, 436 U.S. 447, 456 (1978)(state may regulate conduct carried out by means of speech).

For example, to protect the public’s investments, theSecurities and Exchange Commission regulates speech byrequiring and forbidding various corporate disclosures.

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Suppose a company negligently misreported its earnings, basedon accounting methods that were the subject of public contro-versy. Under Nike’s theory, the company would be entitled toclaim a First Amendment defense to a shareholder action.

To protect the health of consumers, the Food and DrugAdministration regulates much of what drug companies sayabout their pharmaceutical products. Suppose a pharmaceuticalcompany, in the debate over the efficacy of a certain cancertreatment, made representations about its cancer drug that werenot supported by the scientific evidence. Under Nike’s theory,the FDA might well be foreclosed from regulating such speech.

And as the Solicitor General points out, thegovernment’s regulatory power to enjoin fraud under theFederal Trade Commission Act, as well as under the numerousstate laws modeled after the FTC Act, runs counter to Nike’stheory in this case. US Br. 28.

Each of these regulatory agencies acts in areas ofsignificant public interest. Invalidating such regulation woulddrastically limit the traditional sphere of government policepower and open consumers to the misconduct that the policepower is meant to prevent. For this reason, if the questionpresented here arose in an action by a governmental agency, theSolicitor General would undoubtedly support the respondent.See US Br. 20.

3. Finally, allowing this suit to go forward would notplace companies at an impermissible disadvantage relative totheir customers. When a member of the public or a competitormakes a false statement about Nike’s practices, Nike can holdthe speaker accountable, consistent with state libel laws and theFirst Amendment. Morever, to the extent that Nike believed

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that this suit was brought to chill the exercise of its right tospeak with regard to a matter of public concern and was withoutlegal merit, Nike could have moved, within 60 days of serviceof the complaint, to strike the complaint under California’s anti-SLAPP statute. See Cal. Code Civ. Proc. § 425.16. Ifsuccessful, Nike would have been entitled to recover fromKasky its attorney fees and costs incurred in making themotion. Id. § 425.16(c).

Suits like this one brought under California Businessand Professions Code § 17200 make the playing field morelevel, by holding Nike accountable for its false speech. Such aresult is particularly appropriate because Nike has an inherentadvantage, as it can claim (and has claimed) first-hand accessto facts about its 800 overseas factories that its critics can neverattain. Assuming that the New York Times v. Sullivan standarddoes not apply in this lawsuit, see 376 U.S. 254, 279-80 (1964),less stringent speech protection would be justified by the factthat Nike’s speech has a commercial purpose, is robust, and isverifiable by Nike. Because Nike’s speech was intended toinfluence sales of its products, the First Amendment presents noimpediment to holding Nike responsible for the accuracy of itsfactual assertions.

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CONCLUSION

For the foregoing reasons, the Court should affirm thedecision of the California Supreme Court and remand the casefor further proceedings.

Respectfully submitted,

Alan B. Morrison Counsel of RecordAllison M. ZieveMarka PetersonScott L. NelsonDavid C. VladeckPUBLIC CITIZEN LITIGATION GROUP1600 20th Street, NWWashington, DC 20009(202) 588-1000

Counsel for Amicus Curiae April 2003 Public Citizen