Its open season on Corporate America. Somewhere between the tech stock bubble bursting and the first Enron executive testifying, an army of special interest groups, anti-globalization ideologues and trial lawyers awakened to the smell of opportunity, and sprang into action.
Class action lawsuits have been filed against McDonalds on behalf of customers who claim the company made them fat; soft drinks are being banned in schools, their manufacturers accused of contributing to juvenile diabetes and the nations "obesity epidemic"; corporate execs are being publicly attacked by womens groups for their membership in the private Augusta National Golf Club; and anti-globalization mobs are staging sit-ins and cyber attacks against a laundry list of corporate targets at upcoming IMF/World Bank meetings.
In this type of hostile environment, a companys very existence depends on its ability to quickly and thoroughly defend itself against scurrilous attacks in the court of public opinion. That ability has been placed in serious jeopardy by a California Supreme Court decision, which has dealt anti-business activists a powerful new card.
In May, the court ruled that public statements by Nike, Inc. -- including press releases and letters to newspaper editors -- in response to public accusations leveled against its overseas labor practices, constituted "commercial speech." That designation strips Nikes statements of their full First Amendment protections, and places them in the same category as the companys explicit product advertisements for purposes of applying state laws barring false and misleading advertising.
Nike is asking the U.S. Supreme Court to review the decision. Without the High Courts intervention, the company will have to stand trial in a lower state court against California resident Mark Kasky, who, under the states rigid consumer protection laws, filed a claim -- without having to show any personal harm -- alleging Nikes public relations campaign contained false or misleading statements. If found liable, Nike could be forced to surrender all profits attributable to the statements.
The California Supreme Courts decision is based on a bizarre, arbitrarily selective interpretation of the High Courts precedent on this subject. The U.S. Supreme Court has long protected a corporations right to contribute to matters of public interest and to openly defend itself in public debate.
If allowed to stand, the Nike decision will have a profoundly chilling effect on the free speech rights of all corporations, regardless of where they are based or where they speak. Nike, which is based in Oregon, was accused, in part, of making false statements which appeared in the New York Times, but were distributed in California.
With the varied and increasing number of attacks on corporations, as well as the publics demand for corporations to speak out on controversial issues, the paradox for Nike and other corporate entities in the wake of the California Supreme Courts decision is how to continue to engage in the public debate without fear of being dragged into a courtroom every time they open their mouths.
The Nike decision warrants action by the U.S. Supreme Court. On review the Court should reverse the California Supreme Courts ruling, directly confront the conflict that has arisen over the growing gray area between commercial and noncommercial speech, and reestablish the fundamental right of corporations to fully and freely contribute to the open flow of information in the "marketplace of ideas."September 26, 2002