Kasky v. Nike, Inc.
| Decision Date | 02 May 2002 |
| Docket Number | No. S087859.,S087859. |
| Court | California Supreme Court |
| Parties | Marc KASKY, Plaintiff and Appellant, v. NIKE, INC., et al., Defendants and Respondents. |
Law Offices of Paul R. Hoeber, Paul R. Hoeber; Bushnell, Caplan & Fielding, Alan M. Caplan, Philip Neumark, Roderick P. Bushnell, San Francisco; Milberg Weiss Bershad Hynes & Lerach, William S. Lerach, Patrick J. Coughlin, Albert H. Meyerhoff, Frank J. Janecek, Jr., and Patrick W. Daniels, San Diego, for Plaintiff and Appellant.
Bill Lockyer, Attorney General, Richard M. Frank, Chief Assistant Attorney General, Herschel T. Elkins and Louis Verdugo, Assistant Attorneys General, Ronald A. Reiter, Phyllis Cheng and Michele R. Van Gelderen, Deputy Attorneys General, as Amici Curiae on behalf of Plaintiff and Appellant.
Law Offices of Carroll & Scully, Charles P. Scully II and Donald C. Carroll, San Francisco, for California Labor Federation, AFL-CIO as Amicus Curiae on behalf of Plaintiff and Appellant.
Aaron Isherwood, San Francisco, for the Sierra Club, Environmental Defense and California Certified Organic Farmers as Amici Curiae on behalf of Plaintiff and Appellant.
Brobeck, Phleger & Harrison, David J. Brown, James N. Penrod and Robert P. Varian, San Francisco, for Defendants and Respondents.
Deborah J. La Fetra and Mark T. Gallagher for Pacific Legal Foundation as Amicus Curiae on behalf of Defendants and Respondents.
Cadwalader, Wickersham & Taft, Los Angeles, Steven G. Brody; Preuss Shanagher Zvoleff & Zimmer and Alan J. Lazarus, San Francisco, for Product Liability Advisory Council, Inc., as Amicus Curiae on behalf of Defendants and Respondents.
Fred J. Hiestand, Sacramento, for the Civil Justice Association of California as Amicus Curiae on behalf of Defendants and Respondents.
Ann Brick, San Francisco, for American Civil Liberties Union of Northern California, Inc., as Amicus Curiae on behalf of Defendants and Respondents.
Certiorari Granted January 10, 2003. See 123 S.Ct. 817(2).
Acting on behalf of the public, plaintiff brought this action seeking monetary and injunctive relief under California laws designed to curb false advertising and unfair competition. Plaintiff alleged that defendant corporation, in response to public criticism, and to induce consumers to continue to buy its products, made false statements of fact about its labor practices and about working conditions in factories that make its products. Applying established principles of appellate review, we must assume in this opinion that these allegations are true.
The issue here is whether defendant corporation's false statements are commercial or noncommercial speech for purposes of constitutional free speech analysis under the state and federal Constitutions. Resolution of this issue is important because commercial speech receives a lesser degree of constitutional protection than many other forms of expression, and because governments may entirely prohibit commercial speech that is false or misleading.
Because the messages in question were directed by a commercial speaker to a commercial audience, and because they made representations of fact about the speaker's own business operations for the purpose of promoting sales of its products, we conclude that these messages are commercial speech for purposes of applying state laws barring false and misleading commercial messages. Because the Court of Appeal concluded otherwise, we will reverse its judgment.
Our holding, based on decisions of the United States Supreme Court, in no way prohibits any business enterprise from speaking out on issues of public importance or from vigorously defending its own labor practices. It means only that when a business enterprise, to promote and defend its sales and profits, makes factual representations about its own products or its own operations, it must speak truthfully. Unlike our dissenting colleagues, we do not consider this a remarkable or intolerable burden to impose on the business community. We emphasize that this lawsuit is still at a preliminary stage, and that whether any false representations were made is a disputed issue that has yet to be resolved.
This case comes before us after the superior court sustained defendants' demurrers to plaintiffs first amended complaint. We therefore begin by summarizing that complaint's allegations, accepting the truth of the allegations, as we must, for the limited purposes of reviewing the superior court's ruling. (See Stevenson v. Superior Court (1997) 16 Cal.4th 880, 885, 66 Cal. Rptr.2d 888, 941 P.2d 1157; accord, Charles J. Vacanti, M.D., Inc. v. State Comp. Ins. Fund (2001) 24 Cal.4th 800, 807, 102 Cal.Rptr.2d 562, 14 P.3d 234; Santa Monica Beach, Ltd. v. Superior Court (1999) 19 Cal.4th 952, 957, 81 Cal. Rptr.2d 93, 968 P.2d 993.)
Plaintiff Marc Kasky is a California resident suing on behalf of the general public of the State of California under Business and Professions Code sections 17204 and 17535.1 Defendant Nike, Inc. (Nike) is an Oregon corporation with its principal place of business in that state; Nike is authorized to do business in California and does promote, distribute, and sell its products in this state. The individual defendants (Philip Knight, Thomas Clarke, Mark Parker, Stephen Gomez, and David Taylor) are officers and/or directors of Nike.
Nike manufactures and sells athletic shoes and apparel. In 1997, it reported annual revenues of $9.2 billion, with annual expenditures for advertising and marketing of almost $1 billion. Most of Nike's products are manufactured by subcontractors in China, Vietnam, and Indonesia. Most of the workers who make Nike products are women under the age of 24. Since March 1993, under a memorandum of understanding with its subcontractors, Nike has assumed responsibility for its subcontractors' compliance with applicable local laws and regulations concerning minimum wage, overtime, occupational health and safety, and environmental protection.
Beginning at least in October 1996 with a report on the television news program 48 Hours, and continuing at least through November and December of 1997 with the publication of articles in the Financial Times, the New York Times, the San Francisco Chronicle, the Buffalo News, the Oregonian, the Kansas City Star, and the Sporting News, various persons and organizations alleged that in the factories where Nike products are made workers were paid less than the applicable local minimum wage; required to work overtime; allowed and encouraged to work more overtime hours than applicable local law allowed; subjected to physical, verbal, and sexual abuse; and exposed to toxic chemicals, noise, heat, and dust without adequate safety equipment, in violation of applicable local occupational health and safety regulations.
In response to this adverse publicity, and for the purpose of maintaining and increasing its sales and profits, Nike and the individual defendants made statements to the California consuming public that plaintiff alleges were false and misleading. Specifically, Nike and the individual defendants said that workers who make Nike products are protected from physical and sexual abuse, that they are paid in accordance with applicable local laws and regulations governing wages and hours, that they are paid on average double the applicable local minimum wage, that they receive a "living wage," that they receive free meals and health care, and that their working conditions are in compliance with applicable local laws and regulations governing occupational health and safety. Nike and the individual defendants made these statements in press releases, in letters to newspapers, in a letter to university presidents and athletic directors, and in other documents distributed for public relations purposes. Nike also bought fullpage advertisements in leading newspapers to publicize a report that GoodWorks International, LLC, had prepared under a contract with Nike. The report was based on an investigation by former United States Ambassador Andrew Young, and it found no evidence of illegal or unsafe working conditions at Nike factories in China, Vietnam, and Indonesia.
Plaintiff alleges that Nike and the individual defendants made these false and misleading statements because of their negligence and carelessness and "with knowledge or reckless disregard of the laws of California prohibiting false and misleading statements."
Based on these factual allegations, plaintiffs first amended complaint sought relief in the form of restitution requiring Nike to "disgorge all monies ... acquired by means of any act found ... to be an unlawful and/or unfair business practice," and relief in the form of an injunction requiring Nike to "undertake a Court-approved public information campaign" to correct any false or misleading statement, and to cease misrepresenting the working conditions under which Nike products are made. Plaintiff also sought reasonable attorney fees and costs and other relief that the court deemed just and proper.
Nike demurred to the first amended complaint on grounds, among others, that it failed to state facts sufficient to constitute a cause of action against Nike and that the relief plaintiff was seeking "is absolutely barred by the First Amendment to the United States Constitution and Article I, section 2(a) of the California Constitution." The individual defendants separately demurred to the first amended complaint on the same grounds.
On January 7, 1999, the superior court held a hearing on defendants' demurrers. At the hearing, the court stated that it considered the crucial question to be whether Nike's allegedly false and misleading statements noted in the first amended complaint constituted commercial or...
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