The California Supreme Court Story

Nike Can’t Just Say It, Court Rules

-- Los Angeles Times headline, May 3, 2002⁸³

Paul Hoeber appeared to be on the ropes.⁸⁴ Standing before the California Supreme Court on February 6, 2002, the day of oral arguments in Kasky v. Nike, the appellant’s lawyer defiantly assaulted the lower court’s judgment, but received blow after blow from the most skeptical of the jurists. Justice Brown led the attack on Hoeber’s argument that Nike’s communications were false commercial statements that receive no constitutional protection. Brown, the morally conservative and economically libertarian African-American,⁸⁵ seemed incredulous that Nike statements could be any less protected in this context than if the company had uttered them in testimony before the California legislature regarding a bill to regulate sweatshops. “Aren’t they allowed to say that? Isn’t it protected?,” she questioned. “You are reading something into [the company’s statements] to make it commercial.” When Hoeber held his ground, arguing that the context may be all-determinative, Justice Marvin R. Baxter delivered the next punch. Defining Nike’s communications as constitutionally unprotected speech, Baxter observed, would result in “a debate with one participant with his hands tied behind his back.”

Not all of the justices seemed entirely unsympathetic to Hoeber’s contentions, however. Justice Kennard took up a lance for the Kasky cause, asking: “Why can’t the state regulate such false and misleading statements?” Again and again, Kennard zeroed in on Kasky’s charge of false advertising: “I don’t think we can simply disregard that. That, I think, is the crux of the case here.” When the verbal contest ended, however, it seemed, at least to the press, that the California high court was leaning toward Nike’s side. The next day, the headline of The Legal Intelligencer’s article on the case read: “Nike’s Ads Not Actionable, Justices Hint.”

That hint, however strong, ultimately proved deceptive. When the California Supreme Court issued its judgment on May 2, 2002, Nike had lost.⁸⁶ By a slim margin, the Court voted 4-3 that Nike could be found liable for its allegedly deceptive public statements regarding its labor practices. In other words, those communications were commercial speech for which the company could be held civilly liable under California’s consumer protection statutes.

Justice Kennard, Kasky’s champion during oral arguments, wrote the opinion of the Court, joined by Chief Justice George and Associate Justices Werdeger and Carlos A. Moreno. Recognizing that the U.S. Supreme Court had not succeeded in formulating an “all-purpose test”⁸⁷ to distinguish commercial from non-commercial speech, the majority strove for much less. It provided merely a “limited-purpose test,”⁸⁸ one suited only for cases in which “a court must decide whether particular speech may be subjected to laws aimed at preventing false advertising or other forms of commercial deception.”⁸⁹ Under that test, the Court held, Nike’s communications must be considered commercial expression subject to California’s consumer protection regulations.

The “limited-purpose test” required consideration of three elements: the identity of the speaker, the identity of the intended audience, and the content of the message.⁹⁰ In a typical commercial speech case, the speaker would be someone engaging in commerce, “that is, generally, the production, distribution, or sale of goods or services.”⁹¹ The audience normally would be the “actual or potential buyers or customers . . . or persons (such as reporters or reviewers) likely to repeat the message” to those targets.⁹² Finally, the message’s factual content “should be commercial in character.”⁹³ Usually, this would include “representations of fact about the business operations, products, or services of the speaker . . . made for the purpose of promoting sales of, or other commercial transactions in, the speaker’s products or services.”⁹⁴