SACRAMENTO — The battle over conditions at Nike Inc.’s overseas factories moved to the California Supreme Court on Wednesday, with the justices considering a lawsuit accusing the apparel maker of a consumer whitewash violating California’s false advertising laws.
The case balances a corporation’s right to defend itself against bad publicity with the right of California consumers to be free from deceptive advertising.
The highly publicized suit, which has been dismissed by a trial court and a state appeals court, claims Nike’s 1996-1997 campaign in defense of its wages, treatment of workers and health and safety conditions at Asian plants run by contractors was a misleading business practice.
During an hour of oral arguments here, the justices teetered back and forth on whether Nike’s defense was “political speech” protected by the First Amendment or commercial speech subject to a California consumer protection law that is one of the nation’s least friendly to businesses.
The same law was invoked in a suit against the Joe Camel advertising campaign on the grounds that it promoted illegal cigarette sales to minors. R.J. Reynolds denied the allegation but dropped the ads and settled the suit.
Consumer attorneys seeking reinstatement of the case against Nike argued that the Beaverton, Ore.-based company defended itself against a huge public backlash in a way that promoted its products.
“When the critics said you are running sweat shops and you should not buy Nike shoes, Nike said, ’No, no, no, these charges are false,”’ argued attorney Paul R. Hoerber. “In that context, the meaning connected to those statements: ‘You should buy shoes.”’
But some of the court’s justices were concerned that it would be impossible for a company to defend its actions — truthfully or falsely — without there being some type of financial motive.
“You are reading into whatever they do as economic motivation,” Justice Janice Rogers Brown said.
Not all the justices seemed sympathetic to Nike’s plight.
Justice Joyce L. Kennard said: “The Constitution doesn’t give blanket protection to false and misleading statements.”
And Chief Justice Ronald M. George said Nike’s image campaign was based on selling shoes.
“Wasn’t the ultimate goal to sell more of the company’s products by making these statements?” George asked.
“I do not think that is exactly correct,” replied Nike attorney David Brown. He said the company engaged in “classic political debate” protected by the First Amendment and added that “maybe the statements were true, maybe they were false.”
A state appeals court found that Nike’s image campaign was not regulated by California false-advertising laws but was protected First Amendment speech in defense of its corporate reputation.
The company issued press releases denying abuses and cited a favorable report it had commissioned by Andrew Young, former United States ambassador to the United Nations.
The suit said Nike has falsely stated that it guarantees a “living wage” to all workers, that its workers in Southeast Asia make twice the local minimum wage and are protected from corporal punishment, and that it complies with government rules on wages, hours and health and safety conditions.
Those claims are refuted by studies by labor and human rights groups, news media investigations and — most damaging of all — a January 1997 audit by the firm of Ernst & Young, commissioned by Nike, the suit said.
Among other things, the audit found that employees in a large Vietnam shoe factory were exposed to cancer-causing toluene and suffered a high incidence of respiratory problems, according to the suit.
The case is Kasky v. Nike Inc., S087859. The court is expected to rule within 90 days.