Nike’s lawyer, Harvard Law Professor Lawrence Tribe, said that a lawsuit challenging the company’s publicity campaign should be dismissed because it violates Nike’s free-speech rights. He said the California Supreme Court’s ruling allowing the lawsuit to go forward was “making the courts pawns in a public debate,” allowing corporations to be silenced by the threat of expensive and burdensome litigation.

The case centered around a lawsuit filed by San Francisco consumer activist Marc Kasky in 1998 accusing Nike of false advertising through its public campaign aimed at defending itself against allegations that its shoes are made in sweat shops. The California Supreme Court upheld the lawsuit and Nike appealed to the Supreme Court.

Tribe argued that Nike has a right to respond to charges against it, which he said would be infringed by lawsuits like Kasky’s. “The only solution that Nike is given is to talk in vague generalities,” Tribe said.

Justice Anthony M. Kennedy responded to Tribe’s argument by asking if he expected the court to rule that “a civil scheme of this type is so burdensome, so expensive, that it chills speech?”

San Francisco lawyer Paul Hoeber, representing Kasky, maintained that the California Supreme Court ruling did not silence Nike, but applied only to “factual statements about how products are made,” uttered “for the purpose of selling a product.”

“Once you tie a party’s hands behind its back in respect to facts, you’ve silenced them,” said Justice Stephen G. Breyer.
In response to questioning from Justices Breyer and Antonin Scalia, Hoeber maintained that preserving the right to sue corporations for false advertising is a protection that consumers deserve.

U. S. Solicitor General Ted Olsen, who filed a brief supporting Nike on behalf of the Bush administration, cited the ruling’s potential for abuse, saying that “California has transferred its authority to regulate communication to anyone” who can afford a filing fee.

Any corporation that sells or advertises in a state can be sued under that state’s laws.

In 1996, a number of news articles and television shows depicted workers in Nike’s overseas factories getting paid less than local laws allow and subjected to unfair and hazardous work practices. Nike responded with a number of unconventional public relations efforts, including statements on the corporate website, letters to the athletic directors of major universities, press releases and letters to newspapers.

A California resident, Kasky took the company to court under an unusual article of the California Business and Professions code, which allows any citizen to bring suit for practices prohibited by the code, a right usually reserved the state’s attorney’s. Nike claimed that the grounds for the lawsuit were insufficient and violated free-speech rights under both the U.S. and California Constitutions. Nike’s objections were upheld, and a California court ordered the case dismissed.

The court said Nike’s campaign was a contribution to public debate on a political issue, rather than a clearly commercial form of speech such as a paid advertisement for a specific product.

Over the years, a body of Supreme Court law has emerged that makes it drastically difficult for the government to legally restrict political speech, or for individuals or corporate entities to claim damages for false or damaging statements made in the course of public debate on political or social issues. However, the court has ruled on several occasions that “commercial speech” is less entitled to the protection of the First Amendment than other speech, which allows the public and government to hold businesses and their officers accountable for false advertising practices.

Exactly where the line between commercial and political speech is to be drawn has remained vague.

On Kasky’s second appeal, the California Supreme Court overturned the dismissal in a decision that held Nike’s campaign to be commercial under a broad definition that holds speech to be commercial if “it is likely to influence consumers in their buying decisions” and “the speaker has a financial or commercial interest” in affecting such influence.

The outcome of the U.S. Supreme Court’s deliberations may rest on Justices Kennedy and Sandra Day O’Connor, frequently the swing votes on close decisions.