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'Nike' means ‘victory’ no more
[September 12, 2003]

By Nicholas Provenzo

Justice is delayed is justice denied, so the saying goes. These words wring sadly true today with news of Nike’s settlement with political activist Marc Kasky. Kasky, acting under a broadly written California law that permits anyone to act as a “private attorney general,” sued Nike, claiming the company’s political statements in defense of its labor policies amounted to illegal false advertising. Despite not alleging any injury to himself, or even direct knowledge that Nike ever lied, the California Supreme Court ruled Kasky could proceed with his case. Nike’s last hope of avoiding trial was dashed when the U.S. Supreme Court abruptly dismissed the company’s appeal, after agreeing to decide the case and accepting more than 30 briefs (including one from CAC) in support of Nike. The Court never decided the merits, preferring to hide behind a tortured reading of jurisdiction to avoid deciding whether Nike’s speech was protected under the First Amendment.

To most of us, Nike’s right to defend itself publicly is clear. The right of free speech is first in the Constitution for a reason; without the freedom to express oneself to others, the ability to think, act, and live is fatally compromised. The individual right of speech, moreover, is not lost or diminished when men join together to form corporations or other associations. Nor is the right of speech dependent on a speaker’s motive. The Supreme Court, unfortunately, believes that “economic” motives are less worthy of First Amendment protection than “political” motives. This false dichotomy has caused much judicial mischief over the years, culminating in Kasky’s lawsuit based on the theory that speech that might influence a consumer’s purchasing decision is “commercial,” thus not constitutionally protected.

In settling with Kasky, Nike has ratified the constitutional segregation of commercial speech, even if the settlement technically admits no legal fault and establishes no formal legal precedent. We have seen time and again how a single settlement empowers the parasites of the American trial bar to file greater and bolder complaints. It is only a matter of time, perhaps just days or weeks, before other major companies (including those that filed briefs in support of Nike) find themselves at the mercy of California’s citizens, each of whom possess the power under state law to sue any company they dislike for whatever reason.

Defenders of Nike’s decision will offer pragmatic arguments. They’ll claim the cost of refuting Kasky’s claim through discovery, trial, and another round of appeals is too much for Nike to bear, and that it’s in the best interest of Nike and its shareholders to pay Kasky off now and live to fight another day. This form of pragmatism is known as appeasement: If we give our enemy what he wants now, maybe he’ll leave us alone.

Yet reason dictates that appeasement almost always leads to more appeasement, and ultimately to wholesale capitulation. Whatever short-term benefit Nike gained from this settlement will be lost under the weight of the numerous lawsuits that are sure to come from other opponents of the company. Nike’s own press release justifying its settlement with Kasky underscores this point: Nike says that due to the difficulties posed by the California law, it has decided not to issue its corporate responsibility report externally for 2002 and will continue to limit its participation in public events and media engagement in California. What could possibly be more important to Nike than its freedom to participate in public events and media engagement in California, or any other state in the union?

The particular form of Nike’s settlement provides another disturbing harbinger of what is likely to come. Nike agreed to give $1.5 million to the Fair Labor Association, a Washington interest group that promotes “international labor standards.” What is disturbing is not that FLA is getting this money, but that Nike’s financial generosity does not extend to the businesses and interest groups, (frankly, like CAC), that supported the company’s rights before the Supreme Court. With just a fraction of what FLA received, pro-freedom groups could mount a serious campaign to repeal the California law that Nike was forced to settle under. They could renew the legal battle before the Supreme Court. They could expand the coalition of businesses and groups that support free speech rights. They could do all that and more. Yet Nike doesn’t seem to care much about defending principles, only with settling the crises-of-the-moment.

The group that should be most outraged by this settlement, however, is the same group Nike will claim its protecting—the company’s shareholders. Now Nike’s shareholders are faced with a diminished company that is subject to future legal attacks. Had Nike defended itself to the end, it would likely have prevailed over Kasky, and projected an image of corporate strength; as things stand now, Nike is a wounded animal ripe for the picking by other sundry activists. After all the recent talk about improving corporate management, shareholders must demand greater accountability from managers when it comes to fighting meritless litigation. At a minimum, managers must stand up for a company’s basic constitutional rights.

The business community as a whole must also reassess how they deal with bankrupt regulatory regimes like those in California. The “private attorney general” statute is one of the worst excesses of California’s infamous anti-business culture; no other state employs a statute that broad in scope and potential for damage. Obviously business leaders must immediately begin the fight for the statute’s repeal. But that may not be enough. The immorality of California’s regulatory culture is so entrenched, that bold, decisive action ought to be on the table.

One immediate step worth considering would be a refusal by businessmen to engage in any business advertising within the state, (a move that might actually please Marc Kasky, since his goal was to stop Nike from defending itself in print), but would strike terror in the hearts of California legislators. A boycott of paid advertising would inflict enough economic damage to get California officials to rethink their failure to defend economically motivated speech.

Now that Nike has abandoned its case before the courts, decisive action of some sort is necessary if businesses are to have a fighting chance in the Golden State. The only other option is to follow Nike’s example of appeasement.

 

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