Kasky vs Nike

Kasky vs Nike was the title of a landmark legal case in which Marc Kasky, a resident of San Francisco, launched a legal action in April 1998 against Nike in which he claimed that public statements by the company had misrepresented factory working conditions. At the heart of the case was that the statements made by the company were "commercial speech" and thereby subject to regulatory restrictions relating to false and misleading advertising an not protected by the U.S. Constitution's First Amendment. The case was settled out of court in September 2003.

Case Timetable

 * April 20th, 1998: Statement of Claim Filed by Kasky's lawyers in the Superior Court of the State of California;
 * Trial court supported Nike's claim that its CSR statements were protected speech and dismissed Kasky's complaint;
 * Kasky appeal against this decision was rejected;
 * May 2002: Kasky appealed against the lower court's decision to the California Supreme Court. They found 4-3 in favour of Kasky that Nike violated sections of the Business and Professions Code;
 * June 26, 2003: the U.S. Supreme Court declined to rule on Nike's appeal;
 * September 2003: The case was settled out of court.

The Case
The case began as a "private attorney general" action, using California's "business fraud" statute.

In the initial statement of claim, Kasky argued that Nike:

"...in order to maintain and/or increase its sales, made misrepresentations by the use of false statements and/or material omissions of fact, including but not limited to the following:
 * (a) claims that workers who make NIKE products are protected from and not subjected to corporal punishment and/or sexual abuse;
 * (b) claims that NIKE products are made in accordance with applicable governmental laws and regulations governing wages and hours;
 * (c) claims that NIKE products are made in accordance with applicable laws and regulations governing health and safety conditions;
 * (d) claims that NIKE pays average line-workers double-the-minimum wage in Southeast Asia;
 * (e) claims that workers who produce NIKE products receive free meals and health care;
 * (f) claims that the GoodWorks International (Andrew Young) report proves that NIKE is doing a good job and "operating morally"; and
 * (g) claims that NIKE guarantees a "living wage" for all workers who make NIKE products."

Kasky's lawyers, Alan Caplan and Philip Neumark argued that Nike should lose a significant share of profits on sales in California for a period of several years. More important than the "disgorgement" threat, however, was the prospect of turning over memos and files proving a decade of dissembling and outright lies about workers' wages and conditions.

(This was the legal team when the case was argued at the Supreme Court: Paul R. Hoeber argued the cause for respondent. With him on the brief were Alan M. Caplan, Roderick P. Bushnell, Patrick J. Coughlin, Randi Dawn Bandman, Albert H. Meyerhoff, and Sylvia Sum)

Somewhat surprisingly, the AFL-CIO legal department filed a brief to support Nike's "right to lie." In addition, Bob Herbert, the New York Times columnist and fierce critic of the company's sweatshop practices, wrote a column supporting the Nike position.

As is usual in such settlements, the terms are confidential; Nike does not have to say how much was paid to Kasky's lawyers to end the threat of discovery.

Owing to the settlement, the line between commercial and political speech remains indistinct. The advertising industry avers that this situation will force corporations to be restrained in entering the public arena on issues such as the environment or social issues, such as the treatment of workers. The prodigious output from "corporate social responsibility" practitioners in the years since Kasky was settled, however, makes it appear these fears are unfounded.

The case was settled in Sept. 2003, just as "discovery" was granted, thereby ending a golden opportunity to examine Nike documents which would likely have proven extensive knowledge of continuing "sweatshop" practices while Nike promotional material was proclaiming "leadership" in protecting the rights of contract employees in far-off factories.

Resources On The Kasky vs Nike Case

 * ReclaimDemocracy.org: http://reclaimdemocracy.org/nike/
 * Council of Public Relations Firms: http://www.prfirms.org/resources/nike/default.asp

Other SourceWatch Resources

 * Corporate Social Responsibility