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Business’ Right to Free Speech Imperiled

Business’ Right to Free Speech Imperiled

Opinion

by M. David Stirling

California’s gross state product of $1.344 trillion puts the Golden State among the world’s six largest economies, just before or after France, depending on the dollar’s fluctuating exchange rate.

Most remarkable, however, is that 90 percent of that GSP is generated by private industry through its output of goods and services.

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It’s no small matter, then, that the U.S. Supreme Court is being asked to review a decision of the California Supreme Court which, if allowed to stand, will profoundly diminish the First Amendment free speech protection of those commercial enterprises that generated California’s GSP.

The issue has to do with whether a company may speak out on questions of public policy which relate to the company’s business. So unexpected and unprecedented was the state High Court’s ruling that most companies doing business in California still are not aware of its potential impact on their commercial activities or the legal liability it could impose on them.

When, in 1996, Oregon-based Nike Corp. became the prime target of accusations of sweatshop labor practices among its foreign subcontractors of 550,000 manufacturing workers , mostly in China, Vietnam and Indonesia , it defended its corporate image through full-page newspaper ads, letters to the editor, letters to university presidents and athletic directors, and other public statements.

San Francisco activist Marc Kasky, suspecting that Nike’s public statements were not completely accurate, sued Nike under California’s Unfair Business Practices Act. Never before had anyone attempted to use this law to pressure a company to change its labor practices in other countries. Kasky’s suit was dismissed by both the trial court and state court of appeals.

On review, the California Supreme Court ruled, in a 4-3 decision, that while Nike’s public statements did defend the company’s foreign labor practices, their primary purpose was to encourage consumers to buy Nike’s products.

As such, the majority held, Nike’s statements were not deserving of free speech protection as they were more akin to advertising than to protected policy debate. So incognizant was the majority’s interpretation of Supreme Court precedent calling for “breathing space” in public policy debate, that Justice Janice R. Brown’s dissent practically pleaded with the U.S. Supreme Court to take the case on review.

Justice Ming W. Chin’s strong dissent stated: “While Nike’s critics have taken full advantage of their right to uninhibited, robust, and wide-open debate, the same cannot be said of Nike, the object of their ire. When Nike tries to defend itself from these attacks, the majority denies it the same First Amendment protection Nike’s critics enjoy. Because Nike sells shoes , and its defense against critics may help sell those shoes , the majority asserts that Nike may not freely engage in the debate. The majority today refuses to honor a fundamental commitment and guarantee that both sides in a public debate may compete vigorously , and equally , in the marketplace of ideas.”

By relegating Nike’s public statements to unprotected “commercial” status, the state Supreme Court majority imposed severe consequences on companies doing business in California. Under the state’s vague, subjective, and overreaching Unfair Business Practices Act, any plaintiff , even one who himself suffers no damage , may, on behalf of the public, trigger the seizure of all a company’s profits from the sale of its products in California, whenever a jury believes the company’s statements “might deceive or confuse” the public.

Only by remaining completely mute on matters of public policy that relate to its business may companies doing business in California be certain of avoiding this ruling’s dire economic impact.

With a carried-over $25 billion debt, an anti-business Legislature for years to come, an excessively litigious legal culture and onerous regulatory burdens, California is not a friendly environment for doing business. Suppressing the free speech protections of the productive commercial enterprises that generate 90 percent of California’s GSP will only make matters worse.

Stirling is vice president of Pacific Legal Foundation, a public interest legal organization that defends free enterprise in the courts.

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