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Nike v Kasky nears resolution

June 2003

A US Supreme Court ruling on the Nike v Kasky case, which has brought social reporting into the spotlight in the US, could be delivered as early as the end of this month.

The judges have now heard oral argument in the case, which it is hoped will help to clarify the free speech rights of companies, and are considering their decision. Although this could take until the autumn, most observers expect a decision in the next few weeks.

The case follows a California court ruling in May 2002 that public statements made by Nike defending its foreign labour practices were ‘for the purpose of promoting sales of its products’. If those statements were later shown to be incorrect, they would infringe state laws on advertising that bar ‘false and misleading commercial messages’.

Nike’s counsel, Laurence Tribe, told the Supreme Court the ruling would stop companies from making statements or reports on their CSR practices for fear of laying themselves open to legal action. Calling for the California ruling to be overturned, Tribe said this ‘chilling effect’ would end the ‘lively political dialogue about the realities of the Third World and Nike’s role in it’. Nike last year suspended publication of its CSR report as a result of the judgement and, in a new move, has refused to hand over information to the compilers of the Dow Jones Sustainability Indexes for fear it could fall foul of the ruling. It is also refusing to talk to the media about its CSR initiatives until the Supreme Court clarifies the position.

However, Paul Hoeber, counsel for Kasky, told the Supreme Court that the measure was merely an attempt to ensure companies tell the truth when making statements relating to their social responsibilities.

Nike was supported by a large number of organizations, which filed supporting briefs. Among them were companies, trade bodies including the US Chamber of Commerce, non-governmental bodies and more than 30 media organizations, among them the New York Times and CNN. Organizations filing in support of the respondent Kasky included the National Association of Consumer Advocates, the socially responsible investment firm Domini Social Investments, environmental group The Sierra Club and the National Association of Consumer Advocates.

Crucially, however, Nike’s appeal was backed by the US government. Solicitor general Ted Olson argued that the potential for abuse of the California ruling ‘is difficult to overstate’.

Despite this, some observers, including Cynthia Williams, associate professor of law at the University of Illinois, believe the outcome will be hard to predict and the case could even be held over and re-argued.

Williams is one of the authors of the brief filed in support of the social activist Marc Kasky by Domini, KLD Research and Analytics and Harrington Investments, which argues government ‘has a role to play in ensuring that facts of commercial significance are accurate’.

There has been little sign of other companies following Nike’s example and ceasing to publish details of their social and environmental performance.

Adam Kanzer, general counsel for Domini, said the chilling effect was a ‘smokescreen’. He argued the California ruling would make companies take a harder look at their CSR statements, ‘which is a good thing for everyone’.




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