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US libel suit aims at silencing shareholder

April 2004

Cintas Corp, North America’s largest uniform maker, is bringing a libel action against an investor who at the annual shareholders’ meeting accused the company of using a supplier that employs sweatshop labour.

Tim Smith, senior vice-president of the Boston investment firm Walden Asset Management, introduced a resolution on the compliance of vendors and suppliers with the Cintas code of conduct and accused the company of using a factory in Haiti, ‘which is a poster child for sweatshops’.

In its action, Cintas claims Smith made his statements ‘with actual knowledge that they were false’ or ‘at the very least, with reckless disregard to their false and defamatory nature’. It accuses him of relying solely on a biased report by the Union of Needletrades, Industrial and Textile Employees. Cintas is also suing the union for libel.

The move is particularly significant because Smith is the former executive director of the Interfaith Center for Corporate Responsibility and is now president of the US Social Investment Forum.

Adam Kanzer, shareholder advocacy director at Domini Social Investments, who co-filed the resolution, said: ‘This is a very disturbing development. Shareholders need to be able to ask hard questions at annual meetings without fear of being sued.’ The action could become a groundbreaking sequel to the Kasky v Nike case, which was eventually settled out of court (EP5, issue 5). Cincinnati-based Cintas claims to be the largest supplier of uniforms in North America, with more than 27,000 staff and 500,000 customers.




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