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July 2017 Issue

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Kasky v. Nike: A Retrospective on the First Amendment

by By Grace Chuchla, lIrell & Manella LLP

Fifteen years ago, the California Supreme Court issued a decision that commentators described as “irreconcilable” with Supreme Court precedent and likely to “cut[] the heart out of the First Amendment’s protections for statements by commercial entities on nearly every public issue.”   Others were more blunt and simply stated that “we are indeed in trouble” if this decision remains the law.   This decision was Kasky v. Nike, where the court upheld Mr. Kasky’s right to sue Nike under Business and Professions Code §§ 17200 and 17500 based on allegations that Nike, in response to public criticism about working conditions in its international factories, made false statements regarding its labor standards.     

To nobody’s great surprise, the Supreme Court accepted cert to resolve the First Amendment issues inherent in this decision.   But to everyone’s great surprise, instead of reaching the merits, the Supreme Court dismissed cert as improvidently granted.   This left Kasky as good law, which only fanned the firestorm following the California Supreme Court’s decision.  Now, with fifteen years of hindsight, it is time to ask what has become of Kasky.  Have commentators’ predictions held true?  Reviewing the case law citing Kasky reveals that these predictions may have been overblown, as courts have not given Kasky the sweeping power that its text would seem to allow.  

Subsequent treatment of Kasky

Perhaps the most surprising feature of cases citing Kasky is the fact that many read Kasky’s test for what constitutes commercial speech as no different than the Supreme Court’s test.  This minimizes the impact of Kasky’s creation of a “limited purpose test” to distinguish commercial and noncommercial speech, which was one of the aspects of Kasky that most worried commentators.   As one commentator explained, by minimizing the intent requirement in the Supreme Court’s commercial speech test, “no corporate speaker can escape the limited purpose test in any of its public utterances.”   

For instance, JAMS v. Superior Court described the Kasky test as requiring an analysis of “whether the speech is intended to induce a commercial transaction,” despite the fact that the lack of an intent element was one of the key features distinguishing Kasky from Supreme Court precedent.   Rezec v. Sony Pictures went even further and ignored Kasky, instead citing the Supreme Court’s test from Bolger v. Young’s Drug Products as the governing standard for classifying commercial and noncommercial speech.   To be sure, situations remain where the limited purpose test would not be appropriate, but multiple cases have presented the Supreme Court’s test as the universal standard for determining what constitutes commercial speech.

False advertising cases following Kasky have also been hesitant to apply Kasky to situations beyond the precise facts presented in that case.  In Baba v. Board of Supervisors, the court refused to apply Kaksy to allegedly false statements made in the context of a landlord-tenant relationship because this relationship is “more complex, personal, and permanent” than the transactions at issue in Kasky.   But one could argue that this is a distinction without a difference.  Is renting an apartment any less a commercial transaction than purchasing sneakers?  On a broader lever, until a similar fact pattern arises, this interpretive method weakens Kasky

What has motivated courts to treat Kasky in this manner?

The decision in Kasky, while groundbreaking, is quite clear, and after the Supreme Court dismissed cert, there is no question that Kasky remains good law.  So why have courts chosen to read it in a seemingly narrow manner?  One potential theory is that, while a majority of the Supreme Court might have refused to reach the merits, a three-person dissent took up the merits and explained why Kasky could have a chilling effect on First Amendment rights.   California courts likely took note of the fact that at least one-third of the Court was willing to reverse a decision predicated on Kasky’s logic.

Lower courts may also feel that Kasky is a prime candidate to be distinguished on its facts.  Kasky dealt with a multiyear exposé by human rights advocates, labor groups, and print and television journalists.  The story captured the lead slot on CBS’s 48 Hours.  Nike took out full page ads in multiple newspapersto defend itself and commissioned the United States’ former UN Ambassador to prepare a report on the issue.  This was a never-before-seen intersection of corporate speech and a matter of intense public concern.  Lower courts may be hesitant to allow this case to dictate the law in more run-of-the-mill lawsuits.

But perhaps the erosion of Kasky started soon after it was decided, in Bernardo v. Planned Parenthood.   Bernardo also dealt with the intersection of false advertising and a matter of public concern—specifically, abortions.  Ms. Bernardo sued Planned Parenthood on the grounds that its statements regarding the safety of abortions were false because certain scientific studies linked abortions to health problems later in life.  

The court distinguished Kasky by finding that Planned Parenthood’s statements were opinions about a topic of debate in the scientific community, not statements of facts within the defendant’s personal knowledge.   But do the facts bear out this distinction?  In Kasky, certain reports found that Nike’s working conditions were adequate; other reports found that they were subpar.  In Bernardo, certain scientists stated that abortions cause health problems; other scientists stated that there was no such link.  Just as Nike adopted the reports that said that its factories were safe, Planned Parenthood adopted the studies that said that abortions were safe.  Does one situation involve any less of an opinion than the other?  These questions are debatable, but nevertheless, in Bernardo, the court declined to even enter into Kasky’s commercial versus noncommercial analysis and instead found that Planned Parenthood’s speech was protected as an opinion.

While we can never be sure why the court in Bernardo distinguished Kasky, Bernardo underscored how controversial Kasky could be when applied to a topic of public debate that is even more divisive than working conditions in foreign factories.  The court perhaps understood that public debate could be stifled should Kasky be given a broad reading.  It therefore provided an escape route via the opinion versus fact distinction to save defendants such as Planned Parenthood from having to argue whether their speech constitutes commercial speech under Kasky’s far-reaching definition.  From an early point in Kasky’s life, this decision signaled a move away from giving Kasky the power its text would seem to allow and set the stage for later decisions to dissect Kasky’s holding. 

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Grace Chuchla is a litigation associate in the Los Angeles office of Irell & Manella LLP.  Ms. Chuchla practices primarily in the fields of administrative law, copyrights, and trademarks.  She also maintains an active pro bono practice representing individuals seeking asylum.  She can be reached at gchuchla@irell.com.   
  

Thomas C. Goldstein, Nike v. Kasky and the Definition of Commercial Speech, Cato Supreme Court Review 63, at p. 74 (2002). 

Robert M. O’Neil, Nike v. Kasky: What Might Have Been, 54 Case W. Res. Law Rev. 1259, 1267 (2004).

Kasky v. Nike, Inc.,27 Cal.4th 939, 947 (2002).

Nike, Inc. v. Kasky, 537 U.S. 1099 (2003).

Nike, Inc. v. Kasky, 539 U.S. 654, 661 (2003). 

Kasky,27 Cal.4th at 960 (“[W]hen a court must decide whether particular speech may be subjected to laws aimed at preventing false advertising or other forms of commercial deception, categorizing a particular statement as commercial or noncommercial speech requires consideration of three elements: the speaker, the intended audience, and the content of the message.”). 

Vicki McIntyre, Nike v. Kasky: Leaving Corporate America Speechless, 30 Wm. Mitchell L. Rev. 1531, 1551 (2003). 

JAMS, Inc. v. Superior Court,1 Cal.App.5th 984, 995 (2016); see also Denetriades v. Yelp, Inc., 228 Cal.App.4th 294, 310 (adding “economic motivation” to the Kasky test). 

Rezec v. Sony Pictures Entertainment,116 Cal.App.4th 135,140 (2004). 

Baba v. Board of Supervisors, 124 Cal.App.4th 504, 516 (2004).

Nike, 539 U.S. at 676 (Kennedy, J., dissenting).

Bernardo v. Planned Parenthood Fed. of Am., 115 Cal.App.4th 322 (2004).

Id. at 330-31. 

Id. at 344-45.

 

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