SAN FRANCISCO -- The California Supreme Court reinstated a consumer lawsuit against Nike on Thursday, opening a new legal path for the worldwide movement to combat sweatshop conditions in foreign factories operated by the U.S. clothing industry.

Instead of attacking labor conditions at Nike's Asian factories directly, the lawsuit uses California laws against false advertising and unfair competition to try to deprive the company of profits earned in the state by promoting an image of itself as a progressive employer abroad.

"We can't, through this case, affect labor conditions, but we have affected the corporations that manufacture their goods overseas (so that they) can't make false statements regarding their labor practices," said Alan Caplan, the lawyer on the winning side of the court's 4-3 decision.

Where the money would go if Nike lost the case is an open question, said the state attorney general's office.

The Oregon-based company reported $9.5 billion in revenues in 2001.

Nike issued a statement Thursday saying it was weighing its legal options. The trend-setting manufacturer of athletic wear says it maintains contractual relationships with more than 700 factories employing more than 550,000 workers in more than 50 countries.

The Supreme Court's decision classified Nike's promotional campaign as "commercial speech" that's not entitled to full protection under the First Amendment. Unless the suit is tossed out again in further appeals, Nike would be forced to defend the truth of its promotional messages in the lower courts.

"When a corporation, to maintain and increase sales and profits, makes public statements defending labor practices and working conditions at factories where its products are made, those public statements are commercial speech that may be regulated to prevent consumer deception," Justice Joyce Kennard wrote for the court's majority.

The dissenting justices agreed with Nike's position that its campaign was part of the public debate over globalization and problems in emerging countries, the kind of political and philosophical dialogue that's most entitled to undiluted First Amendment freedom.

"Handicapping one side in this important worldwide debate is both ill-considered and unconstitutional," wrote Justice Ming Chin, who called Nike the "poster child in the international campaign for labor rights and reform."

The suit against Nike was filed not by the state but by Marc Kasky, director of a San Francisco arts complex. Attorney General Bill Lockyer, the AFL-CIO and other powerful national organizations backed Kasky's appeal because of its potential impact in a market where manufacturers increasingly promote their images to sell their products and consumers' social values often determine their choices.

Nike was supported in the lawsuit by the American Civil Liberties Union and the Product Liability Council, an organization of 132 major businesses and manufacturers.

Nike didn't even mention its products in the documents that are the basis of Kasky's lawsuit -- a series of letters to editors, college presidents and athletic directors touting excellent conditions at its Asian factories.

Nike claims it meets or exceeds local Asian and international standards. It says it has dramatically increased wages, decreased child labor and promoted worker health and education since Kasky filed his suit in 1998, the same year the company was hit with a call for a boycott.

It suffered losses that year for the first time in 13 years.

The company launched the promotional campaign that led to the lawsuit in response to a run of picket lines and bad publicity that began in 1996 and continued sporadically into this year with the picketing of Nike-endorser Tiger Woods in New Zealand.

Copyright 2002 © The Sacramento Bee

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