Amicus Curiae Brief — Nike, Inc. v. Kasky

i ‘Shipreme Court, US.

ry F iF)

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| FEB 28 2005

!

No. 02-575 3.500

IN THE

Supreme Court of the United States

NIKE, INC., et al.,

Petitioners,

v.

MARC KASKY,

Respondent.

On Writ oF CERTIORARI

TO THE SUPREME Court OF CALIFORNIA

BrieF Amici Curi4zE ON BEHALF OF

SRiMep1a AND CoreRATINGS

In Support OF PETITIONERS

-_———_——_

~~ — —

_-__

THOMAS H. CLarkKeE, Jr.

Counsel of Record

TERRY ANASTASSIOU

Ropers, MAJesKi, KOHN & BENTLEY

Attorneys for Amici Curiae

333 Market Street

Suite 3150

San Francisco, CA 94105

(415) 274-6341

179403

COUNSEL PRESS

(800) 274-3321 + (800) 359-6859

TABLE OF CONTENTS

Table of Cited Authorities

Interest of Amici .......

Summary of Argument ..

I. THe CALIFORNIA SUPREME Court DECISION IN

Kasxy v. Nixe 1s IN DeroGaTion OF THE

EUROPEAN GOVERNMENTAL MOVEMENT For

A. EvuROPEAN GOVERNMENTS AND THE

EUROPEAN COMMUNITY ARE ENCOURAGING

Or REQuiRING Business To RePort ON

SociaL, ENVIRONMENTAL AND ETHICAL

Issues As Part Or THE MOVEMENT For

THE ProsBiematic Aspect Or THe Kasxy

Decision Is Rootep IN Its IMPossIBLE

EXPANSION OF THE DEFINITION OF

THe PoTENTIAL THAT EUROPEAN BUSINESSES

CouLp Be HAu_ep INTO CALIFORNIA SUPERIOR

Court BaAseD ON THEIR ComPLIANCE WITH

THE EuROPEAN Po.Licy Or TRANSPARENCY

REGARDING CORPORATE RESPONSIBILITY

Viovates Basic PrincipLes Or Comity .....

il

Contents

D. NecativE RESULTS OTHER THAN

DISCOURAGING CORPORATE TRANSPARENCY

Are LIKELY To AccruE Ir Kasxy Is Not

OO Ee”

E. Tuis Court SHOULD RESTORE FREE

SPEECH PROTECTION TO COMMUNICATIONS

REGARDING SOCIAL RESPONSIBILITY .....

Conmotaaion .....occcceeseeseeee ene

Page

15

2 22S, eee... £6 ee EE.

ii

TABLE OF CITED AUTHORITIES

Federal Decisions

Filetech S.A. v. Fr. Telecom S.A..,

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Helicopteros Nacionales de Columbia,

S.A. v. Hall,

TT de cececccvewccccccccce:

Hilton v. Guyot,

i eee eee cecisececceccccs

In re Maxwell Communication Corp.,

NT Pe 8 |

New York Times Co. v. Sullivan,

EE ncawcccscccccccesccces:

Societe Nationale Industrielle Aerospatiale v.

United States District Court,

ET Bec eenescccceceescces

Trugman-Nash, Inc. v. New Zealand Dairy Bd.,

954 F. Supp. 733 (S.D.N.Y.1997) ............

State Decisions

Greyhound Corp. v. Superior Court,

EE ob cccccsccessccccceces

Integral Development Corp. v. Weissenbach,

99 Cal. App. 4th $76 (2002) ................

Vons Companies, Inc. v. Seabest Foods, Inc.,

BO Cae. GE SSS CIGSS) ow ccc ccc cece cccess

Page

16

12

14

13

13

iv

Cited Authorities

Page

Foreign Decisions

R v. H.M. Advocate and another, 2002 UKPC D3

(Tramectigt) 2... cccccccccccccccccccccseess +

United States Constitution

ee eS. coccceneseeuseces teens 7, 8,9, 17

California Constitution

Rathate 1, GOUT ccccccccccccceccsocescses 8

State Statutes

Cal. Bus. & Prof. Code, section 17200 .......... 4,8

-Cal. Bus. & Prof. Code, section 17500 .......... 4

Cal. Code Civ. Proc. section 410.10 ............ 12-13

Foreign Statutes and Enactments

Concerning corporate social responsibility: a

Business contribution to sustainable develop-

ment, a Communication from the Commission

of the European Communities, COM(2002) 347

final, Brussels 2 July 2002 ............--455. 3-4, 5

French Penal Code, Law No. 80-538 ............ 16

o—:

Vv

Cited Authorities

On the recognition, measurement and disclosure of

environmental issues in the annual accounts and

annual reports of companies, Recommendation of

the Commission of European Communities,

C(2001) 1495, Brussels 30 May 2001 .........

Pensions Act of 1995, section 35 ...............

Promoting a European framework for Corporate

Social Responsibility, Green Paper of the

Commission of the European Communities,

COM(2001) 366 final, Brussels 18 July 2001

oeeeeeeeeeeeeeeeeeeee ee eee eeeeeeeeeee ees

Secondary Sources

Choi and Guzman, The Dangerous Extraterritoriality

of American Securities Law, 17 NW. J. Intl. L. &

ee weiductududésecocsueecs

Griffin, Jurisdiction and Enforcement: Foreign

Governmental Reactions to U.S. Assertions

of Extraterritorial Jurisdiction, 6 Geo. Mason

Sted SEP peuduccnsncnusedesceceentotsées

Page

3,5

15

ie

l

INTEREST OF AMICT'

SRiMedia PLC (“SRiMedia”) is a London based media

concern which publishes news and research reports on topics

of corporate governance, corporate social responsibility,

and socially responsible investment to a global audience.

The company and its French and Swiss affiliates comprise the

largest publisher of corporate social responsibility news in

Europe. The news and reports published by SRiMedia are read

widely by European lawmakers, senior corporate executives and

compliance officers of some 1200 multinational enterprises, in

addition to investment analysts of the top 275 financial

institutions in Europe, representing approximately £1 .6 Trillion

(U.S. $2.52 Tnillion) of assets under management. The company

also provides news and reports to institutions based in California.

CoreRatings is a London-based ratings agency owned by

Fimalac, a publicly-traded French company that is also the

majority owner of Fitch Ratings, one of only four rating

organizations recognized by the United States Securities and

Exchange Commission for the rating of the quality of corporate

instruments. Based on both public and confidential information,

CoreRatings rates the effectiveness of companies’ corporate

governance processes and their management of corporate social

responsibility risks, including detailed analysis of companies’

responses to environmental, social, labor and ethical issues.

CoreRatings reports are used widely by the leading European

asset management groups in making investment decisions.

CoreRatings’ clients control in excess of $2 Trillion in

investment assets and include among others Barclays Global

1. Letters from both parties consenting to the filing of all briefs

have been filed with the Clerk of this Court. Counsel for the amici

were the sole authors of this brief. No person or entity other than

amici made a financial contribution to this brief.

2

Investors (the world’s largest institutional asset manager), ABN

Amro (the largest bank in the Netherlands), Allianz (Europe’s

largest insurance company) and the Swedish and Norwegian

state pension systems.

As set forth below, SRiMedia and CoreRatings each has

an interest in the outcome of this Court’s deliberations

regarding the California Supreme Court decision in Kasky v.

Nike because the decision would deter the corporate

transparency which SRiMedia and CoreRatings rely upon,

and are intended to serve, by potentially subjecting European

companies to suit in California Superior Court for complying

with European corporate responsibility reporting law and

policy.

SUMMARY OF ARGUMENT

The California Supreme Court decision in Kasky v. Nike,

27 Cal. 4th 939 (2002), operates in direct derogation of

existing and developing law and policy in the European

Union because it discourages the corporate transparency

regarding social, ethical and environmental issues that the

European Union has made a centerpiece of its support for

socially responsible investing and corporate operational

activities. More specifically, under the Kasky decision a

European business entity could potentially be sued in

California Superior Court based on allegations that

statements it makes in annual reports or other similar

publications or to rating agencies were incomplete or

misleading, without any requirement of pleading or proving

knowing falsity or malice. Thus, the potential imposition of

liability against a foreign corporation inherent in the Kasky

decision violates principles of comity because it raises the

potential that a European business entity could be punished

for complying with its own laws.

ee

3

ARGUMENT

I. THe Cavirornia Supreme Court Decision IN Kasay V.

Nike Is In DEROGATION OF THe EuropEAN GOVERNMENTAL

MOveMENT For Corporate SociaL RESPONSIBILITY

A. EvuROPEAN GOVERNMENTS AND THE EUROPEAN

COMMUNITY ARE ENCOURAGING Or REQUIRING

Business To Report On SociaL, ENVIRONMENTAL

AND Ernicat Issues As Part Or THE MoveMENT

For CorpoRATE SOCIAL RESPONSIBILITY

SRI Media and CoreRatings urge this Court to overturn

the California Supreme Court decision in Kasky v. Nike, Inc.

(27 Cal. 4th 939 (2002)) because the decision potentially

penalizes European business enterprises for complying with

the growing body of European law and policy for advancing

corporate social responsibility and sustainable business

operation.

The European Union and companies based in Europe

are currently engaged in a vigorous discussion of these issues.

They are, in fact, in the process of amending laws and

developing policies which already require companies to

report to their investors and/or the public regarding the

companies’ policies about issues such as foreign worker

salaries and working conditions, child labor, forced labor and

other human rights issues, and environmental problems and

sustainability. (“Promoting a European framework for

Corporate Social Responsibility, Green Paper of the

Commission of the European Communities,” COM(2001)

366 final, Brussels 18 July 2001 (hereinafter, “Promoting a

European Framework’); see also “Concerning corporate

social responsibility: a Business contribution to sustainable

4

development,” a Communication from the Commission of

the European Communities,” COM(2002) 347 final, Brussels

2 July 2002 [hereinafter, “Communication from the

Commission’”’}.)

The California Supreme Court decision in Kasky v. Nike

is in direct derogation of this growing body of European law

and policy because, as discussed below (infra, pp. 11-14),

European companies could be subjected to suit in California

Superior Court on a theory of strict liability under Cal. Bus.

& Prof. Code, sections 17200, et seg. and 17500, et seq.

simply because they comply with such reporting

requirements.

Reporting and transparency in the context of socially

responsible investing are issues that have been receiving

increasing amounts of attention from European governments,

business entities and investors. For instance, in July 2000,

the United Kingdom amended its Pensions Act of 1995 to

address the social and ethical impact of investment choices

made by pension fund managers. Mores specifically, this “soft

law”? enactment required reporting on “the extent (if at all)

to which social, environmental or ethical considerations are

taken into account in the selection, retention and realization

of investments.” (Pensions Act of 1995, section 35.)

In May 2001, the European Commission adopted

recommendations for corporate disclosure on environmental

issues in companies’ annual reports. (“On the recognition,

measurement and disclosure of environmental issues in the

2. The United Kingdom distinguishes between binding statutory

law and administrative “soft laws such as codes, departmental

circulars, directives , and statements of practice.” (R v. H.M. Advocate

and another, 2002 UKPC D3 (Transcript).)

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5

annual accounts and annual reports of companies,”

Recommendation of the Commission of European

Communities, C(2001) 1495, Brussels 30 May 2001.) At the

same time, Denmark’s Ministry of Social Affairs developed

and published a “social index” by which companies could

self-evaluate their compliance with social responsibilities in

a manner more readily understandable by the ordinary

investor. Another member-nation, France, began to require

companies to account for “social and environmental

consequences” of their activities in annual reports (Promoting

a European Framework, supra, at p. 18) and to require mutual

funds into which French workers invest through their

employers to report on their policies regarding socially

responsible investing. (/d. at p. 22.)

In July 2001, the European Commission published a

“Green Paper” (policy draft) intended to identify goals and

elicit comment from member states, business entities,

investors and citizens. (Promoting a European Framework,

supra.) This “Green Paper” noted that the movement to

corporate social responsibility was being driven by concerns

about globalization, sustainable development and the

increasing role of social criteria in both individual and

institutional investment. (/d. at p. 5.)

The European Commission published the resulting

Communication from the Commission (supra, COM(2002)

347) one year later. It noted that it had received more

than 250 responses to the “Green Paper” from employer

groups and business organizations, labor organizations,

governmental bodies, and individual member states.

The Commission noted that while all participants agreed to

the usefulness of the public commert process, there were

(not surprisingly) significant differences in the positions

6

expressed by various groups. Significantly, however, many

of the various groups considered transparency, by reporting

and/or accountability, as crucial to the advancement of

socially responsible investing:

Investors stressed the need to improve disclosure

and transparency of companies’ practices, rating

agencies’ methodology and investment management

of SRI (socially responsible investment) funds and

pension funds;

Consumers’ organizations underlined the importance

of trustworthy and complete information about the

ethical, social and environmental conditions in

which goods and services are produced and traded

to guide them in their purchase choices;

The European Parliament proposed to mainstream

[corporate social responsibility] [and] called for

triple bottom line reporting by companies on their

social and environmental performance, including the

human rights dimension.

(/d. at pp. 4-5.)

Thus, “transparency” regarding corporate conduct became

one of the linchpins of the Commission’s analysis:

Transparency is a key element of the CSR debate

as it helps businesses to improve their practices

and behaviour; transparency also enables business

and third parties to measure the results achieved

7

... Greater transparency also prevents companies

from being used for organized crime, and terrorist

groups to launder or generate money for their

benefit.

(/d. at p. 13, and footnote 4.)

The foregoing examples demonstrate that Europeans are

committed to making corporate responsibility a central

aspect of their institutional and individual investment

climate. The Commission of European Communities has

made clear that corporate transparency concerning ethical,

social and environmental issues is a corollary of this

commitment to corporate responsibility. As discussed below

(infra, pp.11-14), the California Supreme Court decision in

Kasky v. Nike is in direct derogation of this existing and

developing public commitment because it exposes the

corporations who comply by reporting, and the entities that

publish their statements to investors and the public, to suit

in California Superior Court; further it exposes to suit those

entities that rate corporate activities in the CSR arena based

on information derived from public and confidential company

information. It does so because the decision announces a

broad expansion of the definition of “commercial speech”

designed drastically to lessen First Amendment protection.

B. Tue Prosiematic Aspeci Or Tue Kasxy DECISION

Is Rootep In Its ImpossiBL—E EXPANSION OF THE

DEFINITION OF “COMMERCIAL SPEECH”

The California Supreme Court’s decision improperly

exposes corporate statements regarding their operations to

liability by lumping them in with advertising concerning

corporate products. (Kasky v. Nike, supra, 27 Cal. 4th 939, 961.)

8

As the Court is aware, the Kasky decision arose from an

attempt by Nike, Inc. to respond to allegations that their

overseas workers were subjected to improper, dangerous and/

or illegal work conditions. (Jd. at 947.) Nike hired former

United States Ambassador to the United Nations, Andrew

Young, to investigate; thereafter, Nike publicized his

conclusions that there was no evidence of unsafe or illegal

working conditions. (/d. at 947-948.) The Plaintiff, Kasky,

brought suit against Nike in San Francisco County Superior

Court, alleging that Nike had violated California s Unfair

Competition Act (Cal. Bus. & Prof. Code, section 17200,

et seq.) by negligently or carelessly having made false or

misleading statements regarding its foreign work conditions.

(Id. at 948.)

The Superior Court sustained Nike’s demurrer to Kasky’s

complaint without leave to amend, and the California Court

of Appeal affirmed, on the ground that the responses to public

accusations were speech subject to the “absolute protection

of the First Amendment to the United States Constitution

and Article I, section 2(a) of the California Constitution. (/d.)

The aspect of the Kasky decision reversing the Court of

Appeal and permitting suit against Nike that is especially

problematic is the California Supreme Court’s extension of

liability for alleged false advertising beyond statements

regarding products or services being offered, to include

“representations of fact about the business operations,

products or services of the speaker . . . made for the purpose

of promoting sales of, or other commercial transactions in,

3. Because California law allows any person to act as a private

attorney general in such suits, Mr. Kasky does not have to have any

personal knowledge of these allegations, nor to have suffered any

injury as a result of any activity undertaken by Nike.

9

the speaker’s products or services.” (/d. at 961, emphasis

added.) The Kasky decision then broadens the definition of

products and services to the point where the lesser protection

afforded commercial speech would cover any conceivable

—_— — -—-—-

communication by any commercial enterprise:

[W]e understand ‘product references’ to include

[] statements about the manner in which the

products are manufactured, distributed, or sold,

about repair or warranty services that the seller

provides to purchasers of the product, or about

the identity or qualifications of persons who

manufacture, distribute, sell, service or endorse

them. Similarly, references to services would

include not only statements about the education,

experience, and qualifications of the persons

providing or endorsing the services.

(Id. at 961.)

This brief is concerned with the effect of the Kasky

decision on European companies complying with corporate

responsibility laws and policies, not specifically with the error

inherent in the Kasky re-definition of commercial speech.

However, one example may suffice to demonstrate the

problematic effect of the decision on speech, hitherto

unquestionably protected absolutely by the First Amendment,

which potentially would subject parties to suit in California

Superior Court.

Consider statements to the press in the context of labor

disputes, whether by an employer or union, which would now

fall within the expanded definition of commercial speech

because the statements would concern the manner in which

10

the employer or union conducted their “business operations.”

Based on Kasky’s expanded definition, a union could allege

that the employer’s claims about fairness of work conditions

were made with an eye to protecting its place in the market,

and an employer could allege that the union’s claims about

unfairness were made to enhance the union’s standing

with potential members. Each party would then be susceptible

to allegations that their “negligence” or “carelessness

was responsible for incomplete or misleading statements.

Thus, any labor dispute (already a contentious situation),

would have the added potential of suit in California Superior

Court for disgorgement of profits pursuant to California’s

Unfair Competition Law.

Whether or not this scenario is permitted to operate

within California, under California law, is not the issue

presented by this brief. However, the possibility that

European business entities could be subjected to suit in

California Superior Court for alleged unfair advertising,

based on actions taken in Europe in attempted compliance

with European law and policy, compels reversal or reduction

of the Kasky expansion of the definition of “commercial

speech.”

a an

1]

C. Tue Porentiat Tuat European Businesses Coup

Be Haucep Into Cairornia Superior Court

Basep On Tueir Compiiance With Tue European

Po.icy Or TRANSPARENCY REGARDING CORPORATE

RESPONSIBILITY VIOLATES Basic PrincipLes OF

ComIity

This Court should reverse or reduce the Kasky expansion

of the definition of “commercial speech” because European

business entities should not be subjected to suit in California

Superior Court based on their attempted compliance

with European law and policy encouraging transparency in

the context of corporate responsibility. As set forth above

(supra, pp. 4-7), the movement for socially responsible

investment is being incorporated into European Union law,

and transparency regarding social, ethical and environmental

issues is considered a centerpiece of this developing policy.

Any law that discourages or deters corporate transparency

would be in direct derogation to a policy announced and

pursued by the European Union and its member nations, and

therefore violates notions of international comity. For a single

state in the United States to impose such law on European

business entities is simply impermissible.

This Court has defined comity as “the recognition which

one nation allows within its territory to the legislative,

executive or judicial acts of another nation.” (Hilton v. Guyot,

159 U.S. 113, 164 [16 S. Ct. 139, 40 L. Ed. 95] (1895).)

Most simply put, comity should be observed when U.S. law

proscribes what foreign law prescribes.

This is precisely the situation in which European business

entities will find themselves if Kasky is left intact. European

law will increasingly prescribe the inclusion of statements

12

regarding their corporate policies on social, ethical and

environmental issues in annual reports and other publications

aimed at investors and the public. The nature and content of

this inclusion will be defined by European law. By complying

with this law, however, European entities will potentially

expose themselves ‘o suit in California Superior Court based

on allegations tat ‘aey made proscribed statements in their

“negligence and carelessness” that were incomplete, or

misleading, even if they fully conform to the requirements

of European law.

In the context of Federal antitrust law, there is a conflict

in Federal decisional authority regarding what will suffice

to establish the sort of conflict between U.S. and foreign

law triggering the operation of comity. Some decisions in

the context of Federal antitrust law have set the bar extremely

high: “What is required to establish a true conflict is an

allegation that compliance with the regulatory laws of both

countries would be impossible.” (Filetech S.A. v. Fr. Telecom

S.A., 157 F.3d 922, 932 (2d Cir. 1998), quoting Jn re Maxwell

Communication Corp., 93 F.3d 1036, 1050 (2d Cir. 1996).)

Other decisions find it sufficient when enforcement of a

U.S. regulation would make compliance with a foreign statute

“difficult to imagine.” See, e.g., Trugman-Nash, Inc. v. New

Zealand Dairy Bd., 954 F. Supp. 733, 736 (S.D.N.Y. 1997.)

However, no Federal decision is found that permits a single

State in the United States to impose its will via extension of

its statutory scheme to subject foreign entities to potential

liability for complying with their own laws.

The potential exposure is not illusory: California's

“long-arm” statute permits its Superior Courts to “exercise

jurisdiction on any basis not inconsistent with the

Constitution of this state or of the United States.” (Cal. Code

5 OU EE IVT Ne.

13

Civ. Proc. section 410.10.) The only limitation that California

places on the exercise of jurisdiction on a non-resident is the

due process requirement that it not violate “traditional notions

of fair play and substantial justice.” (Vons Companies, Inc.

v. Seabest Foods, Inc., 14 Cal. 4th 434, 444 (1996).) Even

where a non-resident’s contact with California is nearly non-

existent, California courts will exercise jurisdiction based

on a weighing of the connection of the non-resident’s conduct

to California. (Jntegral Development Corp. v. Weissenbach,

99 Cal. App. 4th 576, 583-584 (2002), citing Helicopteros

Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 414

[104 S. Ct. 1868, 80 L. Ed. 2d 404] (1984).)

This broad reading of jurisdiction potentially applies to

European companies reporting their compliance with social,

ethical or environmental goals in Europe, regardless of

whether they have a single facility, or sell a single product,

in California. Consider the hypothetical case of a European

business attempting to comply with the emerging law and

policy on transparency and corporate responsibility. If a

California individual or institution considered investing in

the company, it is probable that the prospective investor

would consider annual reports and/or commercial analyses

based on those reports, or ratings undertaken by one of the

few SEC recognized rating agencies. The Kasky expansion

of the definition of commercial speech could be applied to

this information, arguably “representations of fact about the

business operations . . . made for the purpose of promoting

. .. Commercial transactions in [] the speaker’s products or

services.” (Kasky, supra, 27 Cal. 4th at 961.)

The potential for harm extends beyond European

business entities to organizations such as amici herein, whose

operations are dependent on information from business

14

entities regarding social, ethical and environmental aspects

of the business entities’ operations. Amicus are largely, if

not entirely, dependent on the business entities on whom they

are reporting for the information the collect and analyze. Any

significant disincentive to report such information has an

immediate negative impact on SRiMedia and CoreRatings.

It must also be noted that it is no defense to this problem

to claim that foreign corporations are only liable for false or

misleading statements because the Kasky decision extends

susceptibility to suit under California’s unfair competition

and false advertising scheme. (/d. at 969-970.) This exposure,

which includes potential liability for disgorgement of profits,

does not require knowing falsity or malice: liability may be

imposed based only on “negligence or carelessness,” just as

the California Supreme Court permitted against Nike. (/d. at

948.) Furthermore, suit in California Superior Court brings

with it California’s liberal discovery policy. (Greyhound

Corp. v. Superior Court, 56 Cal. 2d 355, 375-76 (1961);

see likely European reaction, immediately below.)

Not to oversimplify the issue, but no one wants to be

sued anywhere, much less in California. The potential that

private attorneys general, that is any resident of California,

could haul foreign business entities into California Superior

Court and require them to defend suits whose potential

exposure includes disgorgement of profits would, in and of

itself, act as a disincentive to European companies to comply

with the emerging law and policy of corporate transparency.

This is in direct derogation of the existing and developing

law and policy of the European Union: it potentially penalizes

conduct that the European Union prescribes. Principles of

international comity call for the reversal or substantial

reduction of the Kasky decision’s virtually unlimited

expansion of commercial speech.

TRI

15

D. Necative Resutts OrHer THan DiscouRAGING

CORPORATE TRANSPARENCY ARE LIKELY To ACCRUE

Ir Kasxy Is Not Reversep

There are negative results beyond the affect on corporate

transparency that will likely accrue if the Kasky expansion

of the definition of commercial speech is left intact. For

example, the simplest means by which a foreign business

entity could try to avoid potential suit in California Superior

Court based on statements in investment reports is to

proscribe communications in or to the United States,

investment by Americans, or the purchase or sale of its

products or services to Americans. Commentators have long

recognized the deleterious effect on American investment

Opportunities attendant on attempting to impose American

regulation on foreign commercial conduct:

[E)xtraterritorial jurisdiction reduces the range of

investments available to American investors.

Rather than being able to choose from the full

array of securities issued around the world,

American investors are limited to those that

comply with American disclosure requirements.

In other words, U.S. law travels with the investor.

As a result, the investor will be less able to

diversify her portfolio internationally.

(Choi and Guzman, The Dangerous Extraterritoriality of

American Securities Law, 17 NW. J. Intl. L. & Bus. 207, 226

(Fall 1996).)

Furthermore, the extension of potential liability by Kasky

is likely to elicit retaliatory legislation by the European Union

or its member nations. For example, the discovery procedures

16

embraced by American courts are not viewed with universal

admiration in Europe. Thus, in response to extraterritorial

application of American antitrust laws, European nations

have in the past enacted statutes whose sole purpose was to

impede discovery outside the United States. (Griffin,

Jurisdiction and Enforcement: Foreign Governmental

Reactions to U.S. Assertions of Extraterritorial Jurisdiction,

6 Geo. Mason L. Rev. 505, 505-06, and see footnotes 3-7.)

Indeed, one European Union member nation, France, went

so far as to criminalize requests for information “with a view

to foreign judicial or administrative proceedings or in

connection therewith.” (Societe Nationale Industrielle

Aerospatiale v. United States District Court, 482 U.S. 522,

526 n.6 [107 S. Ct. 2542, 96 L. Ed. 2d 461] (1987), quoting

French Penal Code, Law No. 80-538.) “These anti-discovery

statutes were followed by laws rendering certain types of

U.S. antitrust judgments unenforceable in foreign courts

[and] legislation creating a statutory cause of action to recover

damages paid in satisfaction of U.S. antitrust judgments

(‘clawback’ legislation) ...” (Griffin, Jurisdiction and

Enforcement, supra.)

There is one more probable effect of leaving the Kasky

decision unchanged, one that is unavoidably speculative but

still bears stating. As set forth above, the European Union

has made a public policy of encouraging socially responsible

investing, and made corporate transparency on social issues

a centerpiece of that policy. The disincentive to this policy

created by Kasky will create the impression, justified or not,

that the United States is more concerned with permitting

private citizens (from one state, California) to litigate

allegations concerning false advertising than it is with

permitting the European Union to move ahead with its goals

concerning corporate responsibility. At a minimum, the

17

United States may be perceived as being more interested in

insuring that the small number of false statements be penalized

than enabling an emerging culture of corporate candor. It would

surely be unfortunate if this were the ultimate result of the Kasky

decision.‘

E. Tuis Court SHoutp Restore Free SPEECH

PROTECTION To COMMUNICATIONS REGARDING

SociAL RESPONSIBILITY

Amici herein respectfully submit that Petitioner Nike’s

request that the Court reverse the Kasky decision should be

granted. At a minimum, the California Supreme Court’s

unlimited expansion of the definition of commercial speech

should be addressed. The expansion, along with its attendant

reduced First Amendment protection, works most if not all of

the potential mischief in the Kasky decision. (Kasky, supra,

27 Cal. 4th 939, 960-62.) The overbroad definition exposes all

business entities, including those in other countries, to strict

liability for purported incomplete or misleading information,

and based not on the intent to deceive, but on mere “negligence

and carelessness.”

At a minimum, therefore, this Court should rule that the

absolute protection of the Constitution’s First Amendment

applies to speech by a commercial entity concerning or related

issues of corporate responsibility or socially responsible

investment. Subject only to the constraints of this Court’s

decision in New York Times Co. v. Sullivan (376 U.S. 254 (84

S. Ct. 710, 11 L. Ed. 2d 686] (1964)) and its progeny (knowing,

malicious falsity), speech about social issues connected to

business should be free of incumbrance.

4. This would also be unfortunate in light of the recent major

U.S. business scandals based at least in part on a lack of transparency.

18

CONCLUSION

For the reasons set forth above, Amici SRiMedia and

CoreRatings respectfully submit that the decision of the

California Supreme Court in Kasky v. Nike should be

reversed.

Respectfully submitted,

THOMAS H. CLarKE, JR.

Counsel of Record

TERRY ANASTASSIOU

Ropers, MAJESKI, KOHN & BENTLEY

Attorneys for Amici Curiae

333 Market Street

Suite 3150

San Francisco, CA 94105

(415) 274-6341