Amicus Curiae Brief — Nike, Inc. v. Kasky

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No. 02-575 FEB 28

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IN THE

Supreme Court of the United States

NIKE, INC., et al.,

Petitioners,

v,

MARC KASKY,

Respondent.

On Wait or CERTIORARI

TO THE SUPREME Court OF CALIFORNIA

BRIEF AMICI CURIAE ON BEHALF OF THE ARTHUR W.

PAGE SOCIETY, THE COUNCIL OF PUBLIC RELATIONS

FIRMS, THE INSTITUTE FOR PUBLIC RELATIONS,

THE PUBLIC AFFAIRS COUNCIL AND THE PUBLIC

RELATIONS SOCIETY OF AMERICA

IN SUPPORT OF PETITIONERS

Bruce P. Ketter

Counsel of Record

MICHAEL R. PoTENZzA

CHRISTOPHER W. DysBwapD

DeBEVOISE & PLIMPTON

Attorneys for Amici Curiae

919 Third Avenue

New York, NY 10022

(212) 909-6000

179351 g

COUNSEL PRESS

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

i

QUESTION PRESENTED

Does corporate speech that is inextricably part of a vital

debate about matters of public interest become “commercial”

because, although it does not propose a commercial

transaction, it may “maintain [corporate] sales and profits?”

il

TABLE OF CONTENTS

Question Presented .....cccccccccccccccvvcees

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Table of Cited Authorities .............5000e05.

Interests of the Amici Curiae ...........000045:

Summary of Argument ............0-eeee eens

AGMTIGE ooo cccccccvcccccceceseeteveceoees

I. Factual Corporate Communications Are A

Vital Component Of Unfettered Debate On

Matters Of Public Concern ..............

II. Public Relations Activities That Make

Important Contributions To Public Debates

Will Be Chilled By Kasky ...............

Ill. The Kasky Test Covers An Enormous Amount

Of Protected Corporate Speech ..........

. . d.. ssndadeesessienteseeeeele

Page

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TABLE OF CITEDAUTHORITIES

FEDERAL CASES

Board of Trustees v. Fox, 492 U.S. 469 (1989) ....

Garrison v. Louisiana, 379 U.S. 64 (1964) .......

Joseph Burstyn, Inc. v. Wilson, 343 U.S. 495 (1952)

Pac. Gas & Elec. Co. v. Pub. Utils. Comm'n, 475

a EA

R.A.V. v. St. Paul, 505 U.S. 377 (1992) ..........

Riley v. Nat'l Fed'n of the Blind, 487 U.S. 781

ees eee reheeedeetnedeeececeeses

FEDERAL STATUTES

Sarbanes-Oxley Act of 2002, Pub.L. No. 107-204

a

UNITED STATES CONSTITUTION

Page

13

ll

13

TT che cunteecoencecaceceseeens passim

iv

Cited Authorities

OTHER AUTHORITIES

5 Die After Taking Tylenol Believed to Contain

Cyanide, New York Times, Sept. 30, 1982 .....

AEI Conference on Productivity & the American

Economy -— Part 1 (C-Span television broadcast,

SE SE SUED evcccnnccosccecccceecstes

Speech by Steve Ballmer, CEO of Microsoft (C-Span

television broadcast, November 12, 2002) .....

EDMUND M. Burke, CorPORATE COMMUNITY RELATIONS

SUE Sc cccednecncesdducestaenesesesuneee

Peter Clarke, Address at SRI Media Conference

Sk SD bbb 006eendeeesnnssoeseceees

Columbia’s School of International and Public

Affairs Course Catalog, INAF U9178.001 “Human

Rights and Corporate Responsibility” .........

Corporate Crises Have Long-Term Impact New

Consumer Survey Finds, Business Wire, Aug. 17,

SEE 06.00cecdbsetdeceseneseauesenacesseces

Al Frank, No Comment = No Credibility, Star-

BMDGER, AMG, 6 BEES cocccccvcceccveceseees

Steve Gosset, Avoiding PR Disasters, HARVARD

MANAGEMENT COMMUNICATIONS LeTTER (2001) .. .

Page

14

17

12

13

12

See

Vv

Cited Authorities

Bonnie Harris, Jn Fast Food, Some See Fast Track,

Los ANGELES Times, Mar. 12, 2001 ............

Harvard’s John F. Kennedy School of Government

Course Catalog, KSG BGP-232 “Business as a

DE -cinienonsecteuduwesbencenss

Bob Herbert, Let Nike Stay in the Game, New York

Times, May 6, 2002, atA21 .................

http://www.awpage* ociety.com/public/about/

apabout/html (last visited Feb. 26, 2003) ......

Anthony Krulwich, Recalls: Legal and Corporate

Responses to FDA, CPSC, NHTSA, and Product

Liability Considerations, 39 Bus. Law. 757 ....

Tamar Lewin, Tylenol Posts an Apparent Recovery,

New York Times, Dec. 25, 1982 ..............

MacNeil/Lehrer Report: Cyanide Investigation (PBS

television broadcast, Oct. 1,1982) ...........

Meredith May, Teachers Sizzle Over Fast Food

Fund-Raiser, SAN FRANCISCO CHRONICLE, Oct. 15,

aR IN LAP OS nee AE re AP Te

McDonald’s Social Responsibility Report, available

at http://www.mcdonalds.com/corporate/social/

report/index.html (last visited Feb. 26, 2003) ...

Page

13-14

11

12

vi

Cited Authorities

Leo Mullin, Delta Airlines, Chairman & CEO

(C-Span television broadcast, September 25,

DE Sedebssutebebusdsdcuedendadusecndes

Newshour with Jim Lehrer: Bridging the Gap

(PBS television broadcast, March 20, 1996) ....

Newshour with Jim Lehrer: High-Tech Workers

(PBS television broadcast, April 3, 1998) ......

Newshour with Jim Lehrer: Megamerger Masters

(PBS television broadcast, January 12, 2000) ...

Newshour with Jim Lehrer: Newsmaker: Phillip

Knight (PBS television broadcast, May 13, 1998)

Newshour with Jim Lehrer: Return of Thalidomide

(PBS television broadcast, August 4, 1998) ....

Newshour with Jim Lehrer: Sharing the Wealth

(PBS television broadcast, January 6, 2003) ....

Pharmaceutical Innovation: the enabling

conditions, at http://www.merck.com/overview/

98ar/p6.htm (last visited Feb. 26, 2003) .......

Harvey L. Pitt & Karl A. Groskaufmanis, When Bad

Things Happen to Good Companies: A Crisis

Management Primer, 1149 PLI/Corp 307 ......

Page

vil

Cited Authorities

Precious Cargo, available at http://gm.com/company/

gmability/safety/child_passenger_safety/

precious cargo/index.html (last visited Feb. 26,

DD cuvidhdnedsddnnnsvbecase souapuseees

Milford Prewitt, Critics Slam Best-Seller Critique

of OSR, Nation’s REsTauRANT News, Jun. 11, 2001

eeeseeseeweenweeeseeneeeeweeeeeeeneeeeeneeneeneeeeeee@

Protect Free Speech: A California Court Threatens

a Vital Principle, Financiat Times, Dec. 9, 2002

PAawPekeetPeReRP@PeeRBRBERERPBPeARA RR SEHR SRR RRR BR eA eT AE RS

Speech by James Robbins, President and CEO, Cox

Communications (C-Span television broadcast,

Pr «vn abegoneedees beenneeess

Page

10

Eric SCHLOSSER, Fast Foop Nation (2001) . 6, 10,11, 12

Regina Schrambling, Catching America With Its

Hands in the Fries, New York Times, Mar. 21,

MT Géneeseseussenteussesebnessseneeeees

Sandi Sonnenfeld, Media Policy — What Media

Policy?, 8/1/94 Harv. Bus. Rev. 18 (1994) .....

Therapeutic Cloning Under Fire ar http://www.lef.

org/magazine/mag2002/mar2002_cover_west_

SERGE BOGE cc ccccccccccccccscecess

Gary Young, Nike Ruling: Just How Chilling Is It?,

NATIONAL Law JourNaL, Jan. 20, 2003, atA9 ...

16, 17

—_—

l

BRIEF AMICI CURIAE ON BEHALF OF THE ARTHUR

W. PAGE SOCIETY, THE COUNCIL OF PUBLIC

RELATIONS FIRMS, THE INSTITUTE FOR PUBLIC

RELATIONS, THE PUBLIC AFFAIRS COUNCIL AND

THE PUBLIC RELATIONS SOCIETY OF AMERICA

IN SUPPORT OF PETITIONERS

INTERESTS OF THE AMICI CURIAE'

The Arthur W. Page Society, founded in 1983, is a

professional organization with approximately 300 members

consisting of chief corporate public relations officers of major

companies, as well as other leaders in the public relations

profession who are closely related to corporate public

relations. Its goals are to strengthen the management policy

role of the corporate public relations officer; develop

knowledge of corporate management issues; educate the

public about the role of public relations management;

encourage research that leads to improvement in the corporate

public relations function and to introduce these concepts to

scholars, teachers and students.

The Council of Public Relations Firms represents the

business of public relations and corporate communications.

Its 120 member firms include all of the ten largest firms and

over three quarters of the top 50 firms (measured by revenue)

in the world. Together, amici and its members represent every

facet of the public relations and corporate communications

industry. The mission of the Council of Public Relations

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

amici made a financial contribution to this brief.

2

Firms is to advance the business of public relations by

building the value of public relations as a strategic business

tool, by helping its member firms set the standards for the

profession and by promoting the benefits of careers in public

relations.

The Institute for Public Relations, established in 1956

by a senior group of public relations professionals, is devoted

to advancing the professional knowledge and practice of

public relations through research and education. It has

supported more than 200 research projects, ranging from what

students of public relations must study in order to understand

the profession to how new technologies affect the public

relations profession, as well as sponsored numerous

competitions and awards to reward excellence in the field.

Formed in 1954 at the urging of President Dwight D.

E:senhower, the Public Affairs Council is one of the leading

associations for public affairs professionals. It provides

unique information, training and other resources to its

members to support their effective participation in

government, community and public relations activities at all

levels. Nearly 600 member corporations, associations and

consulting firms work together to enhance the value and

professionalism of the public affairs practice, and to provide

thoughtful leadership as corporate citizens.

The Public Relations Society of America is the world’s

largest organization for public relations professionals.

Its nearly 20,000 members, organized into 116 chapters,

represent business and industry, technology, counseling firms,

government, associations, hospitals, schools, professional

services firms and nonprofit organizations. Chartered in

TO ll —

3

1947, its primary objectives are to advance the standards of

the public relations profession and to provide members with

professional development opportunities through continuing

education programs, information exchange forums and

research projects conducted on the national and local levels.

Amici counsel companies on the impact of their decisions

and actions upon shareholders, employees, customers and

other stakeholders. They also assist companies of all types

to gather and disseminate information related to their

businesses and communities on all conceivable topics, from

investor relations, to philanthropic and community outreach

programs, to corporate crisis communications. For decades,

amici have relied on the First Amendment protections

available to all speakers, regardless of their identity, to engage

in robust public debate about issues of public concern without

fear of the risk of strike suits. This protection has become

even more vital over the last several decades, because,

as Arthur W. Page? put it, it is increasingly true in the

information age that “all business in a democratic country

begins with public permission and exists by public approval.”

http://www.awpagesociety.com/public/about/apabout.htm|

(last visited Feb. 26, 2003). Because the California Supreme

Court’s decision will have an unfair, unprecedented and

materially chilling impact on the ability of companies and

amici to speak on issues of public concern, amici urge the

Court to reverse the judgment of the California Supreme

Court.

2. Arthur W. Page, who was the first chief corporate

communications officer to sit on the board of directors of a major

U.S. corporation (AT&T), is credited with having established the

profession of corporate communications.

4

SUMMARY OF ARGUMENT

The California Supreme Court incorrectly held that

claims asserted under California’s unfair competition and

false advertising laws on the basis of letters to the editor,

press releases and other corporate communications may,

consistent with the First Amendment, give rise to strict

liability. It based this conclusion on its sui generis,

three-part definition that “commercial speech” is any

“representation[] of fact”: (1) made by “commercial”

speakers “engaged in commerce”; (2) to an audience that

may include potential purchasers or that may report on the

issue to potential consumers; (3) about a topic related

to “business operations.” Kasky v. Nike, Inc., 45 P.3d 243

247, 256 (Cal. 2002).

This new test creates an Orwellian preference for public

debate bereft of facts. That result cannot be squared with the

First Amendment.

This new test sweeps within its scope amy factual

statement, including letters to the editor and opinion

editorials; statements published on web sites; media

presentations; press releases; television appearances;

appearances on the Newshour with Jim Lehrer’; C-Span

3. See, e.g., Newshour with Jim Lehrer: Sharing the Wealth

(PBS television broadcast, January 6, 2003) (Mark Deem,

Engineering Director of The Foundry, and other executives discussing

how to account for stock options); Newshour with Jim Lehrer:

Newsmaker: Phillip Knight (PBS television broadcast, May 13, 1998)

(Phillip Knight, CEO of Nike, discussing Nike and globalization);

Newshour with Jim Lehrer: Return of Thalidomide (PBS television

broadcast, August 4, 1998) (John Jackson, CEO of Celgene, on the

(Cont'd)

5

appearances‘; indeed, amy public statement made by a

company about a topic related to what that company does.

As a result, the press as a whole—from a newspaper’s

business section to CNN’s Lou Dobbs and CNBC—will

suffer a dearth of information because silence will become

the prudent course of action for business executives and

spokesmen.

This will result in the compelled self-censorship of an

enormous amount of protected speech on important matters

(Cont'd)

FDA’s decision to give limited approval to Thalidomide and Celgene’s

possible marketing of the drug); Newshour with Jim Lehrer: Bridging

the Gap (PBS television broadcast, March 20, 1996) (Aaron

Feurstein, CEO of Malden Mills, discussing corporate responsibility

and the wage-profit gap; using examples from Malden Mills);

Newshour with Jim Lehrer: Megamerger Masters (PBS television

broadcast, January 12, 2000) (Steve Case, CEO of America Online,

and Gerald Levin, CEO of Time Warner, discussing the impending

AOL Time Warner merger and how the consolidation was in the public

interest).

4. See, e.g., Speech by Steve Ballmer, CEO of Microsoft

(C-Span television broadcast, November 12, 2002) (Mr. Ballmer

discussed Microsoft’s recently approved antitrust settlement with the

Department of Justice); Leo Mullin, Delta Airlines, Chairman & CEO

(C-Span television broadcast, September 25, 2002) (Mr. Mullin

discussed the financial well-being of the airline industry and what

must be changed in order for airlines to survive); Speech by James

Robbins, President and CEO, Cox Communications (C-Span

television broadcast, October 22, 2002) (discussing the cable

industry); AEI Conference on Productivity & the American Economy

— Part 1 (C-Span television broadcast, October 23, 2002) (a panel

discussion on the economy including Dick Davidson, Chairman &

CEO, Union Pacific Corporation; Marilyn Carlson Nelson, Chairman

& CEO, Carlson Company).

6

of public concern because the issues also happen to touch

upon the speaker’s “business operations”:

* Johnson & Johnson’s swift public response to

Tylenol cyanide tampering in 1982 would, under

Kasky, expose it to strike suits, see pp. 13-15, infra;

* McDonald’s could no longer effectively respond to

critics such as Eric Schlosser and his book Fast Foop

NATION, see pp. 10-12, infra;

* Advanced Celi technology and other companies

would risk suit by entering the public debate on

cloning, see pp. 15-16, injra;

¢ General Motors and other companies would run

increased risks by commenting on the pros and cons

of airbags for child safety.°

* Technology companies would incur litigation risks

by discussing the need for “green card” quota

increases to bring specialists into the United States.°

5. See, e.g., Precious Cargo, available at http://gm.com/

company/gmability/ safety/child_passenger_safety/precious_cargo/

index.html] (last visited Feb. 26, 2003) (“Another reason to restrain

children properly, in a rear seat, is the vehicle’s frontal air bags,

which are designed to restrain adults. Air bags have to inflate very

quickly, faster than a person can blink an eye, and with great force.

Serious injury, and even death, can result for anyone—especially a

child—-who is up against, or close to, a frontal air bag when it

inflates”).

6. See, e.g., Newshour with Jim Lehrer: High-Tech Workers

(PBS television broadcast, Apr. 3, 1998) (T.J. Rodgers, CEO of

(Cont’d)

7

¢ Drug and biotech companies would have to rethink

whether they can comment on the effect of the Food

and Drug Administration approvals process on the

flow of their new products to the market.’

This list obviously is not exhaustive. Because the Kasky test

covers any utterance where consumers might be present or

might be expected to receive the information through media

outlets, corporate speech as we know it will disappear from

every medium of communication with the public.

All of this strikes amici particularly hard. As a Financial

Times editorial reported, “if companies face potentially

devastating liability for speaking, their only alternative is to

say nothing at all.” Protect Free Speech: A California Court

Ruling Threatens a Vital Principle, FINANCIAL Times, Dec. 9,

2002 at 22. As troubling as the Kasky decision may be for

advertisers and advertising agencies, at least there is a well-

developed body of law (federal and state) that provides

guidance regarding when advertising is false and subject to

litigation. No such rules exist for the corporate speech that

(Cont'd)

Cypress Semiconductor, stating “We hire all the Americans we can

get” but that green cards still needed for foreign engineers and

specialists because there are not enough American engineers to keep

pace the demand for expansion. Rodgers also stated: “I promise that

every time I get one of those engineers I will create five more jobs

right here in America for Americans to build and sell those products”).

7. See, e.g., Pharmaceutical Innovation: the enabling

conditions, at http://www.merck.com/overview/98ar/p6.htm

(last visited Feb. 26, 2003) (“It is critical that the U.S. Food and

Drug Administration approve safe and effective new medicines in a

timely fashion, so that people who need them will get them as quickly

as possible”).

8

amici help create and disseminate because, prior to the

California Supreme Court’s decision, that speech correctly

was considered to be fully protected, core speech regarding

matters of public concern. This makes it difficult, if not

altogether impossible, for amici and their clients to anticipate

where the California courts will draw the line between

“misleading” and non-actionable statements.

The Kasky decision inevitably will stymie public

relations professionals’ ability to assist corporations to

maintain an open dialogue with the public and engage in the

“uninhibited, robust and wide-open” public debate that was

previously thought to be protected by the First Amendment.

Garrison v. Louisiana, 379 U.S. 64, 75 (1964). Given the

significance of this potential outcome, amici urge the Court

to weigh heavily the likely consequences of the judgment of

the California Supreme Court and reverse its erroneous decision.

ARGUMENT

I. FACTUAL CORPORATE COMMUNICATIONS

ARE A VITAL COMPONENT OF UNFETTERED

DEBATE ON MATTERS OF PUBLIC CONCERN

Corporate speech is vitally important to a functioning

democracy. As corporations and the communities in which

they reside and operate have become more closely linked

over the past two decades, the public has come to expect

a new level of civic engagement from corporations. See

EpmuNpD M. Burke, CorPORATE COMMUNITY RELATIONS XiV

(1999) (“The public environment in which companies operate

today . . . is far different than it was just 20 years ago. There

are dramatic and far-reaching changes in the expectations of

communities and societies today that define and influence

9

how a company can operate”). Public relations professionals

facilitate this interaction between the public and companies

by providing factual information on topics of interest to both

groups. Indeed, the public has made clear that its preference

is for more openness and communication from companies,

not less.* See, e.g., Sarbanes-Oxley Act of 2002, Pub. L. No.

107-204 (instituting several measures designed to increase

corporate transparency).

That corporate speech and advocacy play a significant

role in informing public debate and shaping public opinion

and policy is beyond dispute. Government schools now

recognize the increased role of and expectations for business

in American democracy by offering courses in this area.

See Harvard’s John F. Kennedy School of Government

Course Catalog, KSG BGP-232 “Business as a Political

Actor” (describing course designed to analyze the important

role that “[b]usinesses play . . . in the public policy processes

of capitalist democracies”); see also Columbia’s School of

International and Public Affairs Course Catalog, INAF

U9178.001 “Human Rights and Corporate Responsibility”

(describing course designed to analyze the “complex

questions arising out of the interaction of business activities

and human rights. . . .”’).

8. Even one of Nike’s most vocal critics has subsequently stated

“[w)hatever one thinks of Nike, it is a crucial participant in this

continuing debate.” Bob Herbert, Let Nike Stay in the Game, New

York Times, May 6, 2002, at A21.

10

Il. PUBLIC RELATIONS ACTIVITIES THAT MAKE

IMPORTANT CONTRIBUTIONS TO PUBLIC

DEBATES WILL BE CHILLED BY KASAKY

For decades, corporate and non-corporate speech on the

same topics have appeared together in all of the media

traditionally associated with First Amendment purposes:

(a) editorials and letters to the editor; (b) paid-for advertised

editorials in newspapers, magazines, and other publications;

and (c) appearances on news shows and at other public

forums. Often, as is the case here, corporations speak out to

respond to critical speech. Whether by design or because

of lack of access or resources fully to research the issue,

such criticism often leaves out important facts vital to a

comprehensive presentation of the issues involved.

For example, in 2001, Eric Schlosser published Fast

Foop Nation, a best-selling social-cultural critique of the fast

food industry. The book criticized several aspects of the fast

food industry, such as: its contribution to low-wage, unskilled

jobs; its role in the dramatic increase in rates of obesity; and,

its role in the homogenization of American neighborhoods.

See Eric Schlosser, Fast Foop Nation 3-10 (2901). Although

the book criticized the industry as a whole, it focused in large

part on the practices at McDonald’s. Faced with a damning

critique of all facets of its business, McDonald’s vigorously

argued the book provided an incomplete picture. See, e.g.,

Milford Prewitt, Critics Slam Best-Seller Critique of OSR,

NatTion’s RESTAURANT News, Jun. 11, 2001, at 4 (“The real

McDonald’s bears no resemblance to anything described in

that book. The author is wrong about our people, wrong about

our jobs and wrong about our food. He also completely

ignores our values, which is not surprising since he never

contacted us for any information whatsoever”). Other

11

reviewers also questioned the accuracy of the account.

See Regina Schrambling, Catching America With Its

Hands in the Fries, New York Times, Mar. 21, 2001, at Fl

(“Some reviewers have accused Mr. Schlosser . . . of playing

fast and loose with the facts’).

In order to fill the gaps that it felt were missing, McDonald’s

engaged in the traditional response—counter-speech of its

own—to present a fuller account of its business. See, e.g.,

Bonnie Harris, /n Fast Food, Some See Fast Track, Los ANGELES

Tmes, Mar. 12, 2001, at C1 (describing how many Latinos view

McDonald’s and other restaurant chains as a key to long-

term financial security, and quoting McDonald’s spokesman

Walt Riker as stating, “We've always disputed the idea

that fast-food jobs are dead-end jobs, and our Hispanic

workers are evidence of that. We value their work, and we’re

continuing to encourage their advancement through training and

other programs”); see also Meredith May, Teachers Sizzle Over

Fast Food Fund-Raiser, SAN FRANCISCO CHRONICLE, Oct. 15,

2002, at Al (in response to criticisms that McDonald’s

encourages obesity, McDonald’s spokeswoman pointed out

that it was the first major fast food restaurant to introduce

salads and reduce the fat content of its products).

Until the California Supreme Court’s decision, a corporation

like McDonald’s right to defend itself and its shareholders from

criticism and to present a complete record was grounded on the

same unfettered First Amendment protection that the critic

enjoyed. In granting critics First Amendment protection in

attacking a company while simultaneously denying that same

protection to the company in responding to those allegations,

the Kasky decision impermissibly favors speech from a particular

viewpoint. See R.A.V. v. St. Paul, 505 U.S. 377 (1992). Indeed,

McDonald’s response to Fast Foop Nation graphically illustrates

12

the unworkability of the Kasky test; literally every statement

McDonald’s made in response—no matter what the issue—

concerned its “business operations,” because that is precisely

what the book attacked.’

Under the Kasky regime, however, McDonald’s choice is

either to stay silent or risk a potential suit for defending itself

publicly. The adverse consequences of silence, however, are

quite substantial. Not only does silence deprive the public of

important information to contextualize debates, it creates a

public presumption of either stonewalling or guilt. For that

reason it long has been standard communications strategy that

a “no comment” is just about the worst comment a corporation

can make. See, e.g., Sandi Sonnenfeld, Media Policy — What

Media Policy?, 8/1/94 Harv. Bus. Rev. 18, 20 (1994) (“There

was a time when ‘no comment’ meant simply ‘no comment.’

But today when a company spokesperson says ‘no comment,’ it

implies that the organization has something to hide’’). Indeed,

the public often perceives the “words no comment. . . as guilt.”

Steve Gosset, Avoiding PR Disasters, HARVARD MANAGEMENT

COMMUNICATION LetTER (2001).'°

9. ln responding to the concerns raised by Fast Foop Nation,

McDonald’s has made numerous factual statements concerning its

“business operations.” See, e.g., McDonald’s Social Responsibility

Report, available at http://www.mcdonalds.com/corporate/social/

report/index.html (last visited Feb. 26, 2003) (“Employees are

respected and valued”; “Employees receive work experience that

teaches skills and value that last a lifetime”; “Pay is at or above local

rate in marketplace”).

10. See also Corporate Crises Have Long-Term Impact New

Consumer Survey Finds, Business Wire, Aug. 17, 1993 (citing study

of over 1,000 respondents conducted by national public relations

agency finding nearly two-thirds of those questioned took

(Cont'd)

13

The Kasky decision also creates a false dichotomy between

fact and opinion and suggests that corporate statements on

issues of public concern can receive First Amendment

protection only if they are pure opinion, a false dichotomy

that makes the decision even more unworkable. See, e.g.,

Board of Trustees v. Fox, 492 U.S. 469 (1989); see also Riley

v. Nat'l Fed'n of the Blind, 487 U.S. 781, 796 (1988). This

element of the Kasky decision strikes at the heart of amici's

business because companies look to amici to maintain open

lines of communication with the public. Amici assist in

researching fully the facts surrounding a given issue and

design strategies efficiently to deliver this information to

the public. The importance of this free flow of factual

information cannot be overstated.

It is difficult to imagine a more profound example of the

public benefits of unfettered corporate speech than Johnson

& Johnson’s response to the Tylenol cyanide crisis. In the

fall of 1982, seven people died from ingesting cyanide

contained in tampered Tylenol capsules. In the hours

following the first news of the crisis, Johnson & Johnson

made the crucial decision to communicate everything it knew

to the public. As George Frazza, Johnson & Johnson’s

General Counsel at the time, stated: “[w]e decided we were

going to communicate, to be active... We were determined

to find out what the facts were, and whether we liked them

or not, communicate them without gloss to all of our

constituencies.” See Anthony Krulwich, Recalls: Legal and

Corporate Responses to FDA, CPSC, NHTSA, and Product

(Cont'd)

“no comment” as a signal of guilt); Al Frank, No Comment =

No Credibility, Star-Lepcer, Aug. 6, 2002 (citing study by Hill &

Knowlton and Opinion Research Corp. finding that 62% of

respondents equated “no comment” with guilt).

14

Liability Considerations, 39 Bus. Law. 757, 767 (1984).

As aresult, Johnson & Johnson maintained an open dialogue

with the press and public throughout the crisis. See, e.g.,

5 Die After Taking Tylenol Believed to Contain Cyanide, New

York Times, Sept. 30, 1982 at Al2 (Lawrence Foster,

a Johnson & Johnson spokesman, describing what information

had been learned from authorities and Johnson & Johnson’s

method of distribution); see also MacNeil/Lehrer Report:

Cyanide Investigation (PBS television broadcast, Oct. 1,

1982) (Dr. T.N. Gates, medical director of Tylenol, appearing

as one of the guests and discussing the manufacturing and

distribution of Tylenol in the context of the cyanide crisis).

Johnson & Johnson’s forthrightness with the public saved

not only the Tylenol brand and perhaps even Johnson &

Johnson itself, it contributed to the way American consumer

goods are packaged and labeled to be tamper-resistant.

See Tamar Lewin, Tylenol Posts an Apparent Recovery,

New York Times, Dec. 25, 1982 at A30 (quoting a market

researcher’s conclusion that Johnson & Johnson’s recovery

due to “forthright manner” in dealing with the public during

the Tylenol crisis). Kasky’s regime of strict liability, however,

would inhibit such open communication. Under Kasky, if a

company makes a broad statement or unintentionally

publishes incorrect information concerning its distribution

practice (undeniably part of its “business operations”),

the proscribed corrective action is so punitive that it may

dissuade companies from communicating in the first place."

11. During the cyanide crisis, Johnson & Johnson made multiple

statements about its “business operations” that would potentially be

a basis for liability under Kasky. See, e.g., McNeil/Lehrer Report:

Cyanide Investigation (Dr. Gates’ comments that “We are confident

... that our security, our quality assurance procedures are such that

(Cont'd)

15

The harsh results of suppressing this openness are difficult

to overstate: Johnson & Johnson’s swift public communications

literally are credited with saving human life. Of the eight

million capsules recalled after Johnson & Johnson began its

campaign, seventy-five were found to contain cyanide.

See Harvey L. Pitt & Karl A. Groskaufmanis, When Bad

Things Happen to Good Companies: A Crisis Management

Primer, 1149 PLI/Corp 307, 309.

Debates on some of the most important issues of our

time have been shaped and influenced by corporate speakers

and public relations professionals such as amici. One such

debate centers on scientific advances in the field of medicine,

and the ethical issues those advances raise, for example, the

science of cloning and the possible medical uses for the

technology associated with it. As such advances came to the

public’s attention, a vigorous debate ensued concerning

the ethical implications of these scientific discoveries.

See “Therapeutic Cloning Under Fire” at http://www. lef.org/

magazine/mag2002/mar2002 cover_west_ 01.html (Mar.

2002) (“when he [ Advanced Cell Technology’s (“ACT”) CEO

Dr. Michael West] announced recently that ACT had taken

the first step towards human therapeutic cloning, he was

suddenly criticized by everyone from President Bush to the

Pope”).

(Cont'd)

this could not have happened in the process of the packaging —

manufacture and packaging of the product”; “We do have cyanide in

our analytical laboratories because it is required for certain tests . . .

But it would not be in any way accessible to the manufacturing

process”; “Well, we’re shocked, we’re dismayed, we've learned

that medications can be tampered with at the, we believe at the

retail level’).

16

Corporations that have a financial intcrest in cloning

technologies have joined the public debate to add a unique

perspective on the issue. ACT itself, which initially made

the scientific breakthrough making cell cloning possible,

has taken a diametrically opposed view to cloning’s critics.

See id. (“No serious ethicist or embryologist believes that a

pre-implantation embryo is a human being. We are not talking

about creating a pregnancy. We are talking about making

a microscopic ball of cells with no body cells of any kind”’).

It is precisely these representations about ACT’s cloning

process, especially in the form of the robust analogies used

by Dr. West, that would become fodder for strike suits (as

well as suits brought by political advocacy groups opposed

to human cloning).

Ill. THE KASKY TEST COVERS AN ENORMOUS

AMOUNT OF PROTECTED CORPORATE SPEECH

As disparate as the public statements described above

may be, they all share characteristics that illustrate why this

Court should reverse the California Supreme Court’s

decision: (1) all concern issues of great public moment;

(2) all involved the dissemination of facts related to the

company’s “business operations”; and (3) the corporations

involved all stood to benefit financially as a result of the

speech, even though many of the public statements also were

made in part to affect legislation, promote public safety and/

or affect other regulation. If the Kasky decision stands,

however, these communication efforts will be subject to a

new strict liability standard that will incentivize critics not

to respond with more speech, but class action lawsuits. '?

12. | One observer has noted that already the number of U.S.

companies publicly issuing corporate responsibility reports has

(Cont'd)

17

The amorphous nature of the test also means that, as a

practical matter, there is no guidance for amici or others

to determine what corporate speech is entitled to First

Amendment protection. The broad language of the Kasky

decision creates an illusory distinction between “policy”

discussion and commercial speech, which the California

Supreme Court now defines as any statement about “actual

conditions and practices” of the business. This distinction is

unworkable in practice. The end result is that the test contains

no limiting principles because it falsely assumes that because

a corporation always is, in part, motivated by profits, its

speech is entitled to no First Amendment protection. This is

at odds with the Court’s well-settled precedent. See, e.g.,

Joseph Burstyn, Inc. v. Wilson, 343 U.S. 495, 501-502

(1952) (speech is entitled to full First Amendment protection

notwithstanding it is undertaken by “large-scale business

conducted for private profit”). The risks under the Kasky

regime are even greater because amici often do not control

the final presentation of press releases and other communications

to the public, the media does. Cf, Kasky, 45 P.3d at 256

(statements made to reporters that are passed along to

(Cont'd)

dropped from 78 in 2001 to 58 in 2002. See Gary Young, Nike Ruling:

Just How Chilling Is It?, Nationa Law Journat, Jan. 20, 2003,

at A9; see also Peter Clarke, Address at SRI Media Conference

(Nov. 2, 2002):

Many, many funds in Europe screen on social,

environmental and other issues . . . For example, the Dow

Jones Sustainability Index, the FTSF4 Good Index, and

Euronext are actual stock market indices comprised of

companies that are considered to be more socially

responsible .. . The California decision might create a

pretext for those companies to hide behind that decision

so as not to go forward and publish their CSR reports.

18

consumers can be commercial speech). Prudent, risk-averse

companies will have no option but to decline speaking in

order to avoid the possibility of strike suits.

Indeed, for those corporations who enter the public

debate, California’s broad remedies impose another,

even more chilling threat. That law provides as a remedy for

speech that, even though true on its face, may mislead some,

a “Court-approved public information campaign” to compel

a corporation to “correct” editorials and other speech on

matters of public importance. Kasky, 45 P.3d at 250. In other

words, under the California Supreme Court’s test, not only

would the corporation’s speech be subject to a stricter

standard of liability than the speech of its critics, but the

company could be compelled to finance a “public-information

campaign” entirely against its interest to address potential

“confusion” on the public’s part.

This is fundamentally at odds with the governing principles

of the First Amendment. See, e.g., Pac. Gas & Elec. Co. v. Pub.

Utils. Comm'n, 475 U.S. 1 (1986) (California Public Utilities

Commission’s order that PG&E permit the “extra space” in its

envelopes sent to customers to be used by a public interest group

to voice a point of view PG&E did not agree with held to violate

PG&E’s First Amendment right not to speak). It inevitably will

result in a lopsided debate dominated by corporate critics, bereft

of facts that reside exclusively with corporations. The

consequences to a fully informed public are difficult to overstate,

as Johnson & Johnson’s life-saving Tylenol campaign

graphically demonstrates.

In short, because corporations are entities whose decision

makers owe fiduciary duties to shareholders and owners, no

responsible corporate spokesman speaks on a company’s behalf

19

without being concerned about the effects the statements may

have on corporate sales and profits. Because all corporate speech

is, and should be, uttered in the interests of benefitting the

corporation in the eyes of potential consumers, the speech

restricting effects of the California Supreme Court’s test will

be enormous.

CONCLUSION

For the foregoing reasons, the judgment of the California

Supreme Court should be reversed.

Respectfully submitted,

Bruce P. KELLER

Counsel of Record

MICHAEL R. POTENZA

CHRISTOPHER W. DyBWwAD

DEBEVOISE & PLIMPTON

Attorneys for Amici Curiae

919 Third Avenue

New York, NY 10022

(212) 909-6000