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The California Supreme Court will decide for the first time whether the state’s sweeping unfair business practices statute can be used to challenge an American company’s labor practices abroad. Five justices Wednesday voted to hear a San Francisco man’s claim that Nike Inc. violated Business and Professions Code �17200 when the sneaker company allegedly made false statements in order to dupe customers into buying products manufactured by exploited Asian workers. Chief Justice Ronald George, along with Justices Stanley Mosk, Joyce Kennard, Kathryn Mickle Werdegar and Janice Rogers Brown voted to take up Kasky v. Nike, Inc., S087859. At stake in the case is how far companies can go to defend themselves through public relations against attacks on their business practices, and any decision will likely effect similar suits against other clothing manufacturers. Lawyers on both sides say the court’s decision will likely hinge on whether Nike’s denial of labor abuses was constitutionally protected speech or a deception of consumers that may be covered under �17200. “Nike was making a lot of misrepresentations,” said plaintiff’s lawyer Alan Caplan, a partner at San Francisco’s Bushnell, Caplan & Fielding. “It’s a classic case of an unfair business practice.” Caplan, whose firm is joined in the case by San Francisco sole practitioner Paul Hoeber and by Milberg Weiss Bershad Hynes & Lerach, said he was ecstatic about Wednesday’s news. Nike attorney David Brown, a business litigation partner with Brobeck, Phleger & Harrison, said he was surprised the court granted review, but said he was confident Nike will prevail in the matter. “We thought the trial court and court of appeal decisions were correct,” he said. “The facts of the case bring Nike well into First Amendment protections.” Marc Kasky brought his claim against Nike in San Francisco Superior Court last year alleging that the sports apparel company engaged in false advertising to mislead customers about working conditions in its Asian factories. Kasky sought an injunction ordering Nike to “disgorge all monies” it acquired through its alleged unfair practices. He also wanted the Beaverton, Ore.-based company to “cease misrepresenting its working conditions and undertake a court-approved public information campaign,” according to court documents. But San Francisco Judge David Garcia dismissed the action, and a 1st District Court of Appeal panel later slammed the plaintiff’s claim on the grounds that Nike’s campaign constituted free speech. In a unanimous opinion, Justice Douglas Swager wrote: “We see no merit to appellant’s scattershot argument that he might be able to state a cause of action on some theory allowing content-related abridgement of noncommercial speech.” In their petition to the Supreme Court, the plaintiff’s lawyers argue that the court of appeal erred when it tossed the case last March. “The court simply assumed that a company cannot be engaged in commercial speech when its false statements are ‘intended to promote a favorable corporate image,’” attorney Paul Hoeber wrote in his brief. Defense attorneys claim that, if successful, the case could unleash a flood of new California actions against companies operating outside the United States. Since Kasky’s suit, a similar claim has been brought in San Francisco against The Gap, J. Crew, Tommy Hilfiger and other clothing manufacturers accused of deceiving customers about the conditions under which their clothes are made in Saipan. In Union of Needletrades Industrial and Textile Employees v. The Gap Inc., 300474, 18 U.S. clothing manufacturers are accused of misleading the public about labor abuses and mislabeling their clothing. Caplan, who is also involved in that litigation, said a decision by the court in Kasky will have no impact on the Gap case, which accuses manufacturers of more than just misinformation. But Brobeck’s Brown has said Kasky is directly applicable to the false advertising claims in the other suits.

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