Constitutional Law
Jul. 20, 2002
Mouthing Off
Forum Column - By Tom Clarke - Every company might puff a bit when it comes to describing its products or services. It may even use humor or absurdity to promote its brand identity. Consumers, however, are rarely confused when they see the resulting advertisements or public relations blitzes. Yet the California Supreme Court has stated that all such communications, and more, are subject to review in the state's courts to determine whether they are literally and contextually accurate.
By Tom Clarke
Every company might puff a bit when it comes to describing its products or services. It may even use humor or absurdity to promote its brand identity. Consumers, however, are rarely confused when they see the resulting advertisements or public relations blitzes. Yet the California Supreme Court has stated that all such communications, and more, are subject to review in the state's courts to determine whether they are literally and contextually accurate.
In Kasky v. Nike Inc., 2002 Cal.LEXIS 2591 (May 2, 2002), the California Supreme Court said that all sorts of company promotions and communications might have a "tendency to confuse" - even if the communications are true. So long as the speech is "commercial," then Business and Professional Code Section 17500 applies, meaning that any California resident can file suit against a company and force it to defend its advertising materials, public relations announcements, brochures, Web sites, business cards, letterhead and news conference content.
The court's fundamental rationale for allowing the lawsuit to go forward is that "commercial speech" is afforded less constitutional protection under the First Amendment than traditionally protected speech. In essence, reversing its earlier decision about the bold exercise in Jacksonian democracy inherent in Article I, Section 2, of the California Constitution (Gerawan Farming Inc. v. William J. Lyons Jr., 24 Cal.4th 468 (2000)), the court holds that there is less protection also under the state constitution.
Even speech that "relates to a matter of significant public interest or controversy" can be commercial speech and, thus, entitled to less protection than whatever is not commercial speech.
The court sets forth a formula for a so-called "limited purpose test" for the categorization of commercial speech. The key elements are described below. However, rather than providing clarity, the court appears to have created a meaningless blur. In the limited-purpose test formulation, there are three key elements: the characterization of the speaker, the characterization of the intended audience and the content of the message.
The "speaker" is either someone engaged in commerce ("the production, distribution, or sale of goods or services") or someone acting "on behalf of" a person so engaged. Unfortunately, the court never explains whether this "on behalf of" relationship requires a formal structure (e.g. contract, agency or employment) or may be almost fortuitous in nature.
It is the vagueness of the court's many definitions of the operative terms (e.g., "on behalf of") of this test that brings the logical and philosophical underpinnings of the opinion into question.
The "intended audience" concept is equally vague. After including buyers, customers or people acting "on behalf of" actual or potential buyers or customers, the court sweeps into its scope the entirety of all modern media by including "persons (such as reporters or reviewers) likely to repeat the message to or otherwise influence actual or potential buyers or customers."
The court explicitly states that the concept of "intended audience" encompasses, but is not limited to, "statements made in the context of a modern, sophisticated public relations campaign intended to increase sales and profits by enhancing the image of a product or of its manufacturer or seller."
Without clearly explaining its reasoning, the court seems to refer to "other factors" that may be considered. For example, whether the communication is in an "advertising format." That said, the court also notes that advertising format is neither necessary nor sufficient to categorizing a communication as commercial speech.
Likewise, an "economic motivation" may be considered. The court explains that such a motivation can be found in "speech which is intended to lead to commercial transactions." However, to focus on this term exclusively would violate the carefully set forth three-pronged test of speaker, intended audience and content of the message.
Without viewing it as dicta, one can hypothesize that the court was describing another of its neither necessary nor sufficient terms, such as advertising format. Something to be considered, if appropriate, whenever that might be.
The terminology used by the court allows the concept of commercial speech to be twisted like a pretzel and reach into virtually every communication not protected by an explicit privilege. A couple of examples illustrate how Kasky can intrude into traditionally protected speech.
• Modern politics. Politicians frequently employ staff to assist constituents with "problems" related to government bureaucracies and programs. Because the terms are so vague, a politician can be classified as acting on behalf of his constituent-serving staff, who are providing a service. Politicians always are seeking media attention, which certainly helps with donations that fund re-election campaigns.
The third element ("message commercial in character"), notes the Kasky court, need be nothing more than "statements about the education, experience, and qualifications of the person providing or endorsing the services." A political campaign is often a classic in communications addressing the issue of experience, particularly in providing services to their constituents.
Thus, all the key elements are satisfied. Without stating so explicitly, the court has overruled O'Conner v. Superior Court, 177 Cal.App.3d 1013 (1986), and Chavez v. Citizens for a Fair Farm Labor Law, 84 Cal.App.3d 77 (1978), as well as the rationale of National Committee for the Reform Party of the United States v. Democratic National Committee, 168 F.3d 36 (9th Cir. 1999).
This means that all politicians are subject to Section 17500 lawsuits regarding the content of their speeches, platforms and debates.
• Experts. Another example would be the classic "expert" testifying in a public forum about an issue of importance. He or she certainly has a financial interest in increasing business (e.g., as a paid expert, consultant, author or lecturer) through name recognition and issue-association.
Again, expert testimony, classically viewed as the most protected of speech, since it addresses in public forums issues of great interest, can be deemed commercial in nature. For, as the Kasky court notes, communications about issues of public interest and controversy can be commercial speech. It is only because the court has not truly formed a limited-purpose test that such scenarios can be proposed.
Until Kasky, the standards applicable to Section 17500 lawsuits were pretty well-understood. Case law held that the plaintiff must show that the defendant's assertions are factually untrue or are sufficiently misleading such that reasonable members of the public likely would be deceived. The plaintiff's burden could not be met by mere anecdotal evidence.
Further, plaintiffs were required to demonstrate by extrinsic evidence, such as a consumer survey, that the challenged advertisement misleads reasonable consumers.
Now Kasky has thrown that entire body of well-established law into question. Is a "tendency to confuse" a new test or merely a sloppy summation of existing law? Given its repetition in the opinion, one might not unreasonably speculate that it is a new standard. Unfortunately, it may be several years before clarity is obtained as to the freedom of commercial speech in California.
Until a federal court finds the wisdom to strike down the "tendency to confuse" standard and its all-encompassing concept of commercial speech, it would be wise to take several precautionary steps.
Certainly, if a California consumer assumes the role of private attorney general, as is allowed under Section 17500, and files a "tendency to confuse" lawsuit, the wise company will defend the spurious action.
Until lawsuits like these go the way of the dinosaur, companies should assess the risk that their advertising, media and promotional materials might pose. Some reasonable precautionary steps might include reviewing materials (print and electronic) for statements of objective fact and confirming that there is laboratory data to support any claims made.
For example, a statement that a product contains a specified percentage of a certain ingredient, which yields various desirable characteristics, should be confirmed as to the percentage of the ingredient present and the interrelationship between the ingredient and the desirable attributes.
If the company makes statements of product quality, then it should undertake quality assurance and quality control procedures to assure that the requisite quality does indeed exist and that the error rate is statistically insignificant.
If statements of "puffery" of any sort are made ("the best," "the most," "less work"), the company should support them with valid surveys of consumers. The "puff" should not have any tendency to mislead or confuse.
Tom Clarke is a senior partner with the law firm of Ropers Majeski Kohn & Bentley.
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