Contact l Sitemap

home industries issues reasearch weblog press

Home  » Industries » Manufacturing

Kasky v. Nike, Inc.

Superior Court of the State of California
April 20th, 1998


MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH (68582)
PATRICK J. COUGHLIN (111070
FRANK J. JANECEK, JR. (156306)
RANDI D. BANDMAN (145212)
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: (619) 231-1058

BUSHNELL, CAPLAN & FIELDING, LLP
ALAN M. CAPLAN (49315)
PHILIP NEUMARK (43008)
RODERICK P. BUSHNELL (46583)
221 Pine Street, Suite 600
San Francisco, CA 94104
Telephone: (415) 217-3800

PAUL R. HOEBER (48019)
221 Pine Street, Suite 600
San Francisco, CA 94104
Telephone: (415) 217-3800

Attorneys for Plaintiff MARC KASKY, on Behalf
of the General Public of the State of California

IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA

IN AND FOR THE CITY AND COUNTY OF SAN FRANCISCO

MARC KASKY, on Behalf of the General Public of the State of California,

Plaintiff,

v.

NIKE, INC.; and DOES 1 through 200, inclusive,

Defendants.

________________________________________

TYPE OF ACTION:
Local Rule 2.3 Designation:
(1)(a): Unlawful and Unfair Business
Practices

PLAINTIFF DEMANDS A TRIAL
BY JURY

)
)
)
)
)
)
)
)
)
)
)
)


Case No.

COMPLAINT FOR STATUTORY, EQUITABLE AND INJUNCTIVE RELIEF BASED UPON:

(1) Violation of Cal. Bus. & Prof. Code §17200, et seq. - Unlawful Business Practices, predicated on violations of §§1572, 1709 and 1710, et seq.; Negligent Misrepresentation;

(2) Violation of Cal. Bus. & Prof. Code §17200, et seq. - Unlawful Business Practices, predicated on violations of §§ 1572, 1709 and 1710 of the Cal. Civil Code; Fraud and Deceit;

(3) Violation of Cal. Bus. & Prof. Code §17200, et seq. - Unfair Business Practices; and

(4) Violation of Cal. Bus. & Prof. Code §17500, et seq.

INTRODUCTION

1. This private attorney general action against defendant NIKE INC. ("NIKE") charges that NIKE, in order to maintain and/or increase its sales, made misrepresentations by the use of false statements and/or material omissions of fact, including but not limited to the following:

(a) claims that workers who make NIKE products are protected from and not subjected to corporal punishment and/or sexual abuse;

(b) claims that NIKE products are made in accordance with applicable governmental laws and regulations governing wages and hours;

(c) claims that NIKE products are made in accordance with applicable laws and regulations governing health and safety conditions;

(d) claims that NIKE pays average line-workers double-the-minimum wage in Southeast Asia;

(e) claims that workers who produce NIKE products receive free meals and health care;

(f) claims that the GoodWorks International (Andrew Young) report proves that NIKE is doing a good job and "operating morally"; and

(g) claims that NIKE guarantees a "living wage" for all workers who make NIKE products.

2. Plaintiff, by his attorneys, brings this action on behalf of the General Public of the State of California and on information and belief, except those allegations which pertain to the named plaintiff (which are alleged on personal knowledge), hereby alleges as follows:

JURISDICTION AND VENUE

3. This Court has jurisdiction over all causes of action asserted herein pursuant to the California Constitution, Article XI, §10, because this case is a cause not given by statute to other trial courts.

4. This Court has jurisdiction over NIKE because this defendant is a foreign corporation authorized to do business in California and registered with the California Secretary of State and who does sufficient business in California, has sufficient minimum contacts with California, and intentionally avails itself of the markets within California through the promotion, sale, marketing and distribution of its products in California to render the exercise of jurisdiction by the California courts permissible under traditional notions of fair play and substantial justice.

5. Venue is proper in this Court because the products at issue are advertised, promoted, sold and used in this County, and defendant has received substantial compensation from the sale of the products at issue in this County by doing business here and making numerous misrepresentations which had an effect in this County.

PARTIES

6. Plaintiff MARC KASKY is a resident of the City and County of San Francisco, State of California. Pursuant to California Business and Professions Code §17200, et seq., he brings this action on behalf of the General Public of the State of California. Plaintiff alleges no harm or damages whatsoever regarding himself individually.

7. NIKE is an Oregon corporation and its principal place of business is located on the Nike World Campus at 1 Bowerman Drive, Beaverton, Oregon 97005-6453.

8. The true names and capacities of the defendants sued herein as DOES 1 through 200 are unknown to plaintiff who therefore sues them by such fictitious names. Plaintiff will amend this Complaint to allege the true names and capacities of these defendants when they have been determined. Each of the fictitiously named defendants is responsible in some manner for the conduct alleged herein.

9. At all times mentioned in the causes of action alleged herein, each and every defendant was an agent and/or employee of each and every other defendant. In doing the things alleged in the causes of action stated herein, each and every defendant was acting within the course and scope of this agency or employment and was acting with the consent, permission and authorization of each of the remaining defendants. All actions of each defendant as alleged in the causes of action stated herein were ratified and approved by every other defendant or their officers or managing agents, and by agreeing to actively conceal the true facts regarding the acts and omissions, as alleged herein, engaged in conspiratorial conduct with each other.

 

NIKE’S UBIQUITOUS AND SUCCESSFUL PROMOTIONAL SCHEME

10. In order to promote, advertise and market its athletic shoes and apparel, NIKE expended almost $1 billion in the fiscal year ending May 31, 1997. NIKE had annual revenues of $9.2 billion. (See "NIKE INC. 1997 ANNUAL REPORT," attached as Exhibit A.)

11. According to sports-marketing specialists, by the 1990's, seven times as many athletes were parties to working agreements with NIKE as with any other company. Over half of the NCAA championship basketball teams of the past 10 years had worn NIKE products, and more than 60 big-time colleges were "NIKE schools" – this, in most cases, because their coaches were NIKE coaches. In total, NIKE has promotional arrangements with over 200 colleges and universities, including the University of California at Berkeley. For example, the University of North Carolina reportedly receives $7 million from NIKE. Well over 200 of the 324 NBA players wore NIKE shoes – over 80 of them by contract. And, 275 pro football players wore NIKE shoes, as did 290 Major League Baseball players. (See Donald Katz, Just Do It, The Nike Spirit in the Corporate World, Adams Media Corp., Holbrook, MA.,1994, p. 25 [hereinafter, "Just Do It"].)

12. Recently, NIKE paid the Brazilian National Soccer Team an astonishing $100-plus million to become a "NIKE team."

13. NIKE was so masterful at connecting its business aspirations to customers and high-profiled athletes and teams that NIKE’s revenues by fiscal 1993 were as large as those garnered from NBA, NFL and Major League Baseball TV deals, tickets and retail paraphernalia sales combined. (See Katz, Just Do It, supra, at p. 25.)

14. The success of the pervasive NIKE advertising and promotional campaign has been phenomenal. One Time Magazine story about the baby-boom generation quoted a social historian saying that the ethos of the largest American generation could be summed up in three words: "Just Do It." Scott Bedbury, an Advertising Director for NIKE, said, with respect to the slogan, "Just Do It," "This thing has become much more than an ad slogan. It’s an idea. It’s like a frame of mind." (See Katz, Just Do It, pp. 145-46.)>

 

NIKE’S SWEATSHOP STIGMA

15. NIKE’s carefully cultured image has come under attack in the past few years. Various human rights groups have provided documentary evidence that:

• Thousands of mostly young, female workers in Southeast Asian (Indonesia, Vietnam, China) factories that produce NIKE products were being exposed to reproductive toxins and suspected carcinogens. (See, e.g., Exhibit B: NIKE document entitled, "Ernst & Young Environmental and Labor Practice Audit of Tae Kwang Vina Industrial Ltd. Co. Vietnam," January 13, 1997; this NIKE document was released by the Transnational Resource Action Center.).

• These workers were not earning a "living wage" even though they work unimaginable hours – oftentimes 12 to 14 hours per day. (See Exhibit C: "Working Conditions in the Sports Shoe Industry in China," published by Hong Kong Christian Industrial Committee, Asia Monitor Resource Center Ltd., October 1997; see also, Exhibit D: NIKE letter to Prema Mattai-Davis, Executive Director, YWCA of America, from Dusty Kidd, dated September 28, 1997.)

• NIKE workers in Southeast Asia have suffered corporal punishment and corporal abuse. (See Exhibit E: Nguyen, "Report Provided by Thuyen Nguyen of Vietnam Labor Watch on March 29, 1997, After he Returned from 16-day Fact-Finding Tour of Vietnam Factories in Vietnam.")

• NIKE young female workers have suffered sexual harassment.

• NIKE workers in Southeast Asia have been forced to work overtime in violation of applicable laws regulating wages and overtime.

Each of these allegations is more fully described below. NIKE disclosed none of these facts to California consumers either in the promotion of its shoes or at the point of purchase, or in any other manner. As more fully described below, in response to the public exposure of NIKE’s labor policies and practices in Southeast Asia, NIKE has misrepresented to the California consuming public that in some instances the allegations herein alleged were untrue, or, if true, NIKE was not responsible for such acts.

16. The media have continued to expose NIKE’s actual practices. See, e.g., CBS News, Financial Times, The New York Times, The San Francisco Chronicle, Greensboro North Carolina News and Record, Buffalo News and The Oregonian, all of whom have run stories and articles which expose NIKE’s actual practices. (See Exhibits F to L.)

17. Recently, Reggie White, the Green Bay Packer all-pro defensive end, an ordained minister and a "NIKE athlete," has called on NIKE to start manufacturing athletic shoes in the United States instead of in Southeast Asia. (See Exhibit M.) Michael Jordan, who is synonymous with NIKE, is planning to view working conditions in the Asian factories that produce NIKE products, said that:

I’m hearing a lot of different sides to this issue so . . . the best thing I can do is go to Asia and see it for myself. If there are issues . . . if it’s an issue of slavery or sweatshops, [NIKE executives] have to revise its situation.

(See Exhibit N: Marantz, "A Model of Understatement," The Sporting News, December 22, 1997.)

 

NIKE IS LEGALLY RESPONSIBLE FOR EVERY
WORKER WHO PRODUCES NIKE PRODUCTS

18. The vast majority of NIKE’s products are manufactured by subcontractors in China, Vietnam and Indonesia. The vast majority of the 300,000 workers who actually make NIKE products are women under the age of 24.

19. NIKE is legally and ethically responsible for the workers who make NIKE products. Beginning in or after March 1993, NIKE, pursuant to its contracts with each of its subcontractors, has assumed legal responsibility to:

(a) require compliance with applicable governmental regulations regarding minimum wage;

///

(b) require compliance with applicable governmental regulations regarding overtime;

(c) require compliance with applicable health and safety regulations;

(d) require compliance with environmental regulations; and

(e) ensure that workers will not be put at risk of physical harm. (See Exhibit O: NIKE Memorandum of Understanding with its Subcontractors.)

20. NIKE has represented to the public that NIKE has assumed full responsibility for these workers. In a NIKE document entitled "Please, Consider This . . .," NIKE states:

NIKE takes full responsibility for working conditions wherever its products are produced.

[Emphasis added.] (See Exhibit P.)

21. In a letter dated January 15, 1996, Lilian Bours, PR Manager Nike Europe, represented that the NIKE Memorandum of Understanding is "legally binding." (See Exhibit Q.)

22. In a letter dated June 18, 1996 to University Presidents and Athletic Directors, including universities which have contracts with NIKE to wear its equipment and to display the "NIKE Swoosh," and copied to NIKE CEO Philip H. Knight, Steve Miller, Director NIKE Sports Marketing, represented and certified that NIKE is in compliance with applicable government regulations regarding minimum wage and overtime, as well as occupational health and safety, and environmental regulations, and that NIKE enforces these standards through daily observation by NIKE staff members. Mr. Miller stated:

First and foremost, wherever NIKE operates around the globe, it is guided by principles set forth in a code of conduct that binds its production subcontractors to a signed Memorandum of Understanding. This Memorandum strictly prohibits child labor, and certifies compliance with applicable government regulations regarding minimum wage and overtime as well as occupational health and safety, environmental regulations, workers insurance and equal opportunity provisions.

///

///

Nike enforces its standards through daily observation by staff members who are responsible for mandatory adherence to the Memorandum.

[Emphasis added.] (See Exhibit R.)

THE CODE OF CONDUCT AND MEMORANDUM
OF UNDERSTANDING ARE USED BY NIKE AS
MARKETING TOOLS TO ATTRACT CONSUMERS

23. In 1992, NIKE established its own Code of Conduct, which NIKE claims applies to itself and to all of its business partners. (See Exhibit JJ.)

24. NIKE’s Code of Conduct and Memorandum of Understanding were intended, among other things, to entice consumers who do not want to purchase products made in sweatshop and/or under unsafe and/or inhumane conditions. For example, in a candid acknowledgment of the linkage of sales to good company practices and in an overt appeal to customers to consider the Code of Conduct when shopping, NIKE’s Director of Communication, Lee Weinstein, wrote in a letter to the editor published in the San Francisco Examiner on December 14, 1997:

 

Consumers are savvy and want to know they support companies with good products and practices . . . During the shopping season, we encourage shoppers to remember that NIKE is the industry’s leader in improving factory conditions. Consider that Nike established the sporting goods industry’s first code of conduct to ensure our workers know and can exercise their rights.

[Emphasis added.] (See Exhibit S.)

 

NIKE’S CLAIM THAT ITS CONTRACTS PREVENT
CORPORAL PUNISHMENT AND SEXUAL ABUSE AT
FACTORIES WHICH PRODUCE NIKE PRODUCTS IS DECEITFUL

25. In March 1993, NIKE signed an agreement representing that it would "only do business with partners whose workers are . . . not put at risk of physical harm." Athletic Footwear Association’s Statement of Guidelines on Practices of Business Partners, signed by NIKE in March 1993. (See Exhibit T; see also, Exhibit O: NIKE’s Memorandum of Understanding.) In a document entitled "The Nike Code of Conduct: What it is, How it Works," NIKE represented that the "key provisions of the Code include: . . . zero tolerance of corporal punishment or abuse, or of harassment of any kind." (See Exhibit U.) In a NIKE document which was distributed to the media entitled "NIKE Production Primer," dated March 1996 (see Exhibit V), NIKE represented that ". . . NIKE expatriates ensure safe working conditions and prevent illegal working conditions."

26. Notwithstanding NIKE’s representations and its legal and ethical duties to ensure that workers are not subjected to corporal punishment, reports of corporal abuse at factories which make NIKE products abound:

• On March 8, 1997 (International Women’s Day), a supervisor forced 56 female workers to run twice around the 1.2-mile factory perimeter as punishment for failing to wear regulation company work shoes. Twelve of the women suffered shock symptoms, fainted, and were hospitalized. (See Exhibit E: Nguyen, "Report Provided by Thuyen Nguyen of Vietnam Labor Watch on 29 March 1997 After He Returned From 16-day Fact-Finding Tour of Vietnam Factories in Vietnam.")
• Forty-five Vietnamese workers were forced by their supervisors to kneel down with their hands up in the air for 25 minutes. (See Exhibit F: CBS News Report, "48 Hours," Transcript, October 17, 1996.)
• On November 26, 1996, 100 workers at the Pouchen factory in Dong Nai, Vietnam were forced to stand in the sun for an hour for spilling a tray of fruit on an altar which three supervisors were using. (See Exhibit W: VN Fact Sheet, "Hear Laps Story.")
• In Indonesia, an American inspector from NIKE reprimanded a supervisor because an incorrect color was being used on the outsoles. The supervisor, in turn, lined up six workers and smacked each of them with an outsole. (See Exhibit X: Jeff Atkinson and Tim Connor, "Sweating For Nike," Community Aid Abroad, Melbourne, Australia, November 1966.)
• In certain Vietnamese factories, workers cannot go to the bathroom more than once per eight-hour shift and they cannot drink water more than twice per shift. (See Exhibit E.)
• Fifteen Vietnamese women were hit over the head by their supervisor for poor sewing. (See Exhibit F: CBS News Report, "48 Hours.")

27. In Vietnam, at the Tae Kwang Vina plant, a supervisor fled the country after he was accused of sexually molesting several Vietnamese workers. However, in a speech to NIKE shareholders on September 16, 1996, NIKE CEO Philip H. Knight sought to minimize the incident by saying that the supervisor was just trying to wake the female workers and must have touched them in the wrong place. Significantly, the Vietnamese government took a different view: it instigated extradition procedures against the supervisor. (SeeEx. S. F&W.)

 

WAGE AND HOUR VIOLATIONS AT FACTORIES
IN CHINA AND VIETNAM

28. Pursuant to its Memorandum of Understanding, NIKE is under a legal duty to ensure that its products are manufactured in accordance with applicable governmental laws regulating wages and overtime. And, NIKE has represented that its products are manufactured in compliance with applicable laws and regulations regulating wages and overtime. (See, e.g., Exhibits O, P, Q, R and S.) The representations are intentionally and/or recklessly misleading and deceptive and/or were negligently made because they omit material facts: documented violations of the prohibitions of China’s and Vietnam’s labor laws against forced overtime and against excessive overtime at plants which produce NIKE products.

29. The Wellco Factory in Dongguan, Chang’an, China employs 8,000 workers who make NIKE products. The ratio of women to men is seven to one and they are very young, between 18 and 25 years old. (See Exhibit C: "Working Conditions in Sports Shoe Factories in China.")

30. The Asia Monitor Resource Center Ltd. and the Hong Kong Christian Industrial Committee documented the following wage and hour violations at the Wellco plant:

///

///

• Workers work eleven hours per day in violation of both Chinese law and NIKE’s Code of Conduct. In addition to this, workers must work overtime. The overtime of 2.4 hours (on top of the 11-hour work day) violates China’s Labor Law.
• Workers who refuse overtime are subject to termination. This violates both China’s Labor Law and NIKE’s Code of Conduct which states that coerced labor is not acceptable.
• Workers receive only two to four days off every month. This violates both China’s Labor Law and NIKE’s Code of Conduct which states that workers are entitled to at least one day of rest every week.
• In violation of Chinese Labor Law, pregnant workers are treated with disrespect and have been, on occasion, unjustly terminated. (See Exhibit C.)

31. In the same October 1997 report, the Asia Monitor Resource Center Ltd. and the Hong Kong Christian Industrial Committee documented the following wage and hour violations at the Yue Yuen Plant in Dongguan, China. Yue Yuen is a huge factory employing between 50,000 and 60,000 workers. About 80 percent of the workers are women between the ages of 18 and 22 years old. The documented violations at Yue Yuen include:

• In violation of Chinese law, workers must work 10 to 12 hours per day, six or seven days per week, not including overtime. This means a normal work week of 60-84 hours which exceeds the limit set by Chinese law.
• Eighty percent of the workers who were interviewed said that on top of the normal 10 to 12 hour workday, they worked an additional two hours of overtime.
• In the survey, half of the workers were paid by piece rate and stated that they did not receive any extra pay for overtime work. This violates China’s Labor Law, Article 44, which requires that overtime pay should be at least 1.5 times the regular wage. (See Exhibit C.)

32. In Vietnam, the facts give the lie to NIKE’s representations that overtime is not compulsory. In late 1996, Ernst & Young, at NIKE’s request, conducted an audit of the Tae Kwang Vina factory in Bien Hoa City, Vietnam. The audit report was delivered to NIKE in January 1997 but was kept secret until November 1997 when it was leaked to the press. Ernst & Young examined the payroll register of 50 workers at Tae Kwang Vina. Ernst & Young found as follows:

We noted 48 cases where workers were required to work above the maximum working hours.

[Emphasis added.] (See Exhibit B: the Ernst & Young Audit of Tae Kwang Vina, at p. 3.)

33. Thus, in 96% of the cases (48/50), Ernst & Young found that workers producing NIKE products were required to work overtime.

34. In addition to the Ernst & Young audit, Vietnam Labor Watch has documented instances in which workers were forced to work overtime to produce NIKE products. According to Vietnam Labor Watch, most workers who produce NIKE products are forced to work 500 hours or more per year of overtime. This is in clear violation of Article 69 of the Labor Law of Vietnam which restricts overtime to 200 hours per year. (See Exhibit E.)

35. In an eye-witness visit to the factories which produce NIKE products, Thuyen Nguyen was able to observe the women employees’ sense of desperation, physical exhaustion and pressure to work overtime to meet high production quotas. On March 29, 1997, Thuyen Nguyen reported that:

Many of the things I learned during my two-week visit I had already known from earlier reports. But meeting these workers face-to-face made me realize just how bad the conditions are. I cannot describe to you these women’s sense of desperation. Many of them told me they had lost weight since coming to work at the Nike factories. They complained of being tired all the time. Most of the women I spoke to work 10 to twelve hour days, six or seven days a week. . . . Forced and excessive overtime to meet high quotas is the norm. . . . If workers refuse, they are punished or receive a warning. After three warnings, they’re fired.

(See Exhibit E.)

///

36. In sum, NIKE’s representation that its products are manufactured in compliance with applicable laws governing wages and hours is deceitful.

 

NIKE’S CLAIM THAT ITS CONTRACTS PREVENT
HEALTH AND SAFETY VIOLATIONS AT FACTORIES
THAT MAKE NIKE PRODUCTS IS DECEITFUL

37. By its Memorandum of Understanding, NIKE is legally and ethically responsible to ensure that its subcontractors comply with applicable governmental health and safety, and environmental, standards. (See Exhibit O.) In a 1996 document entitled "Please Consider This . . . ," NIKE stated that:

NIKE takes full responsibility for working conditions wherever its products are produced . . .

[Emphasis added.] (See Exhibit P.) In its letter of January 15, 1996 to University Presidents and Athletic Directors, NIKE represented that the Memorandum of Understanding certifies NIKE’s compliance with "applicable government regulations regarding occupational health & safety [and] environmental regulations." (See Exhibit R.) At the NIKE Annual Shareholder Meeting on September 22, 1997, NIKE CEO Philip H. Knight represented that the air quality in NIKE’s Vietnam shoe factory was better than it is in Los Angeles:

You go into the new shoe factory in . . . Vietnam today. There are no surgeon masks, and you’ll find air quality better than it is in Los Angeles.

(See Exhibit Y.)

38. Notwithstanding NIKE’s Memorandum of Understanding and NIKE’s representations, thousands of young (18-24 years old) female workers are exposed to reproductive toxins, and other harmful chemicals, in the solvents and glue which are used in the production of NIKE shoes. These reproductive toxins include, but are not limited to, toluene. In addition to being a reproductive toxin, toluene has the following acute and long-term health consequences:

///

///

SOLVENT

ACUTE HEALTH CONSEQUENCES

CHRONIC HEALTH CONSEQUENCE

Toluene

vertigo; headaches; narcotic coma

irritation of the mucous membrane; euphoria; headaches; vertigo; nausea; lost appetite; alcohol intolerance; autoimmune illness

Workers who produce NIKE products have been and are also exposed to acetone which has the following acute and chronic health consequences:

SOLVENT

ACUTE HEALTH CONSEQUENCES

CHRONIC HEALTH CONSEQUENCE

Acetone

unrest; nausea; vomiting; progressive collapse; coma; kidney and liver damage

headache; drowsiness; throat irritation; coughing; vertigo

39. NIKE’s own documents confirm that workers who produce NIKE products have been exposed to highly toxic and dangerous chemicals. In the previously described audit of the Tae Kwang Vina plant in Bien Hoa City, Vietnam, Ernst & Young found the following:

• The problem of harmful fumes (caused by toluene) needs more attention.
• Dust in the mixing shops exceeds the standard by ten times.
• More than half of the employees in mixing, roller, P.U., stockfit, lamination, TPR (sections using chemicals) do not wear protective equipment (mask and gloves) even in highly hazardous places where the concentration of chemical dust and fumes exceeds the standard.
• In the stockfit section where employees can smell toluene fumes, only thin cotton mask and gloves are available. (See Exhibit B, at p. 7.)

40. On December 9, 1996, Ernst & Young found that the toluene and acetone levels dramatically exceeded the permissible levels:

///

///

///

Toluene: the level at the Assembly I-sole fit, Assembly Ultra Violet, Sole sinking, Attaching room of Stockfit section; Sole fit Ultra Violet, Attaching room of Assembly line and Mixing section exceeded the standard from six to 177 times.
Acetone: the level at Assembly I-sole fit, Assembly Ultra Violet, Attaching room of Stockfit section; Sole fit of Ultra Violet of Assembly line exceeded the standard from six to 18 times. (See Exhibit B, at p. 8.)

41. In addition, Ernst & Young found that dust in the mixing room exceeded the standard by 11 times. (See Exhibit B, at p. 8.) Ernst & Young also found that employees working in sections with noise at more than 85dB(A) had no earplugs and still worked more than eight hours per day. (See Exhibit B, at p. 8.)

42. Notwithstanding the well-known and well-documented adverse health effects of each of the above-listed chemicals and the amount of those chemicals used in the manufacturing of its products, NIKE officials amazingly say that they have little information about the long-term health effects of exposure to solvents. Dusty Kidd, Director of NIKE’s Labor Practices department, downplayed the danger, saying most workers’ exposure is limited because they do not stay more than two or three years in the factories. NIKE’s Kidd said the goal is to meet United States OSHA standards, but that NIKE does not know how many factories meet these standards. According to Kidd, "It’s a work in progress." (See Exhibit L: Jeff Manning, "Poverty Legions Flock to Nike," The Oregonian, November, 1997.)

NIKE’S CLAIM THAT IT PAYS DOUBLE
THE MINIMUM WAGE IS DECEITFUL

43. In a document entitled "Nike Responds to Sweatshop Allegations," NIKE represents that the "average line-workers’ wage in Asian subcontracted facilities is double the government-mandated minimum." (See Exhibit Z.)

44. The Ernst & Young audit directly contradicts this claim. According to Ernst & Young, the minimum wage for workers is $40 per month. According to Ernst & Young, workers at the Tae Kwang Vina factory in Vietnam received an average wage of $45 per month. (See Exhibit B, at p. 2, p. 3, and p. 3, p. 12.)

45. Another recent study of wages of workers who produce goods for NIKE in Vietnam shows that NIKE’s claim of paying double-the-minimum wage is not true. Mr. Vo Minh Quang, Director of the Dong Nai Labor Bureau, and Mr. Nguyen Dinh Thang, President of the Dong Nai Confederation of Labor, reported that:

Most workers here in Dong Nai received at most $40 (U.S.) Per month or 440,000 VND (Vietnam Dong). According to [Vietnam minimum wage laws], this pay is not even legal.

(See Exhibit AA: "The Truth Behind Nike’s Recent Public Statement, excerpted from a newspaper entitled Thanh Nien and translated by Vietnam Labor Watch.)

46. In March 1997, Vietnam Labor Watch interviewed 35 workers of four factories which produce NIKE products. Vietnam Labor Watch examined the pay stubs of some of the workers. The pay stubs, attached as Exhibit BB, show as follows:

 

Exhibit
No.


Basic Pay Without Overtime Per Month


Net Pay, Including
Overtime, After Deductions for
Meals/Health


Hours of Overtime
Per Month








1 & 2


Not legible












3


387,000 (VND)


521,600


40








4


387,000/418,000


458,000


36








5


517,000


593,000


31








6


517,000


575,000


53








7


517,000


551,200


29








8


517,000


595,700


21








 

These pay stubs show that, even with overtime hours that often exceed Vietnam’s legal limits, workers do not earn twice the minimum wage of 444,444 VND.

47. Indonesia provides another example that disproves NIKE’s representation that it pays double-the-minimum wage. To attract companies such as NIKE, the Indonesian government set the national minimum wage below what was deemed necessary to support the workers’ minimum "physical needs." Significantly, as NIKE has conceded, throughout much of the 1990's, NIKE subcontractors received government exemptions from paying even the minimum wage. (See Exhibit CC: Jeff Manning, "Life in Global Arena Grows in Complexity // NIKE Criticized for Production in Asian Lands," Minneapolis Star Tribune, November 29, 1997.)

48. In sum, NIKE’s representation of double-the-minimum wage is both false and based on misleading statistical data.

NIKE’S CLAIM THAT IT PROVIDES
FREE LUNCHES IS DECEITFUL

49. In its document "Nike Responds to Sweatshop Allegations," NIKE represents that:

In addition, compensation extends beyond wages to include . . . free meals . . .

(See Exhibit Z.) The identical representation was made by NIKE CEO Philip H. Knight in a letter dated June 21, 1996 to the New York Times asserting that NIKE "provides free meals, housing and health care." (See Exhibit DD.)

50. As documented by Vietnam Labor Watch in their analysis of workers’ pay stubs, workers who produce NIKE products were forced to pay 9¢ U.S. for their lunches. (See Exhibit BB.) To put this in context, workers at the Tae Kwang Vina plant earn approximately 16.8¢ U.S. per hour ($45 per month for 267 hours). In addition, the pay stubs show that the workers paid for their own health care. (See Exhibit BB.)

NIKE’S RELIANCE ON THE GOODWORKS
INTERNATIONAL REPORT IS DECEITFUL

51. On February 22, 1997, hundreds of persons filled San Francisco’s Union Square on the opening day of Niketown, a multi-floor NIKE superstore, to urge prospective customers to stay away, citing widespread labor abuses by contractors who make NIKE products.

///

52. Two days later, NIKE CEO Philip H. Knight announced that NIKE was commissioning an independent investigation of its Asian operations. NIKE contracted with Andrew Young, former U.S. Ambassador to the United Nations, to conduct the investigation. To conduct this investigation, Andrew Young founded a firm called "GoodWorks International" (hereinafter, "GoodWorks").

53. GoodWorks released its report in June 1997. (See Exhibit EE.) On the same day that GoodWorks issued its report, NIKE took out full-page advertisements in major U.S. newspapers (New York Times, Washington Post, U.S.A. Today, San Francisco Chronicle, etc.) (See Exhibit FF.)

54. In addition, NIKE has repeatedly used the GoodWorks Report in various public statements. For example, at the September 22, 1997 Annual Shareholders’ Meeting, NIKE CEO Philip H. Knight, stated:

So I think we continue to make good progress, and I think that any independent party will find as Andrew Young that we are operating morally.

[Emphasis added.] (See Exhibit Y.)

55. NIKE’s representations that the GoodWorks Report supports claims that NIKE is "doing a good job" and "operating morally" are misleading because NIKE intentionally omitted the following facts:

(a) The GoodWorks Report did not address, directly or indirectly, wage, hour and overtime violations at factories which produced NIKE products. Mr. Young has stated, "I was not asked by NIKE to address compensation and ‘cost of living issues’ which some . . . had hoped would be a part of this report." (See Exhibit EE, p. 3.)

(b) The GoodWorks Report did not address the life-threatening health and safety issues documented in the Ernst & Young audit of the Tae Kwang Vina factory. (See Exhibit B.) Even though the Ernst & Young audit was completed three months before Andrew Young visited Vietnam, Andrew Young did not address a single violation which was documented in the Ernst & Young audit. In fact, Andrew Young did not even visit the Tae Kwang Vina plant. Either NIKE withheld the Ernst & Young Tae Kwang Vina audit from Andrew Young, or Andrew Young and/or his staff negligently or recklessly ignored the Ernst & Young report. In any event, NIKE knew, or should have known, that the GoodWorks Report was deficient in its failure to address the potentially life-threatening health and safety violations at the Tae Kwang Vina plant (as documented by Ernst & Young).

(c) As NIKE knew, or should have known, the GoodWorks Report listed consultants who were never consulted. For example, The GoodWorks Report lists Anita Chan, a renowned researcher of the Australian National University, as a person whom GoodWorks contacted. Mr. Young states as follows:

Early in the process, I wrote and called a number of the important international and U.S. N.G.O.’s [non-governmental organizations] – both to inform them of our assignment and to solicit their input and advice.

(See Exhibit EE, p. 7; Appendix, p. 16.)

56. In a letter submitted to the Washington Post, Anita Chan categorically denies that she was either phoned or contacted by Andrew Young or anyone else from GoodWorks. She goes on to list various health, safety and wage violations in China which she would have brought to Mr. Young’s attention had she been phoned or contacted. (See Exhibit GG.)

57. NIKE also knew, or should have known, that the alleged photograph of Andrew Young with the caption, "Andrew Young meeting with plant management and union representatives in Vietnam," was misleading. This photograph, along with others purporting to show Andrew Young with "union representatives," came as something of a shock to the Vietnamese Confederation of Labor, which represents workers at the NIKE factory. They do not know these individuals. Mr. Vada Manager, a NIKE spokesperson, has admitted that these individuals receive salaries from the company, not from the union or the government. (See Exhibit HH: Stephen Glass, "The Young & the Feckless," New Republic, September 15, 1997.)

58. In sum, NIKE’s representations that the GoodWorks Report is proof that NIKE is "doing a good job" and that NIKE is "operating morally" are misleading.

NIKE’S CLAIM THAT IT GUARANTEES A
"LIVING WAGE FOR ALL WORKERS" IS MISLEADING

59. On October 27, 1997, NIKE issued a release datelined Washington, D.C. and entitled, "Nike Addresses Concerns Regarding Women’s Issues and Highlights Leadership in Worker Initiatives." (See Exhibit II.) The release quotes Kathryn Reith, NIKE Manager of Women’s Sports Issues, who represented that NIKE guarantees a living wage for all workers. Ms. Reith stated that:

NIKE is fulfilling our responsibility as a global corporate citizen each and every day by guaranteeing a living wage for all workers . . . and creating opportunities for women’s financial independence.

[Emphasis added.]

60. This statement is false. On September 28, 1997, a month before the Kathryn Reich statement quoted above, Dusty Kidd, Director of NIKE’s Labor Practices department, wrote:

I am fully cognizant of the call on the part of some for a "living wage." That is generally defined as sufficient income to support the needs of a family of four. We simply cannot ask our contractors to raise wages to that level – whatever that may be – while driving us all out of business, and destroying jobs, in the process.

This letter was written to Prema Mattai-Davis, Ph.D., Chief Executive Officer, YWCA of America. Dusty Kidd copied Doug Stamm, NIKE’s Director of Public Affairs, on the letter. (See Exhibit D.)

FIRST CAUSE OF ACTION

(Unlawful Business Practices in Violation of California
Business & Professions Code §17200, et seq., Predicated on
Violations of Civil Code §§ 1572, 1709 and 1710, et seq.
– Negligent Misrepresentation)

61. Plaintiff incorporates by reference paragraphs 1 through 60 above.

62. In order to maintain and/or increase its sales and profits, NIKE, through its advertising, promotional campaigns, public statements and marketing, has, by the use of false statements and/or material omissions of fact, made misrepresentations, including but not limited to the following:

(a) claims that workers who make NIKE products are protected from and not subjected to corporal punishment and/or sexual abuse;

(b) claims that NIKE products are made in accordance with applicable governmental laws and regulations governing wages and hours;

(c) claims that NIKE products are made in accordance with applicable laws and regulations governing health and safety conditions;

(d) claims that NIKE pays average-line workers double-the-minimum wage in Asia;

(e) claims that workers who produce NIKE products receive free meals and health care;

(f) claims that the GoodWorks (Andrew Young) report proves that NIKE is doing a good job and operating morally; and

(g) claims that NIKE guarantees a "living wage" for all workers who make NIKE products.

63a In making these misrepresentations of fact to the general public, defendant has failed to fulfill its duty to not misrepresent material facts. The direct and proximate cause of defendant’s misrepresentations was the negligence and carelessness of NIKE

64a By making misrepresentations of material fact, NIKE violated Civil Code §§ 1572, 1709 and 1710 (negligent misrepresentation). Accordingly, NIKE has also violated the Business and Professions Code §17200 proscription against engaging in unlawful business practices.

SECOND CAUSE OF ACTION

(Unlawful Business Practices in Violation of California
Business & Professions Code §17200, et seq., Predicated on
Civil Code §§ 1572, 1709 and 1710 – Fraud and Deceit)

65a Plaintiff incorporates by reference paragraphs 1 through 64 above.

///

66a In order to maintain and/or increase its sales and profits, NIKE, through its advertising, promotional campaigns, public statements and marketing, has, by the use of false statements and/or material omissions of fact, made misrepresentations, including but not limited to the following:

(a) claims that workers who make NIKE products are protected from and not subjected to corporal punishment and/or sexual abuse;

(b) claims that NIKE products are made in accordance with applicable governmental laws and regulations governing wages and hours;

(c) claims that NIKE products are made in accordance with applicable laws and regulations governing health and safety conditions;

(d) claims that NIKE pays average-line workers double-the-minimum wage in Asia;

(e) claims that workers who produce NIKE products receive free meals and health care;

(f) claims that the GoodWorks (Andrew Young) report proves that NIKE is doing a good job and operating morally; and

(g) claims that NIKE guarantees a "living wage" for all workers who make NIKE products.

67a NIKE’s misrepresentations were made with knowledge or with reckless disregard of the laws of California prohibiting false and misleading statements. In so doing, NIKE violated California Civil Code §§ 1572, 1709 and 1710, et seq., and accordingly violated California Business and Professions Code §17200, et seq.’s proscription against engaging in unlawful business practices.

THIRD CAUSE OF ACTION

(Unfair Business Practices in Violation of California
Business & Professions Code §17200, et seq.)

68a Plaintiff incorporates by reference paragraphs 1 through 67 above.

///

69a In order to maintain and/or increase its sales and/or profits, by committing the acts enumerated herein, NIKE violated California Business and Professions Code §§17200, et seq.’s prohibition against engaging in unfair business practices. These practices include, but are not limited to:

(a) causing and/or allowing the working conditions pursuant to which its products are manufactured; and/or

(b) misrepresenting and/or omitting material facts in its advertising, promotion and public statements regarding the working conditions employed in the production and manufacturing of its products.

FOURTH CAUSE OF ACTION

(Violation of California Business and Professions
Code §17500, et seq.)

70a Plaintiff incorporates by reference paragraphs 1 through 69 above.

71a Defendant’s use of forms of advertising, promotional and public statements which misrepresent material facts violates California Business and Professions Code §17500, et seq. Beginning at an exact date unknown to plaintiff, but at least since 1993, defendants have committed acts of untrue and misleading advertising, including but not limited to the promotional statements and other public statements set forth in this Complaint, and as defined by Business and Professions Code §17500, by engaging in the acts and practices alleged in this Complaint, as well as other acts and practices unknown to plaintiff at this time, with intent to induce members of the public to enter into contracts for the purchase of NIKE products.

PRAYER FOR RELIEF

WHEREFORE, plaintiff prays for the following relief.

A0 A preliminary and permanent injunction enjoining NIKE, its agents, employees, assigns and all persons acting in concert or participating with it from:

(1) failing and refusing to disgorge all monies which NIKE acquired by means of any act found by this Court to be an unlawful and/or unfair business practice under California Business and Professions Code §17200, et seq.

(2) failing and refusing to undertake a Court-approved public information campaign to correct any NIKE statement and/or claim that this Court finds misleading or deceitful within the meaning of California Business and Professions Code §17200, et seq. and §17500, et seq.

(3) misrepresenting the working conditions under which NIKE products are made including, but not limited to, wages, hours, overtime, environmental, health and/or safety conditions, and the use of child labor to produce NIKE products.

B0 Reasonable attorneys’ fees and costs;

C0 Such other and further relief as this Court may deem just and proper.

DATED: April 20, 1998

MILBERG WEISS BERSHAD HYNES
& LERACH LLP
BUSHNELL, CAPLAN & FIELDING, LLP
PAUL R. HOEBER

By___________________________________
PATRICK J. COUGHLIN

By___________________________________
ALAN M. CAPLAN

Attorneys for Plaintiff
MARC KASKY, on Behalf
of the General Public of the
State of California

///

///

///

///

///

///

JURY TRIAL DEMAND

Plaintiff hereby demands a jury on each cause of action.

DATED: April 20, 1998

MILBERG WEISS BERSHAD HYNES
& LERACH LLP
BUSHNELL, CAPLAN & FIELDING, LLP
PAUL R. HOEBER

By___________________________________
PATRICK J. COUGHLIN

By___________________________________
ALAN M. CAPLAN

Attorneys for Plaintiff
MARC KASKY, on Behalf
of the General Public of the
State of California