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February 10, 2004
Cintas Defamation Suit Challenges Shareowner Free Speech Rights
    by William Baue

Cintas files a defamation lawsuit against Tim Smith of Walden Asset Management for alleging that the company uses sweatshop labor in Haiti.

Until now, shareowners have unquestioningly enjoyed and exercised their Constitutional free speech rights to express concerns with management at corporate annual general meetings (AGMs). However, a defamation lawsuit filed late last month by Cintas (ticker: CTAS) against socially responsible investment (SRI) firm Walden Asset Management and its senior vice president, Tim Smith, could have a "chilling effect" on shareowner dialogue.

The Cintas complaint centers around remarks Mr. Smith made at the October 2003 AGM introducing a resolution that asks Cintas to assess the efficacy of its Code of Conduct in preventing sweatshop labor in countries where it sources. Mr. Smith referred to Haitian American Apparel (HAACOSA) as "a major supplier to Cintas."

"Cintas products in Haiti are currently being produced in violation with its own Code of Conduct," the complaint quotes Mr. Smith as saying. "Cintas is sourcing from a factory which is a poster child for sweatshops."

The Cintas complaint vehemently denies these allegations, and charges Mr. Smith with defamation for knowingly disseminating "false" information.

"This lawsuit is pretty alarming, as it could have a chilling effect on shareowners' ability to speak freely," said Adam Kanzer, general counsel & director of shareholder advocacy at Domini Social Investments, which co-filed the resolution. "The lawsuit raises the question of what it means to speak freely at annual meetings."

"It looks like a 'slap suit' to scare people away," Mr. Kanzer told

The Cintas complaint alleges that Walden cited the Union of Needletrades, Industrial and Textile Employees (UNITE) as its sole source for the statements, despite Walden's own policy of fact-checking with more than one source.

UNITE is currently embattled with Cintas, and has posted a white paper on its website outlining its grievances against the company. The Cintas complaint characterizes UNITE as "a highly biased source."

Cincinnati-based Cintas claims to be the largest supplier of uniforms in North America with more than 27,000 employees, 500,000 customers, and more than 5 million people wearing their product each day. Cintas was selected as one of the most admired companies in 2003 by Fortune Magazine and also made the “A-List” of the best global companies as designated by Forbes Magazine.

This case has far-reaching implications for shareowner action. The complaint calls for an injunction to enjoin Walden from making statements associating Cintas with Haitian sweatshops. Applied more broadly, such an injunction could amount to a gag order for shareowner action practitioners, who wonder at the suit's motivations.

"What is the purpose of this lawsuit?" asks Sister Ruth Rosenbaum, executive director of the Center for Reflection, Education, and Action (CREA), a shareowner activist who has done extensive research on the contract-supply labor chain in Haiti and other countries. "Is it to intimidate shareowners? Is it to say that the company is not responsible to its shareowners?"

"If the company disagrees with these statements, why don't they provide documentation as proof instead of filing a lawsuit?" Sister Rosenbaum told

Cintas spokesperson Wade Gates declined to respond to's questions and requests for such documentation, referring only to the complaint as the sole public commentary on the suit.

The Cintas lawsuit represents an intriguing counterpoint to the Kasky v. Nike lawsuit that reached the US Supreme Court, which sent the case back to California with conflicting opinions issued by the Justices. In 1998, San-Francisco-based social advocate Marc Kasky filed suit against Nike (ticker: NKE), extensively documenting false statements the company made publicly denying its use of sweatshop labor in developing countries.

Nike claimed first amendment free speech protection for its public statements. The California Supreme Court disagreed with Nike, and defined its statements as commercial speech, which the law holds to a high standard of veracity. After the US Supreme Court sent the case back to California, Mr. Kasky and Nike settled out of court, precluding a judicial examination of the veracity or falsity of Nike's public statements.

Now, the Cintas Corporation is turning the tables, seeking to deny shareowners free speech rights.


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