The 9th US Circuit Court of Appeals upheld a ruling that Adidas did not conceal risks linked to its partnership with Kanye West (Ye), rejecting investor claims after the brand cut ties in 2022.
Adidas has successfully defended itself against an appeal from shareholders who alleged the company concealed misconduct by rapper-entrepreneur Kanye West (Ye) before ending their partnership in 2022.
The 9th US Circuit Court of Appeals in San Francisco ruled on Wednesday that Adidas did not mislead investors in its annual reports. The court noted that disclosures about potential negative effects from improper behaviour by entertainment partners were sufficient and did not amount to fraud. “A reasonable investor would know that a partnership with a celebrity partner like Ye would come with inherent risks relating to improper behaviour,” the three-judge panel stated.
Background to the case
The case was brought by the HLSA-ILA Funds, representing maritime workers in Virginia, who claimed losses after Adidas shares fell when the company severed ties with Ye following his antisemitic remarks. The partnership, which began in 2013, had been highly profitable, generating about €1.5 billion ($1.75 billion) in sales in 2021.
Aftermath of partnership termination
Adidas ended the collaboration in October 2022, leaving over €1 billion worth of Yeezy shoes in storage. The company later sold remaining inventory, pledging some proceeds to charities combating hate. The decision upholds an earlier dismissal by a federal judge in Oregon, where Adidas’ North American headquarters are located.
About Adidas and Yeezy
The Yeezy line, launched with Ye in 2015, became a cultural phenomenon and a major revenue driver until the partnership collapsed amid controversy.
