Adidas prevailed this week in a shareholder appeal claiming the company concealed alleged misconduct by Kanye West before their lucrative Yeezy partnership collapsed. The Ninth Circuit found the investors failed to show the sportswear giant misled the market about risks tied to the mogul’s behavior.
In a published decision, the appellate panel held that Adidas had no duty to disclose every instance of West’s erratic conduct. It notes that a “reasonable investor” would understand the inherent volatility of a celebrity-driven partnership.
The ruling affirms a prior district court dismissal of the putative class action brought by HLSA-ILA Funds, which argued that Adidas ignored mounting red flags surrounding West’s public behavior, including years of controversial statements, before formally severing ties in 2022.
Adidas Wins Appeal Against Kanye West
The investors alleged they suffered significant losses when Adidas ended the partnership after West posted antisemitic remarks. It triggered a steep drop in the company’s share price.
The Yeezy line had accounted for billions in annual revenue and was considered one of Adidas’ most valuable assets. Plaintiffs argued the company privately grappled with West’s conduct while publicly presenting the collaboration as stable, thereby omitting material information from securities filings.
The panel rejected that theory, concluding that the plaintiffs failed to identify any actionable misrepresentation. The judges wrote that Adidas’ disclosures already acknowledged risks associated with relying on high-profile talent and that the company was not required to forecast West’s future behavior or the exact moment the partnership might unravel.
The lawsuit also referenced West’s appearance at a 2022 fashion event where he promoted a “White Lives Matter” design, followed by online antisemitic comments that prompted the company to halt production and remove Yeezy products from sale immediately. Several corporate partners — including Gap and JPMorgan — cut ties with West in the same period, intensifying the fallout.
The partnership’s collapse left Adidas with more than €1 billion in unsold Yeezy inventory. The company later announced plans to liquidate the remaining stock and donate part of the proceeds to groups combatting hate.
Counsel for the investors did not respond to requests for comment. Representatives for West also remained silent. The ruling marks a decisive win for Adidas and clarifies the boundaries of disclosure obligations in celebrity-driven commercial ventures.
Leave a Reply