Appeals Court Affirms Ruling in Favor of Adidas Regarding Kanye West Partnership Lawsuit
On Wednesday, the 9th US Circuit Court of Appeals in San Francisco ruled in favor of Adidas, upholding a previous district court decision. This ruling dismissed an appeal from shareholders who alleged the sportswear company misled investors regarding its partnership with rapper-entrepreneur Kanye West, also known as Ye.
Background of the Lawsuit
HLSA-ILA Funds, representing a group of investors, filed a lawsuit claiming Adidas continued its collaboration with West despite awareness of his conduct over several years. The firm alleged that Adidas internally addressed West's behavior but failed to disclose potential risks to shareholders in its reports, leading to financial losses when the partnership ended. The appeals court stated that a reasonable investor would acknowledge inherent risks associated with a celebrity partnership, including potential issues stemming from individual behavior.
Kanye West Partnership and Dissolution
The collaboration between Adidas and Kanye West's Yeezy brand was a significant partnership for the company. In 2022, following West's display of a "White Lives Matter" T-shirt design at a fashion show and subsequent online comments identified as antisemitic, Adidas initiated a review of the partnership. This led to the company discontinuing the sale of Yeezy products. West's actions also resulted in several other companies, including Gap and JP Morgan, severing their ties with him. West was not a party to the lawsuit.
Financial Impact
The termination of the Yeezy collaboration, which generated approximately €1.5 billion ($1.17 billion) in sales for Adidas in 2021, had a notable financial impact. Adidas's share price declined in 2023. The company was left with over €1 billion worth of unsold Yeezy inventory. In response, Adidas announced in 2023 its intention to sell these remaining products and donate a portion of the proceeds to organizations combating hate.