Bold claim: Adidas won’t be knocked down by shareholder lawsuits over its Kanye West partnership. And this is exactly what a San Francisco court ruled, dismissing investors’ claims that Adidas hid misconduct by Kanye West (also known as Ye) before their collaboration dissolved in 2022.
The ruling from the 9th U.S. Circuit Court of Appeals found that Adidas did not mislead investors who argued their shares declined after the brand severed ties with West. While Yeezy had been one of Adidas’ most successful lines, its end following West’s controversial remarks cost the company hundreds of millions of dollars.
BBC reporters reached out to Adidas for comment, but the firm overseeing the class action or West’s representatives did not respond. West himself was not a defendant in the lawsuit, though he faced widespread criticism for antisemitic statements and unfounded conspiracy theories. The controversy intensified after West unveiled a White Lives Matter T-shirt in 2022, which prompted Adidas to halt sales of Yeezy products. Other firms, such as Gap and JPMorgan Chase, also cut ties with the rapper.
Court filings disclosed on Wednesday indicate that HLSA-ILA Funds, the plaintiffs’ counsel, argued Adidas knew about West’s problematic behavior for years yet continued the partnership and then failed to disclose the risk to shareholders. The appeals court agreed that a reasonable investor would understand that a celebrity collaboration can bring inherent risks tied to behavior.
Prior to the appeal, a district court had dismissed the case, after which the investors sought relief again. Adidas’ decision to end the Yeezy relationship led to a significant drop in the company’s share price in 2023.
Yeezy, West’s high-end sneaker line, had been exceptionally lucrative, generating roughly €1.5 billion in sales in 2021. The partnership’s collapse left Adidas with more than €1 billion worth of Yeezy inventory stored. In 2023, Adidas announced plans to sell those remaining products and donate a portion of the proceeds to charities dedicated to fighting hate.
If you found this outcome surprising, you’re not alone. What’s your take on whether brands should bear responsibility for the conduct of high-profile partners, even when it risks harming investors? Join the discussion below.
