Adidas secured a legal win in San Francisco after a federal appeals court tossed out a lawsuit claiming the company misled investors about its partnership with Kanye West, also known as Ye, before their billion-dollar collaboration unraveled in 2022.
A three-judge panel from the 9th U.S. Circuit Court of Appeals ruled that the German sportswear company had sufficiently warned shareholders about the risks of working with high-profile celebrities.
The court concluded that investors should have understood the potential hazards tied to Ye’s erratic behavior, stating, “a reasonable investor would know that a partnership with a celebrity partner like Ye would come with inherent risks relating to improper behavior.”
The decision, handed down in San Francisco, upheld an earlier dismissal from August 2024 by a federal judge in Portland, Oregon, where Adidas runs its North American operations.
The lawsuit, led by HLSA-ILA Funds on behalf of maritime workers in southeast Virginia, accused Adidas of being “fully aware” since 2018 that Ye had made inappropriate remarks to employees at both Adidas offices and his Yeezy design studio.
But the court wasn’t convinced that Adidas acted in bad faith. The ruling emphasized that the company had consistently outlined the risks of celebrity collaborations in its annual filings.
The Adidas-Yeezy partnership, which began in 2013 after Ye left Nike, was a financial juggernaut. By 2021, it had generated $1.7 billion in revenue, accounting for nearly 7% of Adidas’ total annual sales.
The Yeezy sneaker line alone ballooned from $65 million in 2016 to more than $1 billion just five years later.
However, the alliance began to unravel in 2022, as reports surfaced detailing troubling workplace incidents. Allegations included Ye showing explicit images to staff and creating a toxic work environment.
The situation escalated when Ye made antisemitic remarks online and during interviews, prompting Adidas and other corporate partners like Gap, Balenciaga and CAA to sever ties.
Adidas officially ended the nine-year relationship in late 2022. The company spent much of 2023 and 2024 offloading leftover Yeezy inventory, with proceeds from the sales going to organizations fighting antisemitism.
Despite efforts to move forward, Adidas reported a 2% decline in North American sales in 2024, attributing the drop to “solely due to significantly lower Yeezy sales.”
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