Court sides with Adidas in appeal over Kanye West collaboration

Adidas has rejected an appeal from shareholders who accused it of covering up the misconduct of rapper entrepreneur Kanye West, also known as Ye, before their partnership ends in 2022.

A court in San Francisco said the sportswear giant did not mislead investors who claimed they lost money after its shares plummeted when Adidas cut ties with the West.

Yeezy’s partnership with West was one of Adidas’ most successful partnerships but subsequently collapsed. Numerous anti-Semitic comments made by the rapper cost the brand hundreds of millions of dollars.

The BBC contacted Adidas for comment but was unable to reach the firm handling the class-action lawsuit or West’s team.

West, who is not a party to the case, He has been widely criticized for repeatedly making antisemitic statements and promoting conspiracy theories.

The Yeezy brand’s collaboration with Adidas came under scrutiny after it showed off a “White Lives Matter” T-shirt design at a fashion show in 2022. Shortly thereafter, he posted anti-Semitic comments online, causing Adidas to pull his products from sale.

West’s behavior led several companies, including Gap and JP Morgan, to cut ties with the rapper.

Court documents filed Wednesday show that HLSA-ILA Funds, the firm representing the investors, claims Adidas continued its partnership with West despite knowing about his controversial behavior for years.

The filing alleges that Adidas “grappled internally” with West’s behavior but misled shareholders by not disclosing the risks in its reports.

The 9th U.S. Circuit Court of Appeals in San Francisco ultimately sided with Adidas.

The court said Wednesday that a reasonable investor would know that a partnership with a celebrity like West could present “inherent risks of improper conduct.”

A district court had previously dismissed HLSA-ILA’s lawsuit, and the firm later appealed.

The collapse of Adidas’ partnership with West has caused the German firm’s share price to fall in 2023.

Yeezy, the luxury sneaker designed by West, has been a particularly lucrative line for Adidas, generating sales of around €1.5 billion (£870 million; $1.17 billion) in 2021.

The collapse of the partnership left €1 billion worth of Yeezy shoes in Adidas’ warehouse. The brand announced that it will sell these products in 2023 and donate some of the proceeds to charities fighting hate.