German sporting goods manufacturer Adidas has won a legal victory in a securities lawsuit. This was in connection with the previous partnership with the artist Ye, formerly Kanye West.
The U.S. Court of Appeals in San Francisco affirmed a district court’s dismissal of the lawsuit. The lawsuit was filed by shareholder HRSA-ILA Funds. This emerges from a court file.
The lawsuit accused Adidas of misleading investors. The company downplayed risks associated with the Yeezy collaboration. In addition, internal concerns about Ye’s behavior were not disclosed.
HRSA-ILA argued that Adidas should have warned investors. Ye’s “anti-Semitic and other inappropriate behavior” posed a threat to the company. This is particularly true given the decline in share prices following the end of the partnership in 2022.
The appeals court rejected the claims. It concluded that Adidas had adequately addressed the risks in public documents.
The company’s risk disclosure for business partners stated that inappropriate behavior by “athletes, influencers or partners in the entertainment industry could have a negative spillover effect.”
HRSA-ILA called this language misleading. She presented any risk as hypothetical. However, the court disagreed with this view. It noted that disclosure focuses on potential negative impacts rather than the behavior itself.
The court also highlighted that Ye’s public controversies were widely known. This was already the case before Adidas terminated the partnership. Therefore, “reasonable investors would know that partnering with a prominent partner like Ye would involve inherent risks.”
The judges ruled that HRSA-ILA failed to prove that Adidas or its executives were involved Scienter acted. This is a deliberate or reckless attempt to mislead. By confirming the verdict, Adidas is closing an important legal chapter.
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