Before Kanye’s Antisemitic Meltdown, Did Adidas Do Enough to Warn Investors? A Court Says It Did

Adidas didn’t violate federal securities laws by failing to warn its shareholders about offensive behind-the-scenes behavior from Ye (formerly known as Kanye West) before his downfall, a federal appeals court says.

A lawsuit claimed Adidas knew internally about serious problems with Ye as early as 2018 but didn’t disclose them, misleading investors and leaving them to face losses when his antisemitic rants finally killed the lucrative Yeezy partnership in late 2022. Among other things, they claimed Ye had mentioned Hitler to Adidas staffers as a possible album name.

But in a ruling issued Wednesday (Dec. 3), a federal appeals court rejected that case — in part because investors ought to have known that Ye already had “public notoriety” for “improper behavior” before he ever linked up with Adidas.

“A reasonable investor would know that a partnership with a celebrity partner like Ye would come with inherent risks,” wrote the U.S. Court of Appeals for the Ninth Circuit in the ruling, obtained by Billboard. The decision upheld a lower judge who was “troubled” by Ye’s conduct but reached the same conclusion last year.

Adidas ran a profitable collaboration with Ye (formerly Kanye West) and his Yeezy apparel brand for nearly a decade, but cut ties with the embattled rapper in October 2022 amid a wave of offensive statements he made about Jewish people. In a statement announcing the split, Adidas said the rapper’s statements had been “unacceptable, hateful and dangerous.”

It was a messy breakup for Adidas. The split contributed to a loss of $655 million in sales for the last three months of 2022 and left Adidas holding $1.3 billion worth of unsold Yeezys that were difficult to liquidate. And in May 2023, a group of investors took Adidas to court, arguing its executives had been aware for years of the potential harm that could come from the Ye partnership but had failed to publicly share such concerns with shareholders, as required by U.S. securities law.

The case heavily cited a November 2022 Wall Street Journal article reporting that Adidas executives feared for years that the Yeezy relationship could “blow up at any moment.” The article reported that Ye had made antisemitic comments in front of Adidas staffers, including the Hitler mention, and had watched pornography at work. The Journal story also highlighted a 2018 presentation to then-CEO Kasper Rørsted that detailed the risks of the arrangement and contemplated cutting ties with him.

Ahead of the split, Adidas had warned investors of all sorts of potential problems that might cause its share price to drop. One was that “improper” behavior by celebrity endorsers might have a “negative spill-over effect on the company’s reputation” and “lead to higher costs or liabilities or even disrupt business activities.” In their lawsuit, the investors argued that this disclosure had been misleading, treating the problem as a mere hypothetical when it already had concrete evidence of such behavior by Ye.

But in Wednesday’s ruling, the Ninth Circuit said the investors had misinterpreted what exactly Adidas was warning about: “The disclosure presents the hypothetical risk as the negative effect of improper behavior, not the improper behavior itself.”

The investors cited cases in which courts had held tech giants Alphabet and Facebook liable for such warnings about data, but the appeals court said those rulings were hardly analogous to Adidas’ very public relationship with a world-famous rapper.

“[The] Alphabet and Facebook [rulings] dealt with historical data breaches that the companies concealed,” the court wrote. “This case involves a celebrity partner who already had public notoriety for his improper behavior even prior to the partnership.”

Adidas declined a request for comment. The investors didn’t immediately respond.

Wednesday’s ruling affirmed the earlier decision of Judge Karin Immergut, who dismissed the case in August 2024. While she ruled that Adidas had not violated the law, she stressed that she was not condoning Ye’s “erratic, inappropriate, and antisemitic” behavior: “The question before this court is not whether to admonish Ye or hold Adidas morally accountable for Ye’s conduct.”