Adidas defeats appeal of lawsuit over imploded Ye partnership

By Jonathan Stempel

Dec 3 (Reuters) - Adidas defeated an appeal on Wednesday by U.S. shareholders who said the footwear and apparel maker fraudulently concealed antisemitic and other improper behavior by Ye, formerly known as Kanye West, before its partnership with the rapper and fashion designer imploded in 2022.

The 9th U.S. Circuit Court of Appeals in San Francisco said Adidas did not mislead shareholders in its annual reports by saying improper behavior by partners from the entertainment industry could have a negative spill-over effect on business.

"A reasonable investor would know that a partnership with a celebrity partner like Ye would come with inherent risks relating to improper behavior," a three-judge panel said.

The panel also found no intent to defraud, and said Adidas' disclosure "presents the hypothetical risk as the negative effect of improper behavior, not the improper behavior itself."

Lawyers for the lead plaintiff HLSA-ILA Funds, which serve maritime workers in southeast Virginia, did not immediately respond to requests for comment. Adidas did not immediately respond to similar requests. Ye was not a defendant.

Shareholders in the proposed class action said they lost money because Adidas' stock price fell after antisemitic rants led the German company to sever ties with Ye in October 2022, ending a nine-year partnership that in 2021 generated about 1.5 billion euros ($1.75 billion) of sales.

The shareholders said Adidas continued the partnership despite being "fully aware" since at least 2018 that Ye routinely made improper comments to its employees and employees at his Yeezy design shop.

Adidas began selling leftover Yeezy sneakers in May 2023, pledging to donate some proceeds to groups combating antisemitism, and finished late last year.

The company's sales in North America fell 2% in 2024, "solely due to significantly lower Yeezy sales," Adidas said in March.

Wednesday's decision upheld an August 2024 dismissal by a federal judge in Portland, Oregon, where Adidas' North American headquarters are located.

(Reporting by Jonathan Stempel in New YorkEditing by Nick Zieminski)