Adidas Wins Key Court Ruling as Judges Say Kanye West’s “Public Notoriety” Was Obvious Business Risk

A major appeals court has dismissed a lawsuit against Adidas tied to its terminated partnership with Kanye West. The Ninth Circuit Court ruled in favor of the sportswear giant this week. The judges stated investors were sufficiently warned about potential partnership risks.

The decision ends a legal challenge from shareholders. They claimed Adidas did not properly disclose the dangers of its lucrative Yeezy deal. The court found West’s controversial history was already public knowledge.

Judges Rule “Reasonable Investor” Knew the Risks

The court’s opinion was direct. It stated any “reasonable investor” should have understood the risks of partnering with a figure like Kanye West. Judges noted the rapper had “public notoriety for his improper behaviour even prior to the partnership.”

This refers to West’s long history of controversial statements before 2022. The ruling emphasized that Adidas’s regulatory statements discussed potential business impacts. They did not need to detail West’s personal conduct, which was already widely reported by media outlets like Reuters.

Investors argued a “business partners risk” clause was misleading. They said it presented the danger as merely possible. The court disagreed, siding with Adidas’s position that public figures carry inherent, visible reputational risks.

Financial Fallout and Lasting Impact

The Adidas-Yeezy collaboration was a commercial powerhouse. It generated nearly $2 billion in annual revenue by 2021. The line accounted for roughly 8% of Adidas’s total sales at its peak.

Its abrupt end in October 2022 caused immediate financial shock. Adidas cut ties after West made a series of antisemitic and offensive remarks. The company’s stock price fell significantly in the aftermath.

This ruling shields Adidas from further liability over those disclosures. It allows the company to fully move past the legal saga. The focus now remains on selling off its remaining Yeezy inventory and rebuilding its brand identity.

The dismissal of this lawsuit reinforces a hard lesson for investors in the celebrity-driven fashion world. Public figures like Kanye West bring immense profit potential alongside very public, and very obvious, reputational risk.

Thought you’d like to know

What was the lawsuit against Adidas about?

Shareholders sued Adidas, claiming the company failed to properly warn investors about the financial risks of its partnership with Kanye West. They argued the company’s public filings were misleading.

Why did the court dismiss the case?

The Ninth Circuit Court ruled that Kanye West’s controversial behavior was already widely known. Judges stated that any reasonable investor should have understood the inherent risks of partnering with such a public figure.

How profitable was the Yeezy partnership for Adidas?

It was extremely profitable. The Yeezy line generated close to $2 billion in revenue in 2021 alone. It represented about 8% of Adidas’s total sales before it was terminated.

What was the immediate impact of ending the Yeezy deal?

Adidas’s stock price dropped sharply when it ended the partnership in October 2022. The company also lost a major revenue stream and was left with a large amount of unsold inventory.

Does this ruling affect other celebrity brand deals?

It sets a legal precedent. It suggests companies may not have a duty to disclose the specific controversial histories of well-known public figures, as that information is considered already available to the investing public.