{"id":8930,"date":"2025-12-05T00:53:09","date_gmt":"2025-12-05T00:53:09","guid":{"rendered":"https:\/\/usatrustedlawyers.com\/blog\/court-says-investors-were-not-misled\/"},"modified":"2025-12-05T00:53:09","modified_gmt":"2025-12-05T00:53:09","slug":"court-says-investors-were-not-misled","status":"publish","type":"post","link":"https:\/\/usatrustedlawyers.com\/blog\/court-says-investors-were-not-misled\/","title":{"rendered":"Court Says Investors Were Not Misled"},"content":{"rendered":"\n
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\n\tAdidas didn\u2019t 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.<\/p>\n

\n\tA lawsuit claimed Adidas knew internally about serious problems with Ye as early as 2018 but didn\u2019t disclose them, misleading investors and leaving them to face losses when his antisemitic rants finally killed the lucrative Yeezy partnership<\/a> in late 2022. Among other things, they claimed Ye had mentioned Hitler to Adidas staffers as a possible album name.<\/p>\n

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\n\tBut in a ruling issued Wednesday (Dec. 3), a federal appeals court rejected that case \u2014 in part because investors ought to have known that Ye already had \u201cpublic notoriety\u201d for \u201cimproper behavior\u201d before he ever linked up with Adidas.<\/p>\n

\n\t\u201cA reasonable investor would know that a partnership with a celebrity partner like Ye would come with inherent risks,\u201d wrote the U.S. Court of Appeals for the Ninth Circuit in the ruling, obtained by Billboard<\/em>. The decision upheld a lower judge who was \u201ctroubled\u201d by Ye\u2019s conduct but reached the same conclusion last year.<\/p>\n

\n\tAdidas 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\u2019s statements had been \u201cunacceptable, hateful and dangerous.\u201d<\/p>\n

\n\tIt 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.<\/p>\n

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\n\tThe case heavily cited a November 2022 Wall Street Journal <\/em>article reporting that Adidas executives feared for years that the Yeezy relationship could \u201cblow up at any moment.\u201d 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<\/em> story also highlighted a 2018 presentation to then-CEO Kasper R\u00f8rsted<\/strong> that detailed the risks of the arrangement and contemplated cutting ties with him.<\/p>\n

\n\tAhead of the split, Adidas had warned investors of all sorts of potential problems that might cause its share price to drop. One was that \u201cimproper\u201d behavior by celebrity endorsers might have a \u201cnegative spill-over effect on the company\u2019s reputation\u201d and \u201clead to higher costs or liabilities or even disrupt business activities.\u201d In their lawsuit, the investors argued that this disclosure had been misleading, treating the problem as a mere hypothetical<\/em> when it already had concrete evidence of such behavior by Ye.<\/p>\n

\n\tBut in Wednesday\u2019s ruling, the Ninth Circuit said the investors had misinterpreted what exactly Adidas was warning about: \u201cThe disclosure presents the hypothetical risk as the negative effect of improper behavior, not the improper behavior itself.\u201d<\/p>\n

\n\tThe 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\u2019 very public relationship with a world-famous rapper.<\/p>\n

\n\t\u201c[The] Alphabet and Facebook [rulings] dealt with historical data breaches that the companies concealed,\u201d the court wrote. \u201cThis case involves a celebrity partner who already had public notoriety for his improper behavior even prior to the partnership.\u201d<\/p>\n

\n\tAdidas declined a request for comment. The investors didn\u2019t immediately respond.<\/p>\n

\n\tWednesday\u2019s 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\u2019s \u201cerratic, inappropriate, and antisemitic\u201d behavior: \u201cThe question before this court is not whether to admonish Ye or hold Adidas morally accountable for Ye\u2019s conduct.\u201d<\/p>\n


\"Billboard
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Adidas didn\u2019t 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 […]<\/p>\n","protected":false},"author":1,"featured_media":8931,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[143,2068,6047],"class_list":["post-8930","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-lawyers","tag-court","tag-investors","tag-misled"],"_links":{"self":[{"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/posts\/8930","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/comments?post=8930"}],"version-history":[{"count":0,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/posts\/8930\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/media\/8931"}],"wp:attachment":[{"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/media?parent=8930"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/categories?post=8930"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/tags?post=8930"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}