On Wednesday, Adidas scored a critical legal win. The 9th U.S. Circuit Court of Appeals in San Francisco rejected the shareholders’ appeal. The investors accused the sportswear giant of concealing misconduct by musician Kanye West, also known as Ye, prior to the dissolution of their partnership in 2022. This ruling reinforces Adidas’s position following a tumultuous period marked by controversy surrounding West’s behavior.
The plaintiffs alleged that they suffered economic damages. They even predicted an immediate crash on Adidas stock after the company severed its relationship with West. However, their allegations were based on the premise that Adidas deceived investors by downplaying the peril of partnering with West. The court agreed, holding that a reasonable investor would be obviously aware of the fundamental dangers of partnering with West. This conclusion was particularly salient in light of his behavior in the past.
In 2022, Kanye West got canceled for his collaboration with Adidas. This criticism recently intensified after Ye shared a design for a T-shirt featuring the words “White Lives Matter” during his last fashion show. West’s online incitement of violence put the situation into a terrifying new level. In response, Adidas removed his merchandise from stores and ended their relationship. These events hit Adidas hard. This forced the hand of other companies, including Gap and JPMorgan, which chose to end their business relationship with West.
In response to these crises, Adidas took bold steps in early 2023. As part of its original announcement, the company said it would sell some Yeezy products and give a significant portion of the sales to groups combating hate. This decision reflects the company’s commitment to addressing the consequences of its previous association with West and its desire to contribute positively to society.
This ruling from the appellate court underscores the murky waters that surround these corporate partnerships and the consequences they may hold. This should be a wake-up call for businesses. They need to balance these business interests with public perception and the basic morality of the people they’re working with.