After a whirlwind week of litigation, Adidas has abruptly dropped a federal court case aimed at freezing $75 million held by Kanye West’s Yeezy brand, saying it will instead pursue the money solely through private arbitration.
In a legal filing Tuesday evening, attorneys for Adidas and Yeezy said they had reached an agreement that would see the sneaker giant voluntarily dismiss the case. It came just hours after a federal judge refused to grant Adidas an emergency order re-freezing the $75 million held by Yeezy.
But the dismissal is hardly the end of the dispute. Adidas and Yeezy will continue battle it out in a private arbitration case, in which Adidas will likely argue that that West’s “offensive conduct” caused the breakdown of their long-standing partnership.
Adidas, which operated a lucrative sneaker collaboration with West for nearly a decade, was one of many companies to terminate its relationship with the embattled rapper (sometimes known as Ye) last fall in the wake of his antisemitic statements and other erratic behavior.
It’s been a messy breakup for Adidas. The split contributed to a loss of $655 million in sales for the last three months of 2022, helping drive the company to a quarterly net loss of $540 million. Last month, CEO Bjorn Gulden said the company would begin selling its $1.3 billion worth of unsold Yeezys, but would “donate money to the organizations that help us and were harmed by what Ye said.”
Days after Adidas announced the split with West, newly-unsealed court records show that it demanded Yeezy return $75 million that had allegedly been deposited in its accounts. When Yeezy refused, Adidas secretly filed its case in federal court, seeking a so-called “attachment” order immediately freezing those funds. While the real issues will be decided via arbitration, Adidas wanted the court to use its power to ensure that the money did not disappear while those private proceedings play out.
Court records show that Judge Valerie E. Caproni quickly granted the asset freeze in November, doing so not only in secret, but also on an “ex parte” basis — meaning without giving West or Yeezy a chance to make counter-arguments. Adidas argued, and the judge agreed, that there was a serious risk that Yeezy would have moved the money if given advanced notice.
But last week, after Yeezy’s attorneys challenged the freeze order, the judge finally lifted it — ruling that Adidas had run afoul of procedural requirements for such asset attachments and had thus “deprived” Yeezy of a fair chance to fight back.
In the wake of that order, lawyers for Adidas scrambled to have it reimposed. They argued that Yeezy currently holds $75 million “to which it has no legal right,” and warned that a court order was needed to maintain the status quo.
“Yeezy is likely to comingle the funds with an unknown balance of funds in its possession at other financial institutions, such that it would be more difficult if not impracticable to audit those accounts and determine which monies are owned by Adidas,” lawyers for Adidas wrote. “In addition, Ye faces a clear risk of insolvency, giving rise to a risk of irreparable harm.”
But this time, Judge Caproni was unswayed. While she said that Adidas would likely win its arbitration case against Yeezy, the judge ruled that the sneaker company had not met the difficult legal requirements for a new temporary restraining order: “Adidas’s motion for a TRO is denied.”
While the ruling only denied the emergency motion, Adidas could have still won a more conventional order in the coming days reimposing an asset freeze on Yeezy. But hours after Judge Caproni’s ruling, Adidas moved to drop its federal case.
Looking ahead, it’s unclear how long the pending arbitration case will take to play out, or what exact issues are being disputed. But in court documents, Adidas has said that West’s “racist, antisemitic, and other offensive public statements and conduct” caused “considerable damage to its brand.”
“Adidas has multiple causes of action against Yeezy, resulting from Ye’s highly public and offensive conduct described above, which violated the terms of the Agreement and justified adidas’s termination of that contract,” the company wrote. Those broader causes of action, as well as the dispute over [issues], will be resolved through arbitration.”
Reps for both sides did not immediately return a request for comment.
