Adidas

A Manhattan federal judge has denied a request by Adidas for an emergency order re-freezing $75 million held by Kanye West’s Yeezy brand, rejecting the sneaker company’s concerns that the disputed money might disappear.

Days after Judge Valerie E. Caproni lifted a months-long freeze on Yeezy’s accounts, she refused on Tuesday (May 30) to impose a temporary restraining order that would have immediately locked up the money again. Adidas argued that it faced “irreparable harm” without such an order as Yeezy was nearing insolvency, but the judge was unswayed.

“It is hereby ordered that … Adidas’s motion for a TRO is denied,” Judge Caproni wrote in her order, which was obtained by Billboard.

While still a loss for Adidas, Tuesday’s ruling only denied the emergency motion; Adidas can still win a more conventional order in the coming days reimposing an asset freeze on Yeezy. Both sides are due to file briefs on that request by Thursday.

Neither side immediately returned requests for comment.

Adidas, which operated a lucrative sneaker partnership 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.

Shortly after the split, Adidas secretly filed a case in federal court to freeze $75 million in Yeezy assets. Adidas believes West’s company is contractually required to return the funds and has filed a private arbitration case to recover them. The company sought the court order to ensure that the money was not moved while those proceedings play out.

Newly-unsealed court records show that Judge Caproni quickly granted the asset freeze in November. But last week, after Yeezy’s attorneys challenged the order, she lifted it — ruling that Adidas had run afoul of procedural requirements and “deprived” Yeezy of a fair chance to fight back.

Just hours after that decision was issued, lawyers for Adidas filed their emergency request to re-freeze the assets. 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.”

Tuesday’s ruling rejecting that motion came after a live hearing in Judge Caproni’s courtroom. According to a report by Bloomberg, the judge said during the hearing that while Adidas would likely win its arbitration case against Yeezy, it had not met the difficult legal requirements for a temporary restraining order. Among other things, the judge reportedly said that Adidas had offered only “tabloid speculation” about Yeezy’s risk of insolvency.

The newly-revealed litigation with Yeezy is just one piece of 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 513 million euros ($540 million). Last month, CEO Bjorn Gulden said the company would begin selling $1.3 billion worth of unsold Yeezys, but would “donate money to the organizations that help us and were harmed by what Ye said.”

Adidas secretly filed a legal action last year in federal court that successfully froze $75 million in bank accounts held by Kanye West’s Yeezy brand after their high-profile split, newly unsealed court documents show.

Federal court records obtained by Billboard show that the case was filed on Nov. 11, just weeks after the German sneaker giant publicly terminated its relationship with the embattled rapper (sometimes known as Ye) in the wake of his antisemitic statements and other erratic behavior.

Adidas filed the case to ensure such funds were not transferred out of Yeezy’s bank accounts while the two companies litigated their business divorce via private arbitration. And a federal judge quickly granted the company’s request for such an “attachment” order on a so-called ex parte basis — meaning the judge issued the freeze without giving Yeezy a chance to make counter-arguments.

“Petitioner has demonstrated that it has satisfied the grounds for an ex parte attachment because the court is satisfied that there is a risk that Yeezy will remove or dissipate assets if notice of this request for attachment is given to Yeezy,” Judge Valerie E. Caproni wrote in her Nov. 11 order freezing the money.

The existence of the litigation was first reported Wednesday evening (May 24) by the legal news outlet Law360.

The newly-revealed litigation with Yeezy is just one piece of a messy breakup for Adidas. With the company sitting on $1.3 billion worth of unsold Yeezys, CEO Bjorn Gulden announced earlier this month that Adidas would begin selling them, but would “donate money to the organizations that help us and were harmed by what Ye said.”

While West himself had previously disclosed that Adidas filed a federal case to freeze assets — he claimed in a November video that the company had “put a $75 million hold” on his bank accounts — the actual existence of the case could not be independently confirmed because it was filed “under seal,” meaning it was not made public like normal legal filings.

But last week, the case and its key documents were unsealed, thanks to another ruling earlier in the month by Judge Caproni. Referencing West’s own comments disclosing the case, the judge said the desire of both sides for “confidentiality” was now outweighed by the public right to access court records.

“Notably, the attachment itself is no longer confidential as Ye discussed Adidas’s decision to ‘freeze’ his accounts in a public interview, and accordingly, no confidentiality interest exists as to the existence of the attachment order,” Judge Caproni wrote on May 9. “The court further finds that any trade secrets or sensitive business information may adequately be protected through redaction.”

Now, the newly-unsealed court docket shows that lawyers for Adidas and Yeezy are currently sparring over whether the asset freeze should remain in place going forward.

In an April filing, Yeezy’s lawyers urged Judge Caproni to undo the freeze, arguing that Adidas had “failed to show that it was ever entitled to such an order in the first place.” Yeezy’s lawyers said Adidas had made procedural errors in securing the order and had not provided enough proof that it needed the freeze to remain in place.

“Adidas has offered no evidence that Yeezy is currently insolvent or that it has made any effort to conceal its assets or put them beyond Adidas’s reach in the event Adidas obtains an arbitral award against Yeezy,” attorney Peter D. Hawkes wrote for the brand. “Nor has Adidas offered anything more than speculation that, in the absence of attachment, collection of any arbitral award would be more challenging.”

Adidas strongly disagrees. In its own brief filed in early May, the company argued that West had demonstrated a “pattern of volatile behavior” and was in “severe financial stress,” imperiling Adidas’s ability to recover the funds the company believes it will win in the pending arbitration battle.

“There is every indication that if released, Yeezy will spend them, misusing Adidas’s property and rendering an award against them ineffectual,” the company wrote.

Adidas also warned that, if the $75 million is released, West’s conduct had severely harmed his own ability to earn it back in other ways. The company rattled off a list of alleged incidents, including West “stating his admiration of Hitler” and “suggesting that Jewish people ‘are used by the Chinese’ to control Black people.”

“Ye [has] further diminished the value of his endorsement and commercial opportunities by continuing to make racist and incendiary statements,” Adidas’s lawyers wrote.

A lawyer for Yeezy did not return requests for comment on Thursday. A spokesman for Adidas declined to comment.