What’s at Stake in Yeezy Divorce’s Legal Fallout – Sourcing Journal

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Adidas is down but not out, at least when it comes to seizing the $75 million held by its terminated Yeezy collaboration with the rapper formerly known as Kanye West.

In a legal filing late Tuesday, lawyers for the sportswear Goliath said they would be voluntarily dismissing the case and seeking the funds through private arbitration instead.

The move, which was first reported by Billboard, arrived days after New York district judge Valerie E. Caproni nullified a months-long hold on Yeezy’s accounts—and just hours after she rejected Adidas’s bid to re-freeze the cash.

The two parties will continue to duke it out over the sum, which Adidas supplied Yeezy in 2022 to market its cult-favorite footwear before Ye’s antisemitic tirades jettisoned the partnership in October. The Stan Smith maker argued that Yeezy is likely to comingle the funds with others in its possession so that it would be “difficult if not impracticable” to determine what belongs to Adidas. It also said that Yeezy’s descent into potential insolvency could jeopardize the $75 million, risking “irreparable harm.”

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Caproni, in making her decision, said that she failed to see any evidence that support those claims beyond conjecture. Even so, she said that Adidas had a good shot at winning its arbitration case against Yeezy if it can prove that his behavior violated their contract.

The money could be the least of Adidas’s worries. At its height, Yeezy generated roughly 40 percent of the company’s annual profits. The divorce cost the triple-stripe brand $655 million in sales in the last three months of 2022 alone, contributing to a quarterly net loss of $549 million. Adidas is now trying to rid itself of the estimated $1.3 billion in leftover stock, with a ”significant” though unspecified amount of the proceeds benefiting anti-racism organizations, including a foundation run by George Floyd’s family. Meanwhile, garment workers who were short-shrifted on wages during the pandemic are clamoring for a piece of those profits, which they and their supporters are demanding through escalating protests, both physical and virtual. Adidas’s investors are also accusing the World Cup sponsor of failing to mitigate the fallout despite multiple red flags, causing the stock to plummet. Their lawsuit asks for unspecified damages, the payment of legal fees and “further relief as the court may deem just and proper.”

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Ye has additional troubles to contend with, too. Gap is suing the “Jesus Walks” hitmaker for $2 million, along with damages that it has been saddled with, after he allegedly made unapproved changes to a Los Angeles property it had leased for its Yeezy partnership, including adding a ramp and a tunnel in a parking lot, removing ceiling lights and eliminating bathrooms.

Filed in Los Angeles court in April, the lawsuit said that “by making and not repairing or restoring the foregoing alterations of the premises that [Ye] made without Gap’s participation or approval, [Ye] breached the strategic agreement and directly and proximately caused Gap to incur expenses to repair and restore the premises.”

Art City Center, the building’s landlord had come after Gap last year for breaching the lease agreement with the “numerous, significant, unapproved modifications” to the building. Stripping away the lights, it said, led to water and rain damage to the ceiling and roof. The leasing company claimed that the retailer owed it more than $822,924 in “holdover” damages, equalling 150 percent of monthly rent for every month in which the building has veered from its “original condition,” plus another $470,350 from the work that would be required to reverse the changes.

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Gap wants Ye to be on the hook for the damages owed to Art City, as well as another $2 million in compensatory damages for itself. Like Adidas, it pulled the plug on its Yeezy partnership amid the backlash over the artist’s white supremacist rhetoric last fall.

If Kim Kardashian’s ex is bothered, he isn’t showing it. Yeezy is scouting for interns to help it build a “future in clothing” in Los Angeles, where it has moved its office next to Adidas’s flagship store in what the Daily Mail dubbed a “troll” move.



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