Kanye West – now Ye – prevailed in a recent round of a lawsuit that is being waged against his Yeezy brand by adidas following its termination of their partnership last year. Amid a pending damages-centric lawsuit in Germany, the sportswear giant is also arbitrating contract, rights/usage, and damages claims with Ye in the U.S. stemming from the breakdown of the once-wildly-lucrative Yeezy deal. In a win for Ye and his companies (collectively, “Yeezy”), Judge Valerie Caproni of the U.S. District Court for the Southern District of New York held on Friday that a freeze on Yeezy-affiliated bank accounts containing as much as $75 million in cash allegedly belonging to adidas was null. In her order, Judge Caproni held that while she froze “the Yeezy assets that are presently at issue in an arbitration proceeding” between adidas and Yeezy in November, that order was actually nullified “some six months ago” after adidas failed to take action to confirm the order.
For a bit of background: As revealed in newly unsealed court documents, adidas filed the lawsuit at hand in November 2022, seeking an order of attachment to ensure that the $75 million that it provided to Yeezy in 2022 in connection with the marketing of their since-terminated partnership was not moved or commingled with other funds for the duration of the arbitration. Adidas initiated arbitration shortly thereafter, asserting that Ye failed to live up to his side of the deal (almost certainly on morals grounds, at the very least), prompting “the destruction of a business line that generated billions of dollars in annual sales.” Meanwhile, counsel for Ye has asserted claims against adidas relating to an alleged breach of the agreement by the German sportswear company.
Part of the issue in that arbitration centers on $75 million that adidas provided to Yeezy, which it alleges it demanded that Yeezy return on the heels of terminating the Yeezy partnership “after suffering considerable damage to its brand as a result of the well-publicized racist, antisemitic, and other offensive public statements and conduct of Ye.” Adidas claims that its demand was “met with silence” from the Yeezy camp. As such, it was forced to seek the court’s assistance “to preserve funds belonging to [it], but currently in [Yeezy’s] possession, pending resolution of the arbitration.”
Freeze and Unfreeze – The latest round of the scuffle comes after the court first sided with adidas in November. In an ex parte order, the court exercised its authority to attach “$75 million of the Yeezy assets that are presently at issue in an arbitration proceeding between the parties.” The basis for the court’s order: Judge Caproni held that, among other things, “it is probable that [adidas] will succeed on the merits with respect to its claims to return of the [redacted sum of money], and because ‘without provisional relief,’ ‘there is a risk that Yeezy will remove or dissipate assets,’ such that ‘the award to which [adidas] may be entitled may be rendered ineffectual.’”
Fast forward to May 26, and the court moved in favor of Yeezy, vacating the November 2022 freeze on the grounds that adidas failed to commence the required action to confirm the order of attachment. In its defense, adidas (unsuccessfully) argued that it “satisfied the spirit of the confirmation requirement … because it served the attachment order on Yeezy four days after the order was entered, and, accordingly, Yeezy had notice of the attachment.”
Rejecting adidas’ service argument, Judge Caproni held that because “attachment is a ‘harsh and extraordinary’ remedy,” the New York legislature imposes “the additional confirmation requirement” (that goes beyond traditional service) “to ensure that attachments only persist where there is a continuing need.” Without a confirmation hearing, “Yeezy was deprived of an early opportunity to have the court consider its substantive challenges to [adidas’] arguments regarding the need for an attachment order.” As such, Judge Caproni found that the order was actually nullified “some six months ago when adidas failed timely to move to confirm [it],” and accordingly, “the order is vacated.”
Not an across-the-board win for Yeezy, Judge Caproni refused its bid for attorneys’ fees in connection with the motion; Yeezy argued that “because adidas failed to commence arbitration within thirty days of the issuance of the attachment order, it is entitled to attorneys’ fees and costs.” Because the court vacated the attachment order without prejudice to adidas renewing its request for injunctive relief or an attachment, “it does not decide at this time whether Yeezy is entitled to fees and costs.” As such, she held that Yeezy may renew its motion for fees and costs “if appropriate following the conclusion of any renewed motion for a preliminary injunction or an attachment.”
Renewed Petition for Attachment Order and TRO – Adidas’ renewed petition for an order of attachment came on Tuesday, with the company arguing that, among other things, the parties’ agreement requires that upon termination of the partnership, unspent funds (owned by adidas) are required to be returned to adidas. Beyond that, adidas claims that the “need for the attachment to protect the ongoing arbitration … is even clearer than in November.” Specifically, adidas cited “Ye’s deteriorating financial condition and the revelation that, prior to the attachment, Yeezy Marketing transferred directly to Ye and into other Yeezy accounts [some redacted sum of money].”
And all the while, the sportswear company lodged a bid for a temporary restraining order (“TRO”) to “freez[e] and prevent Ye or his companies … from accessing or disposing of the $75 million” while the court decides adidas’ renewed motion for an order of attachment. Adidas claims that a TRO is necessary to preserve its “ability to continue auditing Yeezy’s use of the funds at issue and to recover the funds – which are its property – once its underlying claim thereto is resolved.” Adidas is also seeking an order from the court requiring that Yeezy “return any funds withdrawn from its J.P. Morgan accounts following the court’s vacatur of the attachment order [on May 26] and to rescind any pending requests to withdraw funds from such accounts.”
The case is In the matter of Application of Adidas AG for an Order of Attachment, 1:22-mc-00320 (SDNY).
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