The Ninth Circuit has affirmed the dismissal of a proposed securities fraud class action against Adidas AG , finding that investors failed to adequately plead that the company misled the market over its long-running partnership with Ye and his Yeezy brand , or that executives acted with the intent or extreme recklessness required under U.S.
securities law . Background of the lawsuit HRSA-ILA Funds , an Adidas shareholder, filed a putative class action on behalf of “all others similarly situated” against Adidas AG
and Harm Ohlmeyer , with Kasper Rorsted named as a defendant in the district court.
The fund alleged that Adidas had a “ significant partnership ” with Ye and Yeezy , which it terminated in Fall 2022 after public backlash to Ye’s antisemitic and other improper behavior, and that the fallout and end of the partnership contributed to a drop in Adidas’s share price.
Legal standards the court applied To survive dismissal, a section 10(b) claim must meet heightened pleading standards under Federal Rule of Civil Procedure 9(b) and the Private Securities Litigation Reform Act of 1995 , including stating with particularity what was said, why it was misleading, and facts supporting a strong inference of scienter.
A section 10(b) claim also requires six elements: a material misrepresentation or omission, scienter, a connection with the purchase or sale of a security, reliance, economic loss, and loss causation; failure on material misrepresentation or scienter alone is enough to dismiss…
