No TRO for Adidas in Yeezy Case, Parties Drop Claims Over Frozen Funds

Image: Unsplash

No TRO for Adidas in Yeezy Case, Parties Drop Claims Over Frozen Funds

A New York federal court has denied adidas’ bid for a temporary restraining order (“TRO”) to ensure that Kanye West (now Ye) and his companies could not move tens of millions of dollars that it provided to them in 2022 in connection with their since-terminated Yeezy ...

May 31, 2023 - By TFL, Miriam Gemmell

No TRO for Adidas in Yeezy Case, Parties Drop Claims Over Frozen Funds

Image : Unsplash

Case Documentation

No TRO for Adidas in Yeezy Case, Parties Drop Claims Over Frozen Funds

A New York federal court has denied adidas’ bid for a temporary restraining order (“TRO”) to ensure that Kanye West (now Ye) and his companies could not move tens of millions of dollars that it provided to them in 2022 in connection with their since-terminated Yeezy partnership – and to require them to return any money that they may have already withdrawn. Following a hearing on Tuesday, Judge Valerie Caproni of the U.S. District Court for the Southern District of New York refused to grant adidas’ motion for emergency relief, finding that while adidas is likely to prevail in a pending arbitration proceeding against Ye and his companies, it, nonetheless, fell short in arguing for the need for a TRO while the court decided whether to re-freeze the $75 million in funds. 

The case got its start in November 2022 when adidas sought an order of attachment from the court to prevent the $75 million that it provided to West’s companies (collectively, “Yeezy”) in 2022, alone, for the purpose of marketing their now-defunct Yeezy partnership from being moved or commingled with other funds for the duration of the parties’ arbitration proceedings. (In December, adidas initiated arbitration, arguing that Ye breached his agreement, causing “the destruction of a business line that generated billions of dollars in annual sales.” Also at issue in that arbitration is the $75 million, which adidas claims that Yeezy failed to return despite its demands. Meanwhile, counsel for Ye has set out claims against adidas relating to an alleged breach of the agreement by the German sportswear company.)

Judge Caproni recently dealt Yeezy a win in the case at hand when she held that the six-month freeze on the Yeezy-affiliated bank accounts containing as much as $75 million in cash allegedly belonging to adidas was null because adidas failed to commence the required action to confirm the court’s order. The court was not persuaded by adidas’ arguments that it satisfied the confirmation requirement by serving the attachment order on Yeezy four days after the order was entered in November 2022, and that such a freeze is more necessary than ever in light of Ye’s precarious financial situation. 

On the heels of the court formally nullifying the freeze late last week, adidas lodged a renewed petition for an order of attachment on Tuesday, along with a bid for a TRO to re-freeze the funds and “prevent Ye or his companies … from accessing or disposing of the $75 million” while the court decided on the merits of its renewed motion for an order of attachment.

Counsel for Yeezy pushed back against adidas’ TRO motion, arguing that: (1) By seeking a TRO while the court decides on its motion to renew the vacated] attachment, “adidas seeks equitable relief (a TRO) in aid of a legal remedy (attachment),” thereby, “conflat[ing] legal and equitable remedies; (2) “Even with respect to its legal claim for breach of contract, adidas cannot show a likelihood of success on the merits, [as] adidas admits that it does not know how much, if any, of the $75 million it seeks to freeze it is actually entitled to recover, [and] that is an issue to be determined in the arbitration – along with a host of other issues, including adidas’s liability to Yeezy for its own misconduct;” (3) adidas cannot show irreparable harm in the absence of a TRO, as its “sole viable claim relating to the funds at issue is a claim for money damages;” and (4) adidas “still has not shown that an arbitration award in its favor would be ‘rendered ineffectual’ without provisional relief.” 

After denying adidas’ TRO motion on Tuesday, Judge Caproni confirmed that adidas had agreed to voluntarily dismiss its renewed petition for attachment of the $75 million, and that Yeezy similarly “agreed to waive any and all claims against [adidas] for attorney’s fees” relating to the since-nullified attachment order. Moreover, in light of their agreement that any claims between them shall be resolved through the pending JAMS arbitration, the parties moved – and the court agreed – to dismiss the action at hand in its entirety with prejudice. 

THE BIGGER PICTURE: The larger battle between adidas and Ye over their once-wildly-lucrative Yeezy collaboration, which was supposed to run until 2026, is far from over. For one thing, the contract, rights/usage, and damages claims-centric arbitration that adidas initiated in December is underway and currently in the midst of discovery and an arbitrator-ordered audit of the Yeezy accounts. At the same time, adidas is also engaged in a lawsuit that it filed against Yeezy last year in Germany, in which it is seeking damages in connection with the fallout of the parties’ deal.

Still yet, adidas is navigating the inventory-side aspects of the deal-gone-wrong, as the parties’ split left it with a reported 1.2 billion euros ($1.3 billion) in unsold Yeezy wares. On May 22, adidas confirmed that it would “begin selling some of the remaining inventory of adidas YEEZY products, with an initial release end of May 2023″ via adidas.com/yeezy and the adidas CONFIRMED app. “A significant amount will be donated to selected organizations working to combat discrimination and hate, including racism and antisemitism,” the company stated, noting that “these include but are not limited to the Anti-Defamation League and the Philonise & Keeta Floyd Institute for Social Change.”

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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