After severing their business relationship, Adidas sought to freeze $75 million in accounts belonging to Yeezy. Yeezy is a shoe and fashion brand created by Kayne West. Yeezy shoes and clothes were manufactured and sold through Adidas.

Facts

Kanye West first collaborated with Adidas in 2015 after releasing the Yeezy brand’s first shoe model, the Yeezy Boost 750. Throughout the years, the relationship between Adidas and Yeezy proved to be profitable for both parties.

However, in October 2022, Adidas placed its partnership with Kanye West on hold after he made several public antisemitic and racist remarks. On October 25, 2022, Adidas formally ended its partnership with Kanye West and the Yeezy brand.[1] At the time the contract was terminated, Adidas initiated an arbitration for breach of contract claims.[2] Adidas commenced arbitration “after suffering considerable damage to its brand as a result of the well-publicized racist, antisemitic and other offensive conduct of [Kanye West].”[3]

In anticipation of arbitration, Adidas commenced an action in the Southern District of New York seeking to freeze $75 million in accounts belonging to the Yeezy brand. The $75 million figure was part of the operative agreement between the parties and was to be used for restrictive purposes. Upon the termination of the agreement between Yeezy and Adidas, and in light of Kanye West’s comments and ensuing public relations crisis, Chase Bank, where the funds were located, stated it intended to close all accounts held by Kanye West.[4]

Concerned Kanye West might improperly take the funds, Adidas sought to attach the funds pending a resolution of the arbitration to satisfy any potential judgment. Adidas also sought the alternative remedy of freezing the account.[5]

Outcome of Adidas’ Application

The court initially granted Adidas’ application for attachment on November 11, 2022 during an ex parte hearing held pursuant to CPLR § 7502, and issued an order to that effect. Pursuant to CPLR § 6211(b), Adidas was required to move to confirm the attachment order with five or ten days after it was issued.  However, Adidas failed to move to conform the attachment order and failed to begin arbitration within 30 days of the freeze order.[6] CPLR § 6211(b) further states if the “plaintiff fails to make such motion within the required period, the order of attachment and any levy thereunder shall have no further effect and shall be vacated upon motion.”

Accordingly, Kanye West moved to vacate the order due to Adidas’s failure to confirm the order. In opposition, Adidas argued the deadline to confirm the order was merely procedural and not binding in federal court.[7] The court rule it is well-established, pursuant to FRCP 64, state law applies. The court held Adidas failed to establish any ground upon which the court could “appropriately grant” an extension to move to confirm the attachment order. Accordingly, the attachment order was vacated. The court also held the TRO expired two weeks after it was issued and was no longer in effect.[8] While Adidas thereafter filed a renewed petition for attachment, Adidas later submitted a request for a voluntary dismissal, which the court granted.[9]

Takeaway

As evidenced by Adidas’ actions, it is important to ensure adherence with statutory deadlines. It is also important to remember even in federal court, state statutory deadlines apply. Time is a precious resource, and there is none to waste.

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Sources

[1] https://www.cnbc.com/2022/10/25/adidas-terminates-partnership-with-ye-following-rappers-antisemitic-remarks.html

[2] SDNY civil case no. 1:22-mc-00320

[3] Id.

[4] Id.

[5] https://www.law360.com/articles/1682270/adidas-can-t-keep-freeze-on-75m-in-ye-s-accounts

[6] Id.

[7] SDNY civil case no. 1:22-mc-00320

[8] Id.

[9] Id.