Adidas is facing a class action lawsuit from investors who claim that the sportswear company was aware of Kanye West's problematic behavior for years before it ended their partnership. The lawsuit, filed in federal court in Oregon, alleges that Adidas failed to take sufficient precautionary measures to limit financial losses when the partnership ended due to West's antisemitic comments. Adidas, however, denied the allegations and stated that it “outright rejects these unfounded claims” and “will take all necessary measures to vigorously defend ourselves against them,” USA Today reports.

According to the complaint, Adidas executives discussed the risks of continuing its collaboration with Kanye West as far back as 2018, but the company ignored the potential risks in its 2018 annual report. The lawsuit alleges that the report “ignored serious issues” with the partnership and alluded to the risks rather than acknowledging that the company had actually considered ending the partnership due to West's personal behavior.

The sportswear giant reportedly stands to lose around $1.3 billion from unsold Yeezys inventory following the partnership's termination. It launched an investigation into West's behavior after reports emerged that he created a “toxic environment” at the company. Adidas has also faced criticism from Rolling Stone magazine, which published excerpts of an open letter from Adidas staff members alleging that bosses were aware of West's “problematic behavior” but chose to ignore it.

The class action lawsuit seeks to represent investors who bought Adidas securities between May 3, 2018, and Feb. 21, but it does not name West as a defendant. While Adidas denies the allegations, it said it would launch an independent investigation into the matter to address the allegations. The case is yet another instance of investors seeking legal action against a company due to concerns over reputation risk and ethical behavior.