NOT FOR PUBLICATION FILED

UNITED STATES COURT OF APPEALS DEC 3 2025

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

HRSA-ILA FUNDS, Individually and on No. 24-6655 behalf of all others similarly situated, D.C. No. 3:24-cv-00629-IM Plaintiff - Appellant,

v. MEMORANDUM*

ADIDAS AG and HARM OHLMEYER,

Defendants - Appellees,

and

KASPER RORSTED,

Defendant.

Appeal from the United States District Court for the District of Oregon Karin Immergut, District Judge, Presiding

Argued and Submitted October 23, 2025 San Francisco, California

Before: MURGUIA, Chief Judge, and OWENS and BUMATAY, Circuit Judges.

Plaintiff-Appellant HRSA-ILA Funds (“HRSA-ILA”) appeals the district

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. court’s dismissal of its securities fraud claims against Defendant-Appellees adidas

AG (“Adidas”) and Harm Ohlmeyer (“Ohlmeyer”). HRSA-ILA, an Adidas

shareholder, brought a class action lawsuit asserting two claims: (1) violation of

section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and (2)

violation of section 20(a) of the Exchange Act.

HRSA-ILA alleges that Adidas had engaged in a significant partnership

(“Partnership”) with celebrity Ye (formerly known as Kanye West) and his shoe

company Yeezy, but later terminated the Partnership in Fall 2022 due to public

fallout from Ye’s antisemitic and other improper behavior. The fallout and

dissolution of the Partnership led to a decrease in Adidas’s share price. HRSA-ILA

claims that Adidas had known about and internally grappled with Ye’s antisemitic

and other improper behavior for years, yet misled shareholders by failing to disclose

this risk in its disclosures.

On appeal, HRSA-ILA argues that it adequately alleged actionable securities

fraud claims under section 10(b) for the two disclosures in dispute: (1) Adidas’s

Business Partners Risk disclosures; and (2) Adidas’s statements that it complied with

the European Union’s (“EU”) Global Reporting Initiative (“GRI”), as part of the

EU’s Non-Financial Reporting Directive (“NFRD”). We have jurisdiction under 28

U.S.C. § 1291. We affirm.

2 24-6655 We review the district court’s order dismissing the complaint de novo.

Mudpie, Inc. v. Travelers Cas. Ins. Co. of Am., 15 F.4th 885, 889 (9th Cir. 2021). In

a securities fraud case alleging section 10(b) claims, the complaint must meet the

heightened pleading standards of both Federal Rule of Civil Procedure (“FRCP”)

9(b) and the Private Securities Litigation Reform Act of 1995 (“PSLRA”). Zucco

Partners, LLC v. Digimarc Corp., 552 F.3d 981, 990 (9th Cir. 2009). FRCP 9(b)

requires a party alleging fraud to “state with particularity the circumstances

constituting fraud.” Fed. R. Civ. P. 9(b). The PSLRA requires the complaint to

“specify each statement alleged to have been misleading [and] the reason or reasons

why the statement is misleading.” 15 U.S.C. § 78u-4(b)(1)(B).

1. We affirm the district court’s conclusion that Plaintiff fails to plead an

actionable securities fraud claim for Adidas’s Business Partners Risk disclosures.1

To plead a successful section 10(b) claim, a plaintiff must adequately allege: “(1) a

material misrepresentation or omission by the defendant; (2) scienter; (3) a

connection between the misrepresentation or omission and the purchase or sale of a

security; (4) reliance upon the misrepresentation or omission; (5) economic loss; and

(6) loss causation.” Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, 552 U.S.

1 The Business Partners Risk disclosure appeared in multiple annual reports, so it is sometimes referred to in plural form.

3 24-6655 148, 157 (2008). The district court determined that HRSA-ILA failed to allege an

actionable material misrepresentation or omission. We agree.

An actionable material misrepresentation or omission requires two

components. First, a plaintiff must “allege a misrepresentation or a misleading

omission with particularity and explain why it is misleading.” Retail Wholesale &

Dep’t Store Union Loc. 338 Ret. Fund v. Hewlett-Packard Co. (Hewlett-Packard),

845 F.3d 1268, 1274 (9th Cir. 2017). “Second, applying an objective standard, that

misrepresentation or omission must have been material to investors.” Id. Courts

apply the objective standard of a “reasonable” investor to determine whether a

statement is misleading. In re Alphabet, Inc. Sec. Litig. (Alphabet), 1 F.4th 687, 699

(9th Cir. 2021). And importantly, section 10(b) “do[es] not create an affirmative

duty to disclose any and all material information,” unless such disclosure is

necessary to ensure that the statements are not misleading. Matrixx Initiatives, Inc.

v. Siracusano, 563 U.S. 27, 44 (2011).

HRSA-ILA argues that Adidas misled shareholders through its Business

Partner Risk disclosure, which stated that:

Unethical business practices on the part of business partners or improper behavior of individual athletes, influencers or partners in the entertainment industry could have a negative spill-over effect on the company’s reputation, lead to higher costs or liabilities or even disrupt business activities.

4 24-6655 HRSA-ILA contends that the Business Partners Risk disclosure is misleading

because it treats the risk of improper behavior as hypothetical even though Adidas

knew that the warned-of risk had already come to pass through Ye’s antisemitic and

improper behavior. We disagree because the disclosure presents the hypothetical

risk as the negative effect of improper behavior, not the improper behavior itself.

We reject HRSA-ILA’s arguments that the Business Partners Risk disclosure

is analogous to the disclosures found misleading in Alphabet, 1 F.4th 687, and In re

Facebook, Inc. Sec. Litig. (Facebook), 87 F.4th 934 (9th Cir. 2023), because

Alphabet and Facebook dealt with historical data breaches that the companies

concealed, while this case involves a celebrity partner who already had public

notoriety for his improper behavior even prior to the Partnership. Cf. Alphabet, 1

F.4th at 704–05; Facebook, 87 F.4th at 949–50. Therefore, we conclude that a

reasonable investor would know that a partnership with a celebrity partner like Ye

would come with inherent risks relating to improper behavior and that a reasonable

investor would not be misled by the Business Partners Risk disclosures. See

Hewlett-Packard, 845 F.3d at 1274 (describing a statement as materially misleading

to a reasonable investor if there is a high likelihood that the statement would

“significantly alter[] the ‘total mix’ of information made available” (citation and

some internal quotation marks omitted)). HRSA-ILA’s section 10(b) claim based

5 24-6655 on Adidas’s Business Partners Risk disclosures therefore fails because HRSA-ILA

does not plead a material misrepresentation or omission.2

2. We affirm the district court’s conclusion that HRSA-ILA fails to plead an

actionable securities fraud claim for Adidas’s compliance with the EU’s NFRD and

GRI disclosure standards. The NFRD requires Adidas to disclose certain non-

financial information about its business, risks, and social issues, and Adidas

complies by following the GRI. HRSA-ILA alleges that Adidas’s statement that it

“fulfill[ed] the Global Reporting Initiative’s Standards ‘Core’ option” was

materially misleading because Adidas did not disclose the negative aspects of its

internal culture and Ye’s repeated misconduct. However, allegedly misleading

statements “must be ‘capable of objective verification.’” Weston Family

Partnership LLLP v. Twitter, Inc., 29 F.4th 611, 619 (9th Cir. 2022) (quoting Or.

Pub. Emps. Ret. Fund v. Apollo Grp. Inc., 774 F.3d 598, 606 (9th Cir. 2014)).

HRSA-ILA conceded to the district court that it was unsure if any enforcement body

for the GRI exists that could definitively settle the meaning of the GRI’s broad,

discretionary provisions. As Adidas’s statement is not capable of objective

2 We reject HRSA-ILA’s secondary arguments that the district court improperly made factual rulings and allowed a “truth on the market defense.” The district court explicitly cautions in its order that it “cannot, and does not, make any definitive factual findings,” and only commented on the factual context “to note the very public nature of Ye’s behavior before Fall 2022.”

6 24-6655 verification, HRSA-ILA fails to plead a material misrepresentation. Therefore,

HRSA-ILA’s section 10(b) claim based on the NFRD and GRI fails.

3. Even if HRSA-ILA had adequately pled a material misrepresentation, we

conclude that HRSA-ILA failed to plead scienter, because HRSA-ILA’s complaint

does not “state with particularity facts giving rise to a strong inference that the

defendant[s] acted with the required state of mind.” See Glazer Cap. Mgmt., L.P. v.

Forescout Techs., Inc., 63 F.4th 747, 766 (9th Cir. 2023) (quoting 15 U.S.C. § 78u-

4(b)(2)(A)) (emphasis omitted). Scienter requires a showing of “deliberate

recklessness” that we have defined as “‘an extreme departure from the standards of

ordinary care.’” Alphabet, 1 F.4th at 701 (emphasis in original) (quoting Nguyen v.

Endologix, Inc., 962 F.3d 405, 414 (9th Cir. 2020)). As a corporation, Adidas “can

only act through its employees and agents and can likewise only have scienter

through them,” yet HRSA-ILA fails to show that any agent of Adidas acted with

deliberate recklessness here. See In re ChinaCast Educ. Corp. Sec. Litig., 809 F.3d

471, 475 (9th Cir. 2015) (citation and internal quotation marks omitted).

4. We affirm the district court’s dismissal of HRSA-ILA’s section 20(a)

claims. Section 20(a) provides joint and several liability for controlling persons and

requires a plaintiff to prove “(1) a primary violation of federal securities law and (2)

that the defendant exercised actual power or control over the primary violator.” No.

84 Employer–Teamster Joint Council Pension Trust Fund v. Am. W. Holding Corp.,

7 24-6655 320 F.3d 920, 945 (9th Cir. 2003) (quoting Howard v. Everex Sys., Inc., 228 F.3d

1057, 1065 (9th Cir. 2000)) (internal quotation marks omitted). If a plaintiff fails to

plead a primary violation of section 10(b), his section 20(a) claim fails. Zucco

Partners, LLC, 552 F.3d at 990. Thus, because we determine that HRSA-ILA fails

to plead an actionable section 10(b) claim, we also conclude that HRSA-ILA fails to

plead a section 20(a) claim.

AFFIRMED.

8 24-6655