It was a pretty quiet week in Diamond filings, until yesterday when there was a absolute flurry. It was all from the trustee, all talking about hiring more lawyers, and getting another loan to pay for the legal proceedings that are attempting to get money from the creditors so that the creditors can be paid.
Brett Schenker has a quick breakdown, and Milton Griepp has a more succinct and dire report, but the biggest takeaway is that the Chapter 7 trustee is asking for basically an $8 million float from Chase to finish things up and ALSO pay for the Alliance Litigation, which is Alliance’s adversary proceeding/lawsuit against the estate and the chapter 13 trustee for breach of covenant, fraud and other alleged nefarious doings. That case is also slogging through the courts and we’ll have a look at the last year of developments one of these days. Griepp reports that the trustee is also looking to investigate payments that were made BEFORE bankruptcy was filed to see if anything was “improper”.
While this is mostly more tedious stuff, the big news is that THE CHAPTER 7 TRUSTEE WANTS TO HIRE SUPER LAWYERS. I am not making this up. Right there on the webpage of the lawfirm, it says that!
OK it’s because they are listed on a website called Super Lawyers, but still.
I have blacked out the names and faces of the Super Lawyers because I heard from a reliable source that the judge and various trustees don’t like it when their names are reported in conjunction with all this. Bankruptcy proceedings are normally unremarkable affairs that go unnoticed except by the people who got stiffed, and the bankruptcy community just goes on doing its thing without fanfare or fuss. I don’t think any of us thought we’d still be reporting on this 15 months later! But here we are.
All that said, I’m going to stick with this through the resolution of the consignment inventory matter, but then probably call it a day, as the other relevant issues have long been settled. The Consignment Question could go on for more than a year though, so settle in!
As I’ve mentioned before, it’s typical for a complex multi-million dollar bankruptcy to go on for years, so nothing out of the ordinary there. But I’ve also been thinking about the bigger picture, and thinking……it didn’t have to be this way.
If all the comics publishers with consignment inventory at Diamond had just signed a UCC-1 statement (like a few publishers did) none of this would be happening. They were actually warned by several parties that they should…but they didn’t. Why? Diamond was so integral to the economics of the industry (“Diamond is the banker of retailing!”) and there were so many personal relationships there, I think many publishers forgot this was a business like any other. It was very foolish, and you can bet that no one involved will ever make that mistake again.
But it didn’t have to be this way.
The Chapter 13 auction could have gone with the Alliance Entertainment bid. That would have been a very different outcome and Diamond Comics would probably still be operating in some form. But they didn’t and that’s what the Alliance Litigation is all about.
It didn’t have to be this way.
Maybe Diamond Comic Distributors itself could have taken steps back in the pandemic days that would have modernized and built up its business for the 21st century. They did try to pivot, eventually, but it was too late. They tried to sell the business before filing for bankruptcy but it was too late. Maybe it was never in their nature to do that.
A lot of maybes.
And the slog goes on.
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