It’s been a few weeks since we updated the Diamond Slog, and while things were heating up for a bit now they are molassifying again. Objections, denials, blah blah blah. I’m going to link to the doughty Brett Schenker’s coverage at Graphic Policy for details.
§ Chase Bank files objection to consignment stock motions: Hey what about us! We are the DIP lender!
The bank has filed a limited objection, supporting a “consensual resolution that avoids unnecessary litigation” as long as that protects JPMorgan’s rights and interests including its DIP liens and protections under the Final DIP Order.
§ DIAMOND’S CHAPTER 7 TRUSTEE LAYS OUT RELEVANT DOCUMENTS IN APPEAL ATTEMPT
Trustee Morgan W. Fisher is appealing the court’s rejection of their motion to ask for more time to decide who owns what. The court rejected the motion on the grounds that it was filed too late, but Fisher’s appeal states that the date should have been from when the court ordered the move to Chapter 7 not the date when it was filed.
§ DIAMOND’S CHAPTER 7 TRUSTEE OBJECTS TO THE RELEASE OF CONSIGNOR’S STOCK
In a major filing, Fisher once again laid out the reasons why motions filed by publishers to get their inventory back should be denied. Basically everything we’ve read before, including the difficulty in actually finding the consignment stock, Sparkle Pop’s threat to file a “warehouseman’s lien” against the inventory because the rent hasn’t been paid, and so on. Although both the Ad Hoc Committee and the Consignment Group argued that previous contracts were terminated because of the Chapter 7 making them void, the Trustee argued that the adversary proceedings are the proper way to adjudicate this. Basically a lot of very boring and technical arguments here, but that doesn’t mean they couldn’t be valid.
On August 18, 2025, this Court expressly held that adversary proceedings are required under Bankruptcy Rule 7001 to establish the estate’s interest in the consigned inventory before any disposition may be authorized. Transcript at 207:23–24. The Motion effectively asks the Court to ignore that ruling and transfer possession—and, functionally, ownership—of valuable inventory before the Court has adjudicated the fundamental title and priority questions. What was impermissible for the Debtor under § 363 is equally impermissible for the Consignors on a contested motion. The adversary proceedings are the appropriate vehicle to determine the rights of the parties in the consigned inventory, and they are actively progressing.
And that is one of the more interesting passages.
§ Meanwhile, the Consignment Group filed a motion basically agreeing with the Ad Hoc Committee’s arguments for why they should get their stuff back.
§ BUT, just yesterday what seems like a pretty big blow to the Ad Hoc Committee and Consignment Group was delivered, as both the motion to dismiss the adversary proceedings were DENIED.
While this sounds rough, it was still denied without prejudice – basically because the matter is under appeal it can’t be decided, as we suspected back when the appeal was filed. In addition, although the Diamond Estate clearly hasn’t been following the earlier agreements, this possibly constitutes a breach of contract…not a termination of the previous contracts.
If the Agreement is treated as a rejected executory contract notwithstanding the pending appeal, rejection merely constitutes a breach of contract by the Debtor under 11 U.S.C. § 365(g)(1). As explained in the Trustee’s opposition, that breach would not automatically terminate the rights asserted by the Trustee under the Bankruptcy Code and the Uniform Commercial Code. Mission Product Holdings v. Tempnology, 587 U.S. 370 (2019). Thus, the complaint states a claim.
Oh dear, precedents. We were chatting with a knowledgeable legal type the other day, and apparently consignment inventory squabbles are a common feature of bankruptcies…and just who gets the stock is a matter of very technical legal matters, not who we THINK should get it. In other words, FOR THE LOVE OF GOD, DON’T FORGET TO FILE YOUR UCCs!
Soooooo….we’re kind of back where we started for now. The Ad Hoc Committee and the Consignment Groups want The Stuff back. The trustee and Chase Bank want to sell The Stuff, and would rather wait a year for the adversary proceedings to go to court. Seemingly they’re hoping to drag things out for so long that the publishers give up. Which some of them may have to do.
For instance, one publisher that’s in the Ad Hoc Committee, Living the Line, has launched a Kickstarter for a benefit book to help them pay their legal fees, entitled, fittingly, CONSIGNED: A Living the Line Legal Benefit Anthology.
Diamond filed for bankruptcy in January 2025. Then in May 2025 everything collapsed. The inventory they held for us — books that were legally ours, placed with them on consignment — was seized by the bankruptcy estate. “New Diamond” continued selling our books after the sale. They stopped paying publishers. When we asked for our consignment inventory back: no thx dudes.
This is not a niche problem. More than 300 vendors were caught in the wake of Diamond’s collapse. But pubs who dealt primarily with Diamond were hit hardest. Living the Line is fighting as part of the Ad Hoc Committee of Consignors alongside our friends Fantagraphics, Drawn & Quarterly, UDON, Paizo, Ablaze, American Mythology, Avatar, Action Lab, Zenescope,Battle Quest Comics, Green Ronin, and Hermes Press.
Living the Line has spent $12,000 in legal fees so far. Diamond (Old and Nu) owes LtL $24,000 in unpaid sales revenue. The case is ongoing.
The Kickstarter has already raised $15,769 – it definitely has some cool work in it, but also some contributors who we do not support at The Beat. However, it does give you some idea of the financial burden that publishers are under because of this Diamond Disaster – and how expensive lawyers are.
Will the publishers continue to battle it out, or will they make their own settlements to get their stock back? Stay tuned for the next tedious episode of THE WEEK IN DIAMOND.
Like this:
Loading…
