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Image’s Diamond Agreement… Not Like the Others

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Earlier today we reported that Image Comics and Diamond Comic Distributors settled when it came to the question as to Image’s consigned goods. Currently, Diamond has a motion to sell the consigned goods it still possesses to pay off its debts which is being argued before the court this week. In the agreement, there was this nugget:

Image asserts that the Image Agreement differs in certain aspects as compared to other consignment agreements to which the Debtors are a party.

(Hat tip to Heidi with The Beat for pointing that out while we chatted about the settlement)

So, of course we had to go look and compare and there are some interesting differences.

Image submitted their agreement in a few different motions and you can see a whole bunch of agreements for other publishers here.

Right away, it’s clear there’s a difference between the two. Image’s agreement looks like it was signed in April 2024. Image Comics announced they were moving exclusively to Lunar Distribution in May 2023 with orders beginning on June 2023.

Diamond continued to act as Image’s exclusive “agent” to book market retailers worldwide, but it’s the next bit that’s interesting.

From Image’s agreement:

WHEREAS, Diamond desires to use consigned Products to facilitate sales to non-exclusive  (i.e., comic book specialty retail customers, “direct market” or “direct sales” of the Products) US customers of Image that Diamond would otherwise purchase from Image’s exclusive US distributor.

Compare that to an agreement to another publisher. In the same section:

WHEREAS, Seller desires to appoint Buyer to distribute English language versions of the Products in the markets set forth below; and

WHEREAS, Buyer desires to accept such appointment as distributor for Seller.

As stated elsewhere, I’m not a lawyer, and definitely not a contract lawyer, but that absolutely is a difference.

Now, in agreements with other publishers, there are still references to “consignment.” An example in the section “Supply and Purchase Orders”:

(b) Buyer shall place consignment orders for Products…

(c) Buyer will warehouse Products on consignment in a clear, dry, secure, and fire-protected facility.

There’s numerous other references to consignment goods in the non-Image agreements and there’s far more to the differences between the agreements, but we wanted to focus on the topic at hand. It might be small details that lead to this settlement… We’ll have more coverage of the hearings this week as decisions are made.

Image and Diamond Settle Over Consigned Inventory

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Image Comics logo

A settlement was filed today between Image Comics and Diamond Comic Distributors concerning the consigned inventory Diamond still has and has motioned the court to sell. On July 18, Image filed an objection to Diamond’s plan which is currently at the center of a court hearing that began yesterday and is going into at least today.

That inventory is currently sitting in Diamond’s old warehouse which has been taken over by Sparkle Pop which is housing it for (old) Diamond.

In the document it states that:

  1. Image has provided Diamond with a list of the inventory that will be returned to Image if the agreement is approved;
  2. Image will provide Diamond and Sparkle Pop with proof of insurance and indemnification;
  3. Image will not be respnsible for the costs involved with the returning like picking it up, packing it, and storage costs but will pay for removing it from the warehouse;
  4. Diamond and Sparkle Pop can’t do anything with the inventory beyond returning it;
  5. This is a big one… Diamond has the rights to any proceeds from Sparkle Pop’s unauthorized sales of the consigned inventory. (Old) Diamond has all the claims and causes of action that Image currently has against Sparkle Pop. It was recently revealed that Sparkle Pop was selling consigned inventory without purchasing it. The fact this is included would lean towards Diamond telling the truth about this.
  6. Image drops any claims and any back and forth between the two is over.

So, Image gets its inventory back and all matters between Image and Diamond are dopped. But, Diamond not gets to go after Sparkle Pop for selling product they shouldn’t have. Is that another lawsuit getting launched as part of Diamond’s Chapter 11?

The deal needs to be approved by the court.

Diamond’s Chapter 11 Hearing Goes into Day Two as Publishers Get a Good Sign

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Diamond Comic Distributors

Today was a big day when it comes to Diamond’s Chapter 11 process as a hearing was held to decide on numerous motions. Being decided discussed are:

  1. The sale of Diamond UK;
  2. Diamond’s motion for the sale or other disposition of consigned inventory;
  3. The Ad Hoc Committee of Consignors’ motion to stay Diamond’s motion concerning the consigned goods;
  4. A motion for Diamond to assume or reject executory contracts with members of the Ad Hoc Committee of Consignors.

Out of the four, only one motion had a decision and the motion to sell Diamond UK was approved. It was pretty straight forward and there’s little controversy concerning it.

Evidentiary Hearing Held: re: 638 Motion to Sell Free and Clear of Liens and Notice of Motion IS GRANTED. Order to be prepared by Movant.(related document(s) 638 Motion to Sell Free and Clear of Liens and Notice of Motion, 716 Objection) (Scott, Cherita)

That leaves the next three… and the judge wants to hear more concerning them. In what is a good sign for publishers, especially the ones that are part of the Ad Hoc Committee of Consignors, the judge ruled that motion “granted.” So, there’s a temporary hold on Diamond’s plan so more can be argued for or against it.

In short, the judge wants to hear what the group has to say. There’s no ruling immediately outright in anyone’s favor and that’s not a bad thing. Diamond can’t sell the goods until there’s a decision on their motion for consigned goods but publishers aren’t getting their stock back either. There’s more to be argued.

Also done was evidence being admitted into the hearing, again, not a bad thing, as a lot of it are contracts between the publishers and Diamond.

So, overall, not the fireworks folks thought would happen and a lot of jockeying for what comes next and preparing the real debate to come. The next hearing is on August 19 and a lot of objections and responses are all up… to be continued!

Judge Approves Diamond UK Sale

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We got the answer to one of the motions in today’s hearing. The Judge has approved the sale of Diamond UK.

In July, a motion was submitted to sell the shares of Diamond UK that Comic Exporters and Comic Holdings hold in Diamond UK. Diamond UK was not part of the assets purchased by Universal Distribution and Sparkle Pop in the initial sale of assets during the proceeding. Diamond has been working to sell the rest of its assets.

Diamond UK is being sold for $2.1 million, with the motion calling it a “heavily-negotiated purchase price” with a $200,000 deposit made in good faith.

The purchaser is an entity formed by members of the UK-based management team of Diamond UK. None of Diamond’s officers or directors are part of the ownership group of the newly formed entity.

Sparkle Pop files a Motion to Quash a Subpoena for Joel Weinshanker

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Diamond Comic Distributors

Tomorrow, August 18, is a big day in the Diamond chapter 11 case with a hearing taking on multiple issues that need to be decided. It’s a hearing that’s expected to last multiple days.

Sparkle Pop has filed a motion to quash a subpoena for Joel Weinshanker as the corporate designee for Sparkle Pop. Weinshanker is the owner of the company’s parent company, Ad Populum and heavily involved in Sparkle Pop’s acquisition of Diamond’s assets during the chapter 11 process. The subpoena has the dates listed of the hearing from August 18 to 20 and was the subpoena was requested by the Ad Hoc Committee of Consignors which represents multiple comic publishers.

Sparkle Pop’s argument was there was not “reasonable time to comply” with the subpoena and it was delivered with one business day’s notice. They also argue the subpoena was to the corporate entity and not an individual which is against the rules. They also state that Sparkle Pop was served with a request for discovery by the Committee withdrew its request for a pre-hearing deposition and that this is an end-run around rule requirements. Weinshanker is also outside of the 100-mile limit dictated by rules regarding subpoenas as he resides in Florida and New York.

We’ve got some last minute drama here!

Diamond Amends its Witness and Exhibit List for Monday’s Hearing

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August 18 is the next big day in Diamond’s Chapter 11 drama. A hearing will be held on that day at 9:30 am covering a whole host of topics and motions. An agenda for the hearing has been released and Diamond has amended its witness and exhibit list for the hearing. The updated document is below as well as the changes we found between this and the original filing.

  • Diamond has added Alec Haesler, the Director at Raymond James & Associates, Inc., Investment Banker for the Debtors, as a witness.

Diamond Comic Distributors releases its June Operating Report

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Diamond Comic Distributors

After a significant delay as well as threats to change their status, Diamond has been submitting “Monthly Operating Reports.” June’s report for Comic Holdings and Comic Exporters have been filed and we got May and June for Diamond Select Toys. Now, we have June for Diamond Comic Distributors.

The below includes filings for Diamond Comic Distributors, Diamond Select Toys, and Comic Holdings, and Comic Exporters.

In January, Diamond Comic Distributors, Diamond Select Toys, and more filed a petition for Chapter 11. But, Diamond hadn’t filed a Monthly Operating Report since commencing the case. The reports for January, February, and March were overdue leading to a motion to switch their status from chapter 11 to chapter 7 or dismiss the case. That motion has been dismissed and reports have been filed at random times.

Below is the latest update with a tracking of information for each report.

Here’s the info released for Diamond Comic Distributors:

January 2025February 2025March 2025April 2025May 2025June 2025
Current Employees:473 (though 478 at one point)4624564563940
Disbursements:$13,683,765$31,600,829$25,132,240$22,744,341$27,230,468$9,421,461
Ending Equity/Net Worth:$5,695,551$2,422,745$269,300-$5,224,936-$30,570,469-$32,001,477
Profit:$2,018,090-$10,110,858-$1,700,394-$715,328$41,591,837-$2,569,481

Diamond Select‘s information:

January 2025February 2025March 2025April 2025May 2025June 2025
Current Employees:2118171700
Disbursements:$304,181$280,707$210,703$147,011$160,498$17,621
Ending Equity/Net Worth:-$31,352,292-$44,508,649-$45,510,494-$45,904,870-$12,827,322-$14,347,060
Profit:$152,465$151,188$175,356$144,079$13,433$0

Comic Holdings‘ information:

January 2025February 2025March 2025April 2025May 2025June 2025
Current Employees:000000
Disbursements:$0$0$0$0$0$0
Ending Equity/Net Worth:-$27,916,472-$40,848,045-$41,271,204-$41,624,489-$4,392,505-$5,905,302
Profit:$0$0$0$0$0$0

Comic Exporters‘ info:

January 2025February 2025March 2025April 2025May 2025June 2025
Current Employees:000000
Disbursements:$0$0$0$0$0$0
Ending Equity/Net Worth:-$27,916,472-$40,848,045-$41,271,204-$41,624,489-$4,392,505-$5,905,301
Profit:$0$0$0$0$0$0

We’ll have further updates as subsequent months are released.

Diamond Throws Ad Populum Under the Bus and More in a Released Transcript

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Diamond Comic Distributors

As part of Diamond’s recent filing against the Ad Hoc Committee of Consignor’s motion to assume or reject contracts, a transcript from an August 5 hearing was released. The hearing covered a whole bunch of topics and there’s a lot of juicy details coming out of it.

Here’s the highlights of the 55 page document:

  • During a July 17 hearing, there was a mention of “significant discovery” by the Objectors but there hasn’t been up to this point. There was a lot of information requests that Diamond provided. There were requests for discovery after this date.
  • There’s been questions as to who is selling consigned inventory. Diamond hasn’t but the counsel throws Ad Populum under the bus claiming they were and have been told to stop.

In discussions with certain Objectors, the issue of whether the Debtors are continuing to sell consigned inventory today has been raised. So, I want to be very clear for the record that the Debtors are not currently selling consigned inventory, and they have not sold any consigned inventory since the closing date of the sales of substantially all assets to the two purchasers, Universal and Sparkle Pop. The Debtors have become aware of the fact that Sparkle Pop, one of the purchasers of some of the Debtors’ assets, has been selling consigned inventory on or after May 16th. The Debtors promptly notified Sparkle Pop, both the principals at Sparkle Pop and Sparkle Pop’s counsel, to immediately stop any sales as to the consigned inventory because consigned inventory was explicitly excluded from the acquired assets under that APA.

The Debtors have sent several written communications to Sparkle Pop’s counsel and have verbally informed both the principals at Sparkle Pop and their counsel that they’re not to be selling the consigned inventory, that it’s in violation of the APA, and the Debtors have demanded that the proceeds of any such sales be remitted back to the Estates. Sparkle Pop has yet to respond to the Debtors’ various outreach. However, the Debtors are aware of the issue. We’re not hiding the ball there. The Debtors continue to raise this issue with Sparkle Pop and will continue to take the appropriate action to recover amounts realized by Sparkle Pop from the sale of any inventory on or after May 16th. So, this has been a topic in the informal discussions. The Debtors have provided information on this topic as it has been requested to the objection — to — as it has been requested by the objecting parties. So, we’re aware of it. We’re working to resolve it. We’re providing the information relating to that issue as it’s requested.

Here’s our question, and why this doesn’t quite pass the smell test… if Sparkle Pop didn’t buy the “consigned inventory,”

  1. How do they know what inventory there was to sell?
  2. How did they deliver any of that inventory, assuming they have delivered it?
  • Diamond has worked on a resolution regarding the consignment inventory and though they’ve presented that to publishers, as of that hearing, non took on Diamond on their offer. There was a counteroffer. We’re told there’s been talking of publishers purchasing back their inventory.
  • Less than 20% of Diamond’s sale of inventory is the sale of inventory on consignment. There’s been accusations this is a fudging of numbers because Diamond includes items like Diamond Select which wouldn’t be consignment. But, when it’s just comic or game publishers, it’s over 20%.
  • There’s a lot of comments about the lack of Discovery, the process where individuals ask for evidence, believing it hadn’t been asked for because it wasn’t necessary or too expensive. Discovery requests came later that day from multiple groups and on August 8. There was also discovery asked for and Diamond only provided it through May 15 which is when the sale to Sparkle Pop and Universal closed and Diamond didn’t provide information for any sale prior or subsequent to that date but there has been property sold. The Court did have issue about further requests for discovery but Counsel for some of the debtors pushed back saying they had no idea who to ask for what since they had no idea who was selling the consigned goods. Sparkle Pop is again thrown under the bus.
  • The current loan from JPMorgan matures on August 23 and any further negotiations concerning that relies on what happens with the consignment motion from Diamond.
  • The consignment sale would result in the “significant amount of money” for Diamond. The wholesale value mentioned is $20 million for just some of the inventory. So, what Diamond has is far more than that, exceeding even our estimate based on responses from publishers. GAMA’s counsel says the inventory is “a couple hundred thousand dollars.”
  • The Court questions how JPMorgan didn’t know Diamond was selling goods on consignment from others? The lawyer for JPMorgan basically response with “Diamond has a lot of divisions and sells a lot of stuff” and Alliance and their game distribution needs to be factored in. The retort is that Diamond’s consignment motion is only for Diamond so their other divisions shouldn’t be factored in.
  • There’s questions as to why the process is being rushed as there’s no contract to purchase the inventory out there?
  • The Court was surprised Penn State University is part of this… they publish graphic novels/comics through the Graphic Mundi imprint.

From what I understand, it’s not a terribly profitable business, but it’s one that is educational.

  • Maybe Sparkle Pop isn’t selling consigned goods?

We received a representation in an e-mail yesterday in response to an inquiry received that’s saying that neither Debtor nor Sparkle Pop was selling any of these consigned goods, but many of my clients have received, I believe, solid evidence of the fact that that’s going on.

  • Diamond gets slapped a bit for not filing their monthly reports on time.

And with that… the hearing on August 18 was set with a lot on the docket to discuss.

Read the entire transcript below. It’s a doozy!

Objections Filed Regarding the Motion Requiring Diamond to Assume or Reject Contracts

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Diamond Comic Distributors

Monday is a pretty big day for Diamond’s Chapter 11 filing. Quite a few motions will be heard, all of which have seen objections, filings in support, and back and forth of all of those! We’ve seen a lot of objections filed already as well as witness and exhibit lists.

Diamond and their lender JPMorgan Chase Bank have filed objections to a motion from the Ad Hoc Committee of Consignors that would push Diamond to assume or reject contracts with publishers as well as related relief.

In Diamond’s motion, they open stating that the Ad Hoc’s motion wasn’t in a vacuum and was in response to Diamond’s motion to try to sell the inventory it still had. In what feels like a no dun, Diamond states that the filing from the Ad Hoc was because if its motion is granted, the motion from Diamond to sell the inventory would be moot.

Diamond’s case that it should be denied is:

  1. The Ad Hoc has not satisfied and cannot satisfy, the legal standards that govern the motion to compel or reject contracts;
  2. If granted the Ad Hoc’s motion would all the consignors, aka publishers, to reclaim their products immediately and if they did, Diamond wouldn’t be able to sell it.
  3. The motion if approved would be deemed a termination of the agreements which goes against case law, including a recent Supreme Court Decision.

Where things REALLY get interesting is the inclusion of a transcript with all sorts of juicy details. We’ll get to that in a different article. It’s REALLY good stuff.

JPMorgan hopped in with their own opposition. It again points to the failure of publishers to file the UCC-1 paperwork that would have protected their inventory during the bankruptcy. They reiterate Diamond’s stance that it’s an attempt to undermine Diamond’s consignment motion. JPMorgan argues the rejection of the contracts doesn’t result in termination of the Vendor Contracts and if it were rejected it wouldn’t end the dispute over the inventory. And even if the contracts are terminated, it doesn’t permit the return of the consigned inventory because they’re subject to JPMorgan’s lien against Diamond. That’s kind of at the heart of all of this and other motions have stated the loan shouldn’t have been given with the inventory as collateral to begin with and JPMorgan should have known better.

You can read all of the filings below, including the transcript which we’ll have further details about in a follow up article.

More Objections Filed Going into Diamond’s Monday Hearing

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Diamond Comic Distributors

Monday is a pretty big day for Diamond’s Chapter 11 filing. Quite a few motions will be heard, all of which have seen objections, filings in support, and back and forth of all of those! Yesterday saw a flurry of objections to the Ad Hoc Committee of Consignors’ motion to stay Diamond’s motion to approve its sale or other disposition of consigned inventory.

Diamond’s Objection:

  1. Diamond filed an objection attacking the Ad Hoc Committee’s cited legal authority saying it doesn’t support their relief. Basically, the previous court case that the Ad Hoc Committee mentioned does say what they claim it does.
  2. Diamond also emphasizes it is indeed their property to sell, something many have called into question.
  3. Diamond states again that publishers didn’t file the proper paperwork stating the inventory is theirs.
  4. Sparkle Pop’s email to publishers as to who owes what isn’t relevant.
  5. There’s a swipe at a delay in an Ad Hoc filing with more cases supporting their case and then goes on to say the cases don’t support Ad Hoc’s case.

JPMorgan Chase filed a reply in support of Diamond’s motion for the sale. JPMorgan is the lender to Diamond and would financially benefit from the sale in that the money would go towards paying back the loan. Their filing pretty much comes down to “we get paid first and have an interest in this going through so we can get paid.”

They also filed a memorandum with points supporting their reply in support of Diamond. In it they state:

  1. The publishers didn’t fill out the UCC paperwork in time.
  2. The publishers have to prove that the creditors knew that the debtors were “substantially engaged in the sale of consigned inventory.”
  3. Diamond can sell the inventory even if a “bona fide dispute” exists

JPMorgan concludes that the Ad Hoc’s argument is based on outdated decisions and “obsolete cases.”

Finally, the Official Committee of Unsecured Creditors also objected to the Ad Hoc Committee’s motion. They state:

  1. Diamond’s motion shouldn’t be stayed because due process has been provided.
  2. There’s been a lot of time but discovery requests were only recent.
  3. Diamond is under financial constraints and the process has been sufficient.
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