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.