There’s been a lot of different threads and drama when it comes to Diamond‘s chapter 11/chapter 7 case but one issue and fight that has gone on since nearly the beginning is over consigned goods the former distributor currently holds. Publishers had provided Diamond with goods to sell on consignment and after the initial chapter 11 filing, there were questions as to who “owns” the inventory. Publishers obviously want their product back but Diamond wants to sell it to pay back its creditors. There’s a whole lot more to it as far as the arguments, Sparkle Pop selling some of the inventory when it had no right, and more, but that’s the basics.

Diamond is now in chapter 7 and they and its trustee were given a deadline to accept or reject its contracts with publishers. Diamond’s trustee asked for an extension of that deadline and was denied by the court. That denial is currently in appeal.

Because Diamond and its trustee didn’t file, that set off a flurry of filings by publishers that the lack of response should count as a “rejection” and if the contracts are rejected that sets off a process by which the publishers can get their goods back. In multiple filings, they argued with the court, they want their goods back for multiple reasons beyond the lack of acceptance/rejection of the contracts. Of course Diamond’s trustee and more filed they disagreed with that.

The court has now ruled on two of the three motions filed (and we expect the same ruling for the third) denying the motion to get the consigned goods back, but it’s not quite a denial.

The denial comes with this bit:

WITHOUT PREJUDICE to renewal of the motion upon resolution of the Trustee’s appeal of this Court’s Order Denying Emergency Motion to Extend Time to Assume or Reject Executory Contracts Related to Consigned Goods [Docket No. 1171]. For the avoidance of doubt, the Court expresses no opinion by entry of this Order on whether 11 U.S.C. § 365(g) permits the relief sought in the motion prior to resolution of the pending adversary proceedings regarding application of the Uniform Commercial Code.

In other words, it’s denied right now, but once the appeal about the time extension is decided, it can be filed again. In short, the appeal is going on and since that’s kind of a big deal and would impact this, it’s a bit early to decide things. This also allows publishers to refile with an updated argument/reasoning once that appeal comes back.

You can read both filings below: