The motion by multiple publishers to dismiss the adversary proceedings against them by Diamond has been denied by the court.

Diamond moved to filing individual court cases against publishers regarding the status of consigned goods when a stay was put on a general decision concerning the inventory. 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.

The court has stated the trustee has stated a claim for the goods, which multiple publishers argued wasn’t the case. What’s interesting is the publishers argued that Diamond and its trustee not responding to the acceptance/rejection of contracts is in itself a rejection, the court states that lack of action is more a breach of contract. When one door closes another opens?

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.

Below is an example of the denial by the court.