After two extensions, Sparkle Pop has submitted their response to the proposed settlement between (old) Diamond and its trustee Morgan W. Fisher and 15 publishers. In that settlement, the publishers would pay for packing and shipping of consigned goods held by (old) Diamond and currently stored in a Sparkle Pop warehouse as well as a receive a small monetary amount. In exchange, (old) Diamond would receive a windfall of money that is currently part of the dispute.

(Old) Diamond had declared Chapter 11 and eventually Chapter 7 and in its possession are consigned goods from numerous publishers valued in the millions. There has been a fight for over a year where a little over 30 publishers had been fighting to get those consigned goods back. Diamond had been claiming it has a right to them and was going to sell them to pay off their debt. Sparkle Pop had purchased some of the assets of Diamond in the bankruptcy and that included taking over the warehouse where that product was being stored. That’s the short version…

Sparkle Pop says the agreement fails as it doesn’t resolve consignment disputes, and instead it increases disputes and litigation between publishers and Sparkle Pop while removing (old) Diamond and its Trustee as well as loan lender JPMorgan Chase from that litigation.

Sparkle Pop goes further stating the agreement imposes requirements upon the company without its consent or remuneration for processing fees and storage fees that the company has incurred since December 2025.

From their objection, the proposed settlement requires, among other things:

• Sparkle Pop to completely relinquish its rights to most of the funds in the court registry and to remit nearly all of the funds that it is holding in escrow despite being owed (a) its processing fees for selling goods (an amount over $400,000.00) and (b) its rent and storage fees (an amount over $1 million);
• Sparkle Pop to be forced to allow the Consignment Group Members to pick, pack and pallet the consigned goods being held in its Mississippi warehouse (which they logistically cannot do) without any input from Sparkle Pop or payment to Sparkle Pop on a forced timeline to be invented by the Consignment Group Members; and
• Sparkle Pop to continue to be subject to the third-party claims in the adversary proceedings and future unknown but meritless and unsubstantiated claims by the Consignment Group Members against it.

Sparkle Pop says all of this makes things more complicated for the court as it would have to oversee more legal disputes as well as the aspects of the process of the publishers getting their goods back including, , (a) all aspects of the process including cost, (b) access to Sparkle Pop’s warehouse, (c) the timing, (d) what inventory is removed, and (e) enforcement.

Sparkle Pop goes on to play the victim stating:

Ever since Sparkle Pop purchased the Debtors’ assets, it has been unfairly placed in the middle of the dispute between the consignors and the Debtors (now the Trustee). Without a judicial determination of ownership, Sparkle Pop could not have and still cannot release the consigned goods to one party without exposing itself to legal claims from the other parties.

It goes on to further argue:

Sparkle Pop would not only have to relinquish its interests in the registry and escrow (without receiving its processing fees of $433,270), it would also being compelled to turn over the consigned goods to the Consignment Group Members on their sole terms and conditions (without receiving its pik & pak fees and rent/storage fees of $1,000,000) and still remain subject to potential future litigation from the Consignment Group Members over unsubstantiated and meritless claims.

Publishers have requested the court to force Sparkle Pop to provide update inventory counts of product which publishers have not received for some time. It is believed more product has been sold by Sparkle Pop, against court orders and without distribution agreements, than what is currently known and there is evidence of this provided by publishers to the court. In an exhibit submitted by Sparkle Pop, they state there are 8,250,936 units of goods stored in their warehouse.

Sparkle Pop also says it was not part of this settlement agreement and they would be out money for rent and processing fees regarding the consigned goods.

Below are the filings from Sparkle Pop with more details about their costs and what is stored in the warehouse. We’ll have a deeper analysis in the coming days.