In February, the motion to extend time to “assume or reject executory contracts related to consigned goods” was denied by the court in regards to Diamond‘s chapter 11/chapter 7 process. This concerned the ongoing question regarding contracts between (old) Diamond and publishers handling consigned goods. Who “owns” those goods is a contentious issue with publishers wanting their product back while Diamond, and now their Trustee, want to be able to sell the consigned goods to pay back creditors.
The denial of the motion by the Trustee has caused a chain of rejections. Because the contracts were not assumed or rejected by the deadline, publishers have pounced citing law that saws the contracts default to rejected. You can read about that here and here. Because the contracts are rejected, there’s laid out steps in the contracts as to what happens to consigned goods, primarily the publishers can get them back for the cost of shipping.
Boom Entertainment has filed a motion today to renew their call that they get their consigned goods back.
Like the other filings, Boom Entertainment’s goes over the agreement as far as Diamond and their role when it comes to consigned goods. But, there’s some previously raised issues as well as new ones.
Here’s the highlights:
1) Diamond has not adequately secure the stock as evidenced by the fact that Sparkle Pop, LLC (“Sparkle Pop”) sold it after the Debtor sold its other assets to Sparkle Pop (which expressly excluded the Stock) and then did not remit the proceeds,
2) …the Debtor’s failure to comply with virtually any of its obligations under the Distribution Agreements while nevertheless holding the Stock hostage in the Mississippi warehouse controlled by a third party is causing significant loss and waste, because much of the stock loses value over time.
3) Notably, the Debtor filed the Consignment Litigation only with regard to stock provided by Boom, the Consignors, and another group of consignors constituting approximately thirteen (13) other publishers. For the vast majority of other publishers that own stock sitting at the Debtor’s warehouse, the Debtor failed to commence adversary proceedings and apparently does not seek any finding that Secured Lender’s lien attached to that stock. It is unknown what the Trustee proposes to do with the stock that is not subject to the Consignment Litigation.
Here’s where Boom’s motion gets interesting and stands out from others:
1) Boom’s distribution agreement was terminated prior to the Petition Date
2) Boom has growing concerns that its Stock is being stored unsecurely. Section 3 (c) of the Distribution Agreements require that, “Buyer will warehouse Products on consignment in a clean, dry, secure, and fire protected facility.” Section 8(c) further provides, “[Diamond] shall maintain all insurance with respect thereto in amounts sufficient to fully cover all of [Consignor’s] Products stored there.” (this is a concern raised by others – Brett)
3) However, according to statements made by the Trustee at the hearing held before this Court on February 26, 2026, the Debtors’ insurance coverage on the Stock has lapsed, in breach of the requirements under the Distribution Agreements.
4) The Debtor’s estate is also not current on stock fees and warehouse storage fees owed to Sparkle Pop. The Consignors believe that Sparkle Pop has not been paid since approximately November 2025, and thus Boom is stuck in limbo with their Stock held hostage at a warehouse that the estate no longer owns, rents, or is current with respect to ongoing rent obligations.
5) Given that the Transition Services Agreement between Sparkle Pop and the Debtor is also now rejected, it is apparent that the estate is not storing the Stock and has no means to store it any longer.
The filing brings up again that Drawn & Quarterly purchased graphic novels by Fantagraphics which was fulfilled by Sparkle Pop in violation of a court order. They also state that Living the Line has at least 800 copies of a single title are not accounted for in any inventory report provided by Sparkle Pop.
This is concerning as the consignors in this case have been given no access to, or oversight of, their Stock for several month. The continued fulfillment of orders, without the ability to verify proper control, safeguarding, and accounting of stock is extremely prejudicial to Boom’s interests and the preservation of its value.
What’s really new is that Boom states they terminated their Distribution Agreement with Diamond in December 2024, prior to their chapter 11 filing (petition date). Boom was purchased by Penguin Random House in July 2024 and PRH is a distributor themselves.
Boom has also been exposed to potential claims related to their Stock still held in the Olive Branch Warehouse. Boom ran a Kickstarter3 campaign that in addition to the new content it was developing, the purchase tiers included add-ons that purchasers could buy in order to further support the Kickstarter efforts. These add-ons consisted of a number of pieces of Boom’s existing content held by Diamond.
Now, with Boom’s Stock still being held hostage in 2026, they have not been able to ship these add-ons purchased by Kickstarter supporters, leading to a number of disgruntled customers and exposing Boom to legal claims for failing to deliver the products sold through Kickstarter.
It’s yet another recent filing making a pretty strong case to have the consignment stock returned and question Diamond and Sparkle Pop’s inventory management practices.
