A compromise between “old” Diamond and its trustee Morgan W. Fisher and 15 publishers wasn’t the only bit of news today when it comes to Diamond’s chapter 7 process. Fisher also submitted an order limiting future notices in the case.

The order is interesting as it lays out a lot of information in the case that reminds us of the scope of the situation.

• Diamond’s credit matrix initially consisted of almost 1,300 parties and when subscription comic book customers was added it was over 1,500.
• 75 claims were filed for the Chapter 7 with the highest amount being Dynamic forces with $29,514,087.40 to $182 from Irish Holdings.
• Omni Agent Solutions logged 742 claims in the main case and 71 claims concerning Diamond Select Toys
• There were 759 unique claimants, 28 were governmental agencies.

The motion raises the difficulty and cost in notifying everyone every update about the case and there’s numerous other ways to get notifications like a Notice of Appearance and Request for Notices.

Fisher is motioning to limit notices to:

• Counsel for the Debtor;
• The Trustee and his counsel;
• Secured Creditors;
• The Debtor’s 20 largest unsecured creditors, based on filed claims;
• The Office of the United States Trustee;
• The Internal Revenue Service, and the Comptroller of the State of Maryland;
• Persons who have appeared or filed a notice of appearance and request for service in the case (including persons served via CM/ECF);
• Parties who are directly affected by a particular motion, paper or pleading.

The 20 largest creditors are:

• Dynamic Forces, Inc.: $29,514,087.40
• Alliance Entertainment, LLC: $10,008,534.05
• Bandai Limited: $9,245,465.10
• Penguin Random House LLC: $8,941,467.05
• Passage Trading: $6,297,244.00
• Oni-Lion Forge Publishing Group: $5,646,907.40
• Udon Entertainment Inc.: $4,327,716.06
• Valiant Entertainment LLC: $4,070,588.30
• Disney Consumer Products, Inc.: $3,638,592.00
• Creative Grand Industrial HK Limited: $2,960,931.87
• Zenescope Entertainment, Inc.: $2,360,907.16
• Fantagraphics Books Inc.: $2,279,330.68
• MegaHouse Corporation: $2,150,730.00
• Magnetic Press LLC: $1,957,576.53
• TMP International, LLC: $1,774,558.48
• Aftershock Comics, LLC: $1,767,573.53
• ARA, Inc.: $1,229,027.36
• Funko, LLC: $1,206,854.62
• Action Figure Authority Inc.: $1,200,000.00
• Hasbro, Inc.: $1,185,638.23

They’re also looking for permission to pay for the notifications without having to ask permission for each time they need to do so.

It’s a hell of a new comic book day as court documents have been released as to a settlement between Diamond‘s trustee Morgan W. Fisher and a group of publishers concerning consigned goods being held by Diamond and Sparkle Pop.

To catch folks up, when Diamond declared bankruptcy, it held a large quantity of product in its warehouse that was on consignment. After some time, Diamond claimed it had a right to sell the consigned goods to help pay down its debt and that nothing would go to the publishers. The publishers claimed it was their property and that when Diamond declared bankruptcy it triggered a whole bunch of different things that would allow them to get their product back. This has gone on for about a year and a half that resulted in all sorts of off-shoot lawsuits and a lot of behind-the-scenes negotiations.

To make things even more complicated, some items were sold when they weren’t supposed to. Sparkle Pop, the company that took over “old” Diamond, deposited $840,151.00 into an account of which $669,410.00 represents sales of goods from the Consignment Group. In addition, Sparkle Pop has $417,496.00 for sales after May 15 2025 through February 13, 2026 of which $273,503.00 represents sales of the Consignment Group’s goods. Of that initial amount of the $669,410, $50,000 will go to the publishers with $619,410 going to the trustee but what is in escrow and owed to the other publishers not part of this group needs to be figured out and settled. The $273,503 will go entirely to the trustee. If it’s found Sparkle Pop sold even more than what’s known, the publishers need to pursue that at their own cost and 5% of any recovery from that would go to the Diamond trustee after expenses for the legal proceeding are handled.

Now, we have a resolution, a “compromise,” and from the cursory read, it seems like it’s pretty much what we expected the result to be.

The compromise in short is that a certain group of publishers will get some money for the product of theirs sold and will be able to get the product back but they’ll need to pay for packing and shipping. The compromise is similar to a deal cut between Image and Diamond (the money is the difference between the two).

What’s also big is that it terminates any distribution agreement that currently exists for these publishers with “old” Diamond. This in particular stands out:

The Trustee agrees and acknowledges that the Consignment Group Members were the owners of their respective Consignment Inventory at all times prior and subsequent to the Petition Date, and the TSA did not permit or authorize Sparkle Pop to sell, distribute or dispose of Consignment Inventory on behalf of either the Consignment Group members or the Debtors other than in accordance with the Distribution Agreements and at the Debtor’s sole and express direction.

Publishers that are part of the compromise:

There are some publishers who are noticeably missing from this list and have been participating in court proceedings up to this point.

The bullet points of key parts of the deal and we’ve put in bold the major ones:

• The Court Registry Escrow not allocable to the Otherwise Represented Consignors shall be released to the Parties and distributed as follows: (a) Fifty Thousand Dollars ($50,000.00) to the Consignment Group Members that are also members of the Ad Hoc Committee (to be allocated as it/they deem appropriate); and (b) the remainder to the Trustee (thus, the net amount to be paid to the Estates is $619,410.00).
• The Settling Parties shall jointly move the Bankruptcy Court for an order directing that Sparkle Pop release the aggregate amount allocable to each Consignment Group Member from the SP Escrow, as set forth on Schedule 3 to the Trustee.
• If not already rejected, all Distribution Agreements of the Consignment Group Members shall be deemed rejected as of the Effective Date of the Settlement and terminated in their entirety.
• The Consignment Group Members will have the authority and are required to retrieve any and all of their inventory from the Warehouse, bearing their own costs of picking and packing such inventory.
• Sparkle Pop is entitled to pick and pack the inventory identified by the Consignment Group Members, at rates comparable to what the Consignment Group Members can obtain from other third parties to complete the work. If Sparkle Pop declines to do the pick and pack work at comparable rates, the Consignment Group Members are authorized to access their Consignment Inventory and remove it from the Warehouse under the timelines set forth in the Settlement.
• The Trustee, on behalf of himself the Debtors, releases and discharges the Consignment Group Members from any and all claims, causes of actions, obligations, and damages including, but not limited to, preference claims. Similar releases from the Consignment Group Members flow to the Trustee and Estates, subject to certain claims as described herein and in the Settlement. In other words, the releases are essentially mutual.
• The Consignment Group Members are reserving all rights with regard to any additional claims against Sparkle Pop. In the event any Consignment Group Member recovers additional funds from Sparkle Pop on account of unauthorized sales of or shortages in the Consigned Inventory in excess of the Court Registry Escrow and SP Escrow, such Consignment Group Member shall pay five percent (5%) of any such recovery to the Estates, net of any legal fees and expenses required to collect such amounts.
• In the event Sparkle Pop obtains a judgment against any Consignment Group Member for rent, storage, or similar charges with respect to such Consignment Group Member’s Consigned Inventory stored at the Warehouse, that Consignment Group Member shall have an Administrative Claim against the Estates in an amount equal to 25% of such claim.
• In the event Sparkle Pop or the Consignment Group Members obtain a finding that any consignment inventory delivered by any Consignment Group Member was unreported as being sold by the Debtor prior to the Settlement, but was in fact sold by or at the Debtor’s direction, and paid to or for the benefit of Debtor, the respective Consignment Group Member(s) that delivered any such Missing Inventory shall be entitled to a chapter 7 administrative claim against the Debtors that is subordinate to certain other expenses and claims including any finally-allowed post-conversion administrative claims of Sparkle Pop, JP Morgan Chase and/or the Trustee’s professionals.
• Within sixty (60) days after the Effective Date, the Trustee will file a notice of abandonment pursuant to Bankruptcy Code § 554 as to the Consigned Inventory.
• Within ten (10) days after the Effective Date, the Trustee shall assign to the Consignment Group all of his rights, title, and interest, without representation or warranty of any kind, in and to the CG Adversary Proceedings as plaintiff therein.
• Within ten (10) days after the Effective Date, (i) the Trustee will file a notice of dismissal of the Denial Order Appeal (if not already resolved), and (ii) the Members of the Consignment Group, as applicable, will file a notice of dismissal of the CG Adversary Counterclaims.

But… there’s more!

The Consignment Group Members are entitled to file a “substantial contribution claim” for their legal fees and costs having to do with this fight.

Other consignors who are not part of this settlement as settling parties have to reach a resolution with the Consignment Group Members and its counsel on a fee and expense sharing arrangement. But, the Trustee and other consignors who are not part of this agreement could reach their own settlement.

What’s big, and why we thought there would be a settlement, it ends Sparkle Pop charging “old” Diamond and its trustee in what’s described as a “burdensome administrative cost.”

The Parties believes the Settlement is in the best interest of the Estates. It eliminates a burdensome administrative cost that is being asserted by Sparkle Pop with regard to the continued storage of the Consignment Inventory at the Warehouse; it relieves the Trustee from any further involvement in the CG Adversary Proceedings of the Settling Parties and the Appeal; it provides a substantial cash infusion to the Debtors’ Estate; and it protects the Consignment Group Members from further erosion of value of their Consignment Inventory as well as prevents the flooding of the market with respect to unauthorized sales of their inventory.

You can read all of the documents below and we’ll have more as this major decision unfolds: