On June 25, 2025, Diamond Comic Distributors submitted a motion for the “sale or other disposition of consigned inventory.” Many publishers have been vocal about the motion and many have responded to our inquiries with “no comment” because it’s an ongoing legal matter. TwoMorrows Publishing filed an objection earlier this week and now Magma Comix and Graphitti Designs have each filed their own objections as well.

But, before we get to that, some background…

After Diamond’s sale of the majority of its assets to Universal Distribution and Ad Populum/Sparkle Pop, (old) Diamond still has a “significant inventory” that was sent on a consignment basis. I think we all assumed all inventory was moved to the two new owners, but that doesn’t seem to be the case. They had an option and that specific part of the purchase was left as to be determined. Instead, it’s sitting in (old) Diamond’s warehouse in Mississippi.

(Old) Diamond is claiming the consignors (the sellers) haven’t followed the legal steps to establish a superior claim to their inventory. In short, the publishers (owners of the product) haven’t done what’s require by law to protect their ownership rights. So now, (old) Diamond has to do something with all of that inventory.

So, (old) Diamond submitted a motion to approve their plan to market, sell, or dispose of the inventory to “minimize costs and maximize recoveries” and generate the “best result for the estates.” It is assumed that money raised from the sale would go towards paying off money owed to JPMorgan Chase Bank which has provided loans to the company throughout the Chapter 11 process. So, instead of money going towards publishers, it’d likely go towards a bank.

Of course publishers are angry with the attempted move with some considering it theft as well as a lack of communication by both (old) Diamond and (new) Diamond. There’s also a lot of questions out there like how much stock is being held by (old) Diamond and exactly what stock?

Those who want to object to the motion have until July 16, 2025 to do so in writing and file it with the Clerk of the Bankruptcy Court (Objections to the Motion must be in writing and filed with the Clerk of the Bankruptcy Court, 101 West Lombard Street, Suite 8530, Baltimore, Maryland 21201, on or before July 16, 2025; and be served so as to be received on or before the Objection Deadline by the undersigned counsel for the Debtors.). The hearing on the motion is being held on July 21.

Now, on to the objections…Magma Comix has filed opposition to the sale of the consignment stock. Molten Core Media LLC, aka Magma, has pointed to its contract with Diamond that grants the distributior the “right to hold (Magma’s) products on consignment” but the inventory remains the property of Magma with the disbursement at Magma’s discretion, not Diamond’s.

Included with Magma’s objection is the distribution agreement with Diamond agreed to in 2023. The agreement has all of the “dirty details” of the agreement like percentages Diamond gets for its services and clearly lays out what percentages the product can be sold for.

Magma’s objection seems to be centered around point 8, “Title and Risk of Loss; Inventory.”

All Products are to be held by the Buyer on consignment and remain the property of Seller until sold by Seller through Buyer. Seller shall retain title to Products while they are stored in Buyer’s distribution center, which title will pass to Customers in accordance with Buyer’s Terms of Sale.

Where it gets interesting is within the agreement, it says it immediately terminates if “Either Buyer or Seller files a petition in bankruptcy.” At which point, the Diamond’s rights to sell the product ends if I’m interpreting it correctly and due to the termination, Magma was obligated to remove at its own expense all products held by Diamond unless Diamond has decided to sell the inventory to offset amounts due from the seller to the buyer. So, if Magma owed money, Diamond could keep the product and sell it to make up for that. The seller, aka Magma, has 60 days after the termination of the Agreement and with written demand/notice from Diamond to remove the inventory, otherwise Diamond has the right to dispose of inventory in how it deems or destroys the inventory.

So, based on the agreement, Diamond has no longer a right to sell the product as they filed bankruptcy which voided the contract and it’s unknown if they provided written notice to Magma, or other publishers impacted, that they should remove their product.

But, and it’s a big but, section 365(e)(1) of the Bankruptcy Code (federal) says this type of clause isn’t enforceable as it would prevent business with them in their contracts from doing any business when they declare bankruptcy. That, however, can vary by state and if the contract is void due to the general termination agreement or if any violation is narrow and just the ipso facto clause.

If Diamond’s debtor in possession (DIP) loan from JPMorgan Chase Bank is using the consignment product as collateral and according to this agreement, it’s possible Diamond has lost the rights to that product the second it filed bankruptcy… what’s the loan based on?

Graphitti Design‘s objection is much more straightforward.

I am writing to lodge my formal object to the motion referenced above. Our inventory was sent to Debtors on a consignment basis per the terms ofour Supply Agreement, and is our property, not Debtor’s. My company has an ongoing financial interest in selling all merchandise that is still in Debtor’s warehouse.

Likewise, I object to Debtor’s continuing to sell these items without remitting payment to us. Debtor’s efforts to circumvent paying us fbr our property will not only jeopardize my company’s immediate future financially. but their flooding the market with our products acquired at liquidated prices will hurt our longterm ability to sell those same products through other distribution channels.

You can read all of the documents below.