With the approval of a settlement between Diamond, Sparkle Pop, and 13 publishers this week, as well as Sparkle Pop withdrawing their objection, we thought the signs were there that we’d get another major decision in Diamond’s chapter 7 drama. And, this evening, it looks like the settlement between Diamond, its trustee Morgan W. Fisher and 15 publishers has been “ordered” putting into motion the winding down of the drawn out case.

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.

The settlement 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 deal is similar to one 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:

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.

The case has dragged on for some time and with numerous individual court cases between Diamond and publishers, the cost was adding up which led to the settlement.

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.

From today’s approval:

NOW, THEREFORE, it is by the United States Bankruptcy Court for the District of Maryland, hereby:

ORDERED, that the Motion be, and the same is hereby, GRANTED and all objections and responses to the Motion or the relief requested therein that have not been withdrawn, waived, settled, or resolved as stated on the record or herein are hereby overruled and denied on the merits; and it is further

ORDERED, that the Settlement (as defined in, and attached as Exhibit A to the Motion) is approved in its entirety. Thus, the failure to specifically include or refer to any particular provision of the Settlement in this Order shall not diminish or impair the effectiveness of such provision; provided, however, that to the extent any provision of this Order is inconsistent with the terms of the Settlement, the terms of this Order shall control; and it is further

ORDERED, that the Settlement and any related agreement, document or other instrument may be modified, amended, or supplemented by the Settling Parties thereto in accordance with the terms thereof, without further order of this Court; provided that any such modification, amendment, or supplement is not material, is consistent with this Order, and has the approval of the Settling Parties; and it is further

ORDERED, that the Settling Parties are authorized to take all actions necessary or appropriate to effectuate the terms of the Settlement and that they shall be, and hereby are, authorized to fully perform under, consummate, and implement the terms of the Settlement, including the filing of further pleadings and the execution and delivery of all instruments and documents that may be reasonably necessary, required or desirable to implement and effectuate the Settlement and the transactions contemplated therein; and it is further

ORDERED, that the releases set forth in the Settlement with regard to Boom Entertainment, LLC (“Boom”), shall be only as against Boom and not any affiliates; and likewise the releases of Boom by the Trustee and the Debtors’ estates are only as against Boom and not any affiliates; and it is further (We’re figuring out this aspect of the deal – Brett)

ORDERED, that any party that is engaged to destroy any of the Consignment Inventory with regard to the Settlement terms shall, promptly after destruction, provide a certificate of destruction to the respective Consignment Group Member to evidence the destruction of the respective property, which certificate shall be in accordance with industry standards; and it is further

ORDERED, that, this Order and the Settlement shall be binding in all respects upon the Settling Parties, the Debtors, all creditors of the Debtors and all interested parties affected hereby, and upon the successors and assigns of any of the foregoing; and it is further

ORDERED, that this Court shall retain sole and exclusive jurisdiction to hear and determine all matters arising from or related to the implementation of this Order.

There’s still much to go including lawsuits involving Diamond, Sparkle Pop, and Alliance having to do with the bankruptcy sale and various issues spinning out of it and there’s also a big question as to what lender JPMorgan Chase Bank will get out of this who lent Diamond a considerable sum of money.

There’s also a question as to what the stock that’s been fought over is actually worth? It’s sat in a warehouse for over a year so it’s unknown how valuable it’ll be at this point.

Overall, this has been a drawn out fight that could have been settled many months ago (and we hear there was a lot of drama between publishers behind the scenes as to what to do).

While this is a major step in settling matters, there’s still many steps to go and unanswered questions.

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