One of the major outstanding issues with Diamond‘s bankruptcy is the status of consignment inventory. Diamond currently has stock that was provided to it by publishers on a consignment basis. That stock is currently physically held by Sparkle Pop which purchased some of Diamond’s assets, including taking over the warehouse where these are stored, though they don’t have a right to sell it (which they did and there was drama around that).
Diamond wants to sell the consigned goods to help pay back its creditors. Publishers obviously want their stock back. A judge put a stay on the decision which has been playing out for months. Diamond then went a submitted adversary proceedings against publishers, over 30 of them. In short, instead of this decision being handled at a macro level, the judge said Diamond could sue each publisher individually to figure out the product status.
Now, Diamond is in chapter 7 and due to key dates having passed, the Consignment Group, which is made up of multiple publishers, has submitted motions in each of those adversary proceedings to dismiss the complaints. Oddly a filing had the Trustee of the chapter 7 process selling the consigned goods to Sparkle Pop so it’s unclear how this motion and that clashes.
Filings by Massive Publishing, Oni Press, Panini, Alien Books, Titan Comics, Vault Storyworks, Dynamic Forces, Aspen, Black Mask Studio, Dark Horse, DSTLRY, Heavy Metal, and Magnetic Press were all revealed today were submitted to the court to “Dismiss Adversary Proceeding Complaint(s).”
The motion goes right into it stating that Diamond has not submitted facts to back up their complaint and discovery has not revealed evidence, and that the court can dismiss it over this.
The Complaint(s) in this case is devoid of any meritorious allegations that might possibly support Plaintiff’s claims; thus, this Complaint must be dismissed.
The filing then goes on about the agreement between Diamond and the publishers saying it’s “executory in nature” and Diamond’s obligations were to ship goods, properly store the goods, and pay the publishers when the goods ae sold.
On December 19, 2025, Diamond’s Chapter 11 was switched to Chapter 7 and with that, they had until February 17, 2026 to assume or reject an executory contract. The deadline to assume or reject their contracts has been an issue throughout the Chapter 11/Chapter 7 case with the deadline to do so pushed out over and over. The latest request to extend the deadline was denied in early February.
February 17 has come and gone and since the deadline wasn’t extended again and the agreements weren’t assumed, then they can be deemed rejected.
Because the agreement has been rejected, they are now terminated the Consignment Group argues and the agreement is now in breach and the next steps due to that breach need to be determined.
The Consignment Group feels the agreement has answers to that and as per a Supreme Court case, the publishers would then retain the rights it has received under the agreement. The motion lists out the various ways the agreement can be terminated (something we have mentioned before) and then goes on to state since the Consignors are owed money still and no proof of claim has been filed, the agreement has been terminated by its own terms.
The agreement lays out what happens next:
- Effect of Termination
d. Except as provided herein, the termination of this Agreement shall not relieve or release any party from any of its obligations existing prior to such termination. Upon termination of this Agreement, title to all material containing the
Trademarks, or Seller’s copyrights, service marks, or similar rights shall be deemed to have automatically vested in Seller. Unless otherwise agreed to by Seller, Buyer shall immediately deliver such material to Seller, at Seller’s cost. Buyer, at Seller’s option, may destroy such material at Seller’s cost, and upon such destruction furnish Seller a certificate of destruction satisfactory to Seller and signed by an officer of Buyer.
In short, the Buyer (aka Diamond) needs to return the goods to the Seller (aka publishers) with the Sellers paying for shipping. The Buyer can also destroy the material if the Seller wants, with the Seller paying for that.
The Consignment Group’s motion then concludes that due to all of that, the consigned goods are now clearly owned by the publishers and the Adversary Complaints should be dismissed.
This is a pretty big motion that might be the first real step to settle the outstanding question as to who owns the consigned goods. With the lapse of the date concerning the acceptance or rejection of existing agreements, the publisher’s case gets stronger.
We’ll be watching this closely and report when the court makes a decision regarding this key issue.
