Diamond bankruptcy settlement hits snag as Sparkle Pop files objection

A settlement in the bankruptcy of distributor Diamond Comic Distributor was reached last month, but this week the company holding the warehouse assets of Diamond, Sparkle Pop, filed an objection. The settlement would have returned consignment inventory that has been held since January 2025 to be returned to companies including Paizo and Green Ronin, while $892,913 held in escrow from sales Sparkle Pop made of that held inventory would go to the Diamond Estate to pay off debts.

In their objection, Sparkle Pop claims they are owed $1 million in rent for the warehouse that holds the consignment inventory along with $433,270 in processing fees for the inventory it has sold. Another objection to the settlement is that it would allow third party companies to retrieve the inventory, arguing that the warehouse is a working distribution center with “floor-to-ceiling pallet racks requiring specialized equipment and trained operators”.

Sparkle Pop previously attempted to seize the inventory for unpaid rent in June, but that motion was denied.

Green Ronin Publishing, one of the members of the settlement, released a statement on the GoFundMe page for their legal expenses fighting for the return of their inventory:

We are, at long last, moving towards a resolution of our dispute with Diamond and if all goes well, we will be getting our books back before Xmas. As you may recall, the bankruptcy court appointed a trustee to oversee the liquidation of the remaining Diamond assets (the majority were bought by two companies, Universal Distribution and Sparkle Pop, last year). Last month the trustee and our group submitted a proposed settlement to the judge. Before anything else happens, the judge will have to accept the proposal. After that, there is still the matter of getting our books out of the Mississippi warehouse, which Sparkle Pop now owns. You know that saying that possession is nine-tenths of the law? Well, I won’t feel comfortable until our long-held hostage stock is out of that warehouse.

Our group, the Ad Hoc Committee of Consigners, must give some things up in this deal. Notably, a pot of money the court is holding from sales Sparkle Pop made after it had been ordered to stop selling. Green Ronin, thankfully, only has a small amount of money in this pot, but some of our cohort companies are giving up substantial cash to tie this all up. In addition to getting our product back, we’ll also be clear of our old contract for good and free from various forms of legal jeopardy that have come up in this case. It’s not everything our group wanted, but it’s a good deal for us nonetheless. Everyone just wants this resolved and over. I must once again give kudos to our lawyer Cate, who has been a rockstar throughout this process.

The next time I update I will hopefully be able to tell you that our books are safely in our warehouse. As always, thank you for all your support. We’d have lost all our consigned books without the money to put up a legal defense.

Thanks,
Chris

“Consignment inventory” is when a publisher or other manufactuere/wholesaler provides product to a distributor to sell on their behalf, with the consignment seller getting a portion of the sale price. The inventory still belongs to the publisher during this time.

 

[Parmandur]

Gaaaah.

 

[Alzrius]

Litigation is what happens while you're busy making other plans.

 

[Blue]

So... the longer you litigate, the more rent you're owed...

 

[Koloth]

'Another objection to the settlement is that it would allow third party companies to retrieve the inventory, arguing that the warehouse is a working distribution center with “floor-to-ceiling pallet racks requiring specialized equipment and trained operators”.'
Probably hoping to baffle the judge. Any needed specialized equipment should already be on site, unless someone stole it after Diamond shut down. Most Sam's Club, Costco, Lowes, Home Depot stores have similar rack systems complete with customers wandering around. Trained operators won't be hard to find. Perhaps the operators that used to work there might be available?

 

[Abstruse]

'Another objection to the settlement is that it would allow third party companies to retrieve the inventory, arguing that the warehouse is a working distribution center with “floor-to-ceiling pallet racks requiring specialized equipment and trained operators”.'
Probably hoping to baffle the judge. Any needed specialized equipment should already be on site, unless someone stole it after Diamond shut down. Most Sam's Club, Costco, Lowes, Home Depot stores have similar rack systems complete with customers wandering around. Trained operators won't be hard to find. Perhaps the operators that used to work there might be available?

Yeah, I couldn't really say in the article because it's not professional to get snarky and I don't know for sure if that's what they mean, but I guess technically "a forklift" is specialized equipment and "forklift certification" is training for operators. Which are things every shipping company would have.

 

[Spectral Anomaly]

"But we own a warehouse. What good is our warehouse without wares to house?"

 

[Cordwainer Fish]

Yeah, I couldn't really say in the article because it's not professional to get snarky and I don't know for sure if that's what they mean, but I guess technically "a forklift" is specialized equipment and "forklift certification" is training for operators. Which are things every shipping company would have.

I thought they meant something more like this:

 

[aramis erak]

Sparklepop seems to have the delusion that they own the inventory despite that motion having been denied. Can we say attempted end run?

 

[Abstruse]

Sparklepop seems to have the delusion that they own the inventory despite that motion having been denied. Can we say attempted end run?

They've also been selling inventory without paying the publishers. That's what the $800,000+ of escrow was for, plus they suspect they're still selling inventory against court order. They were willing to let all that money go in order to get their inventory back, but that wasn't good enough for Sparkle Pop.