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.

 

[FitzTheRuke]

FedEx brokerage fee.

You mention something that many don't understand - that $40 mentioned above doesn't go to the Weirdo, and it doesn't go to Canada. It goes to FedEx, UPS, or whoever. They charge it as a "processing fee" for whenever the border asks them to show documentation on where/why it's coming, and asks for GST. Essentially, like you say above, the border asks for basic taxes, say $5, and the shipping company adds another $35 because they found it annoying that they had to do the extra paperwork.

So, some of it goes to Canada, but most of it goes to FedEx, or whoever. None of it goes to the US, other than perhaps that the shipping company usually has most of its ownership there.

 

[Morrus]

Another product from another publisher that used the opening and managed to sell a product that strikes a cost vs perceived value that convinces customers. Just like in all industries.

I understand RPG publishers are often smaller businesses. I also understand there's an international context that affects shipping.

But I'm not playing 50$ of shipping and duties for a 60$ book. It's simple economics. There's very few games I want so much that I would consider doing so.

Some publishers have warehouses in Canada or find different solutions where the shipping and duties are more in line with the rates I see with most other line of products. And I understand that requires money, contacts and work. But that's part of entrepreneurship.

The barrier of entry to make stuff and ship it is much lower than in the past. Someone can make a zine, make a shopify website and mail stuff pretty easily. But being able to send a product somewhere is not the same as being able to really engage with customers and do business.

At the end, I'm a customer and I make simple value decisions about where my money goes and if a 60$ book becomes a 110$ order, you've lost a sale.

It’s not the unwillingness to pay more that was being objected to. It was the pure contemptuous of the message. “If he dies, he dies”. Screw that.

 

[Bunch]

I can understand Sparkle Pop saying they don't want rando equipment operators in their warehouse. Who pays if those guys injured someone? Who pays if they drop a pallet full of other people's stuff and destroy it?

 

[MGibster]

I can understand Sparkle Pop saying they don't want rando equipment operators in their warehouse. Who pays if those guys injured someone? Who pays if they drop a pallet full of other people's stuff and destroy it?

If MGibster LLC sent their employees to recover goods, and they inadvertently damaged someone else's property or injured someone, then MGibster LLC would be liable. For Sparkle Pop to be liable, plaintiff would have to argue they somehow contributed to the accident. Almost every company that owns a building will have third parties enter the site for work purposes for one reason or another.

I did have an employee of one of our vendors trip and fall in one of our bathrooms onsite. She contacted me, asking about our Worker's Compensation carrier, and I had to explain to her that she wasn't one of my employees. If she wants to file a Worker's Comp claim she would need to contact her own employer about that.

 

[LordEntrails]

If MGibster LLC sent their employees to recover goods, and they inadvertently damaged someone else's property or injured someone, then MGibster LLC would be liable. For Sparkle Pop to be liable, plaintiff would have to argue they somehow contributed to the accident. Almost every company that owns a building will have third parties enter the site for work purposes for one reason or another.

Yes, but operating forklifts and other equipment is often out of scope of those visitors. Heck, every place I've worked I have not been allowed/certified to operate the company's own forklifts.

Allowing other companies to enter and "collect" their own products using means that incur significant risk is risky!

And if MGibster LLC is liable, that only helps Sparkle or whoever's good you damage if either you are ethical or they are willing to incur significant legal fees to try and make good that damage your employee incurred. It's a risk with significant expenses. It seems reasonable they would not want to take that without legal protection.

 

[MGibster]

Yes, but operating forklifts and other equipment is often out of scope of those visitors. Heck, every place I've worked I have worked I have not been allowed/certified to operate the company I work for own forklifts.

I don't think Sparkle Pop is obligated to allow MGibster LLC to use their equipment. If Mgibster LLC needs a forklift, they can bring their own.

And if MGibster LLC is liable, that only helps Sparkle or whoever's good you damage if either you are ethical or they are willing to incur significant legal fees to try and make good that damage your employee incurred. It's a risk with significant expenses. It seems reasonable they would not want to take that without legal protection.

I don't believe the risks are as significant as you think. There is immediate harm being done to publishers who can't recover their goods whereas you're concerned about hypotheticals.

 

[Belen]

Yes, but operating forklifts and other equipment is often out of scope of those visitors. Heck, every place I've worked I have not been allowed/certified to operate the company's own forklifts.

Allowing other companies to enter and "collect" their own products using means that incur significant risk is risky!

And if MGibster LLC is liable, that only helps Sparkle or whoever's good you damage if either you are ethical or they are willing to incur significant legal fees to try and make good that damage your employee incurred. It's a risk with significant expenses. It seems reasonable they would not want to take that without legal protection.

Let’s be honest. This is designed to stall and allow Sparklepop to steal the inventory.

I had a similar situation happen to a client recently. The client wanted to move due to negligence and a large publisher threaten this tiny non-profit with a lawsuit they could not afford.

 

[LordEntrails]

I don't think Sparkle Pop is obligated to allow MGibster LLC to use their equipment. If Mgibster LLC needs a forklift, they can bring their own.

So now you are saying other companies should bring their own equipment onsite to a working distribution center and just pull their own pallets...

I don't believe the risks are as significant as you think. There is immediate harm being done to publishers who can't recover their goods whereas you're concerned about hypotheticals.

It's not about what I think. The risks are real. Given how many companies have safety standards around such, and how insurance companies consider these things in their insurance rates, it's pretty clear the risks are real business influencers.
Yes real harm is being done to those publishers. But ignoring harm to others is not the way to go about resolving the issue.

Let’s be honest. This is designed to stall and allow Sparklepop to steal the inventory.

Maybe. But undeclared intentions really are relevant in legal proceedings and are just speculation.

I had a similar situation happen to a client recently. The client wanted to move due to negligence and a large publisher threaten this tiny non-profit with a lawsuit they could not afford.

The situation sucks, it just goes to show that all involved are being negatively impacted.

 

[MGibster]

So now you are saying other companies should bring their own equipment onsite to a working distribution center and just pull their own pallets...

As a general rule, no. In this particular case, yes.

It's not about what I think. The risks are real. Given how many companies have safety standards around such, and how insurance companies consider these things in their insurance rates, it's pretty clear the risks are real business influencers.
Yes real harm is being done to those publishers. But ignoring harm to others is not the way to go about resolving the issue.

I think you've got it twisted. Where did I argue there was zero risk? Maybe someone from MGibster LLC will screw something up and damage Diamond's property, the property of one of Diamond's customers, or even injure someone, but if such a thing happens then MGibster LLC can be held responsible. How many companies will suffer irreparable harm because Diamond won't let go of the merchandise?

Maybe. But undeclared intentions really are relevant in legal proceedings and are just speculation.

I suspect you meant to say they really aren't relevant, but they are. A judge is free to look at Sparkle Pop's motion and decide it's meritless on the grounds they're full of baloney or decide they make a good point.

 

[Lanefan]

So now you are saying other companies should bring their own equipment onsite to a working distribution center ...

I'm surprised it's still a working distribution center; I'd have thought the courts would have locked it down by now - nothing moving in or out - until this all gets settled.