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Message: <blockquote data-quote="Yenrak" data-source="post: 9697312" data-attributes="member: 6888829">TL;DR version: 1) If Diamond's creditors knew this stuff belonged to the publishers, its UCC argument is wrong. The merchandise belongs to the publishers and isn't part of the bankruptcy estate.2) If they didn't know, then the stuff is part of the bankrutpcy estate if the publishers didn't file a UCC-1 perfecting their security interest (basically, letting the rest of the world know that they were the owners of the stuff).3) The publishers might not realistically be able to get their stuff back and resell it themselves because that would be expensive and complicated. Might be better off letting Diamond sell it and accepting the pennies on the dollar as general creditors.Longer Answer:Diamond’s legal argument is that the publishers never filed the paperwork (a U.C.C.-1 financing statement) needed to perfect their legal claim to that inventory. Without that filing, Diamond argues, the books legally became part of its bankruptcy estate and can be sold "free and clear" of the publishers' interests.But under the Uniform Commercial Code, consignors (games publishers, for example) don’t have to file that paperwork if the consignee (Diamond) was "generally known by its creditors to be substantially engaged in selling the goods of others." That might sound technical, but it’s actually the heart of the dispute.Diamond has been the central distributor in the comics and tabletop industry for decades. Their entire business model involved moving goods they didn’t own—everyone in the industry knew this. And Chase Bank isn’t some rinky-dink lender—they’re a global financial institution with vast due diligence capabilities. If they extended credit to Diamond, they likely reviewed its inventory practices and understood it operated largely on consignment. That could mean this consignment exception applies—and that the publishers’ rights to their unsold stock are still intact.So while Diamond is using the absence of U.C.C.-1 filings to try and claim ownership of that inventory, it’s very possible a court could rule that the publishers don’t need to have filed them—because Diamond’s business model was no secret to its creditors.That said, it’s also worth considering that even if some publishers can reclaim their unsold inventory, it might not actually be in their best interest to do so. For many small- and mid-sized publishers, especially in the tabletop and indie comics space, Diamond wasn’t just a distributor—it was their only real pipeline to retail. Without Diamond, they might have no easy way to get those goods back into stores, or even into the hands of customers.Reclaiming physical inventory from a bankrupt company is logistically messy. And it can be costly. Diamond is not going to pay for the return of the merchandise. The publisher would likely have to pay for warehousing, shipping, and possibly even legal fees to retrieve it—and once they’ve got it back, they may not have the infrastructure or channels to resell it. Worse still, the value of that inventory might have already decayed—books tied to specific release windows or marketing pushes could be hard to move in today’s market.In that light, taking a fractional payout as an unsecured creditor—what bankruptcy lawyers call "pennies on the dollar"—might be the least bad option. Especially if the alternative is sitting on pallets of unsellable product or absorbing the cost of getting it back. This is a hard pill to swallow, but it reflects a brutal truth of a market in which the major distributor goes bankrupt while holding lots of merchandise.[HR][/HR]</blockquote>

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