Image Comics has reached a settlement agreement with Diamond Comic Distributors in its dispute over consignment inventory, and a key hearing continues for a third day on Wednesday, August 19.

The hearing on the numerous motions and objections related to Diamond's plan to seize and sell consignment inventory in its warehouse (see "New Filings in Diamond Consignment Dispute") began on Monday based on a plan created in a scheduling conference on August 5.  The plan the Court laid out for this week's hearing was to first decide whether the dispute should be settled by an adversary proceeding, which would require delays for discovery, or to just proceed to a hearing on the motions the same day.

A number of events led up to this week’s hearing.  In the August 5 hearing (for which the transcript was released on August 15), it was revealed that Sparkle Pop, the Ad Populum company that acquired Diamond Comic Distributors assets, had been selling consignment inventory without permission from the Court or the publishers.  Diamond said it became aware of the sales, asked Sparkle Pop to stop, and asked it to pay for what it had sold, but as of the August 5 hearing, had not had a response.

The amounts of the inventory involved in the consignment dispute were substantial for some companies.  The Ad Hoc Committee of Consigners (composed of Paizo Inc., Drawn & Quarterly, Fantagraphics, and other game and comic publishers) said on August 5 that the companies in its group had over $20 million in inventory at wholesale value at stake.  That contrasts with the group represented by GAMA, on behalf of "certain of its members," with Roll for Combat and Snowbright Studio listed, for which its attorney told the Court that Diamond was holding a "couple hundred thousand dollars" worth of inventory.

Diamond had been providing some information in response to informal requests, including a statement that only 20% of its sales in 2024 had been of consignment inventory.  There was considerable pushback on that number from consignment vendors in the August 5 hearing, who noted that no detail had been provided, and that the numbers apparently included sales by Alliance Game Distributors in addition to Diamond so did not accurately reflect Diamond’s reliance on consignment sales.  This is important because one issue on which the motions may be decided (although numerous others have been raised) is whether Diamond’s creditors knew that Diamond was "substantially engaged in selling the goods of others" (see "Consignors Can Win").

In other run-up events, Dark Horse Comics joined the Consignors Group, which also includes Dynamite Entertainment, Oni Press, Titan Comics, Vault Comics, DSTLRY, and others, and added their voice to the group’s objections to the Diamond plan.  The Consignors group also joined the Ad Hoc Committee of Consignors in asking Sparkle Pop to assume or reject the consignment agreements that were in force between Diamond and the publishers when bankruptcy was filed (see "Consignors Ask Court to Force Sparkle Pop to Decide").

This week’s hearing has produced a number of results, although key issues remain to be decided when it continues Wednesday.

The Court approved a key motion filed by the Ad Hoc Committee of Consignors asking to stay Diamond's motion to seize and sell inventory until the Court has made a decision on who owns the inventory, Diamond has notified and served all of the publishers whose inventory it seeks to sell, and there's time for discovery and motions.  This is a blow to Diamond, which sought a quick resolution of the issue.

Tuesday, Image Comics and Diamond filed a proposed settlement of their dispute over the consignment inventory.  Image's situation was a little different from other publishers with consignment inventory in that it argued that Diamond had failed to transfer consignment inventory to Lunar Distribution after Image switched distributors in 2023 as requested.  That was well before the bankruptcy filing.  The settlement agreement specified that Image had provided a list of inventory that Diamond had agreed to make available for pick-up, and that Image was assigning to Diamond its rights to the remaining inventory and any claims against Sparkle Pop for inventory it had sold without permission.  In its July filing, Image said Diamond had $2.9 million worth of Image inventory in its possession, and that the amount it had failed to transfer despite being instructed to do so was $1.23 million.  The value of the inventory Image will be able to reclaim was not revealed.

There have been other allusions to possible settlements: Diamond's attorney said that the company was preparing settlement offers in the August 5 hearing, and in that same hearing GAMA said it had received a settlement offer.

Whatever happens next, there's concern that it needs to happen quickly, before Diamond runs out of money (see "Diamond Debtors Estate in Jeopardy").