We learned last week that the Court had approved a 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. The order today clarifies that the decision will be made after an adversary proceeding initiated by Diamond against each of the publishers with inventory it seeks to seize. An adversary proceeding would be handled separately from the core bankruptcy proceeding, where motions are heard and decided.
The order also contemplates the possibility of settlements, noting that the order does not prevent Diamond and a publisher reaching an agreement allowing the property to be sold. One such settlement has already been reached (see "Image Settles").
Diamond's leverage is its physical control of the inventory. The order does not require Diamond to return the consignment inventory, it just makes the procedure for seizing it more expensive and time-consuming for Diamond (which may not have time, see "Diamond in Jeopardy").
A key hearing coming up at the end of September may clarify the consignment issue further: the Court has scheduled a hearing on September 30 to hear arguments on two publisher motions asking the court to require Diamond to decide whether it’s going to assume or reject the consignment agreements in force when bankruptcy was filed. The motions argue that if the agreements are rejected, the publishers will have the right to terminate the contracts if Diamond does not promptly pay amounts due, which would give the publishers the rights to reclaim inventory.
Sparkle Pop, which bought Diamond's assets, is presumed to have rejected the agreements because it has not accepted them by a deadline set by the court (regardless, it had sold nearly $350,000 worth of the inventory by early August, see "Consignors Ask Court to Force Diamond to Decide").
The two motions were filed by the Consignment Group, which now includes Dark Horse Comics (see "Eventful Hearing"), and by Titan Publishing.