Posted in: Ablaze Publishing, AfterShock, Comics, Comics Publishers, Fantagraphics | Tagged: Ad Hoc Committee, diamond
Legal precedents cited in Diamond Comics Bankruptcy Battle, as the Ad Hoc Committee digs up the past
The Ad Hoc Committee of Consignors, a legal body made up of comic book publishers Ablaze, American Mythology Productions, Avatar Press, Battle Quest Comics, Action Lab, Drawn & Quarterly, Fantagraphics, Green Ronin, Hermes Press, Living the Line, Paizo, Udon and Zenescope, have added to their case against Diamond Comic Distributors in the bankruptcy courts. The Committee has asked the bankruptcy courts to put a stay on Diamond’s plans to liquidate the consignment stock belonging to hundreds of publishers and manufacturers to pay off the banks. Because they have a case to put forward, but they also want the chance to make it properly.
The Ad Hoc Committee point out that they have “not found a single case wherein the debtor was permitted to: sell consigned stock post-petition; fail to pay the amounts due to the consignor(s) in accordance with the underlying consignment agreement; (either knowingly or by failing to exercise proper diligence and care) a third party to sell consigned stock without paying the consignor(s); and then permitted to conduct a bulk sale of the consigned stock without being required to pay to the consignor(s) all amounts that would otherwise have been due and owning in accordance with the underlying consignment agreements.”
And they argue Diamond is trying to do just that, sell the stock in bulk, ignore payment obligations, not give the publishers what’s due them, and not having it out in court first, in an “adversary proceeding”. The cases they have brought up include
Whitehall Jewelers Holdings “In Whitehall, the debtors sought to sell consigned goods… and certain consignors objected to the sale of their stock, arguing in part that the debtors were generally known and substantially engaged in the sale of the stock. In other words, the facts and procedural posture of the case in Whitehall is virtually identical to the case at bar. The court in Whitehall stated that it was “the Third Circuit’s mandate in a recent decision . . . that interest in property can be extinguished only in an adversary proceeding.” It involved debtors trying to sell consigned goods, jewelry in this case through a bankruptcy sale motion, and consignors objected, and forced the debtors to file over 120 adversary proceedings, stating: “the court ‘cannot determine whether the Consigned Goods are property of the estate through a contested matter, such as a sale motion under Section 363′” and that “adversary proceedings are mandated and each Consignment Vendor is entitled to the protections of the law.”
The Maryland Bankruptcy Court “has similarly held that a determination of whether property is property of the estate requires an adversary proceeding, stating “[t]he Bankruptcy Rules require the filing of a complaint to determine the nature, extent and priority of an interest in property of the estate, even when the allegation . . . is that its interest is not property of the estate.”
Panache Cuisine “found support for its position in quoting In re Morabito Brothers… for the proposition that “the termination of colorable property interests will require the greater procedural protections of an adversary proceeding.”
And they state that such arguments play out in “the substantial majority of bankruptcy courts”. Continuing by naming;
Mushi: “That does not dispose of the ownership interest of the deposit itself. If the ownership interest is to be raised, it must be brought as an adversary proceeding in this court with the proper and necessary parties.”
Fontaine v. Conn “The Ninth Circuit, furthermore, has held that it is error for the bankruptcy court to determine a party’s interest in property without an adversary proceeding.”
S.H. Leggitt, “material dispute over ownership of property cannot be adjudicated by motion as a contested matter, and instead should be adjudicated in an adversary proceeding”
Packer: “To the extent the Debtors desire a determination that the deposit account funds are not property of the estate . . . such determination would require an adversary proceeding.”
TSA Stores v Wilmington Savings Fund Society, “the Bankruptcy Court for the District of Delaware permitted the sale of consigned goods, but only subject to (i) the filing of (and ruling on) an adversary proceeding to determine respective rights to the consigned goods; and (ii) a provision in the sale order that permitted the debtors to sell consigned goods only so long as the debtors complied with the terms of the consignment agreements, including all payment obligations to the consignors” and even then, “debtors in TSA promptly paid the consignor as stock was sold, and the ensuing litigation was with regard to a lien priority fight between the consignor and the secured lender.”
Valley Media: “the court only permitted the Debtor to sell the consigned goods subject to the terms of the distribution agreements with its consignors, including all limitations to sale and protections afforded to the consignors with respect to their intellectual property and trademark license rights” and additionally, “the court refused to permit the debtor to sell consigned stock at auction without affording the consignors the rights and protections afforded to them under their executory contracts.”
In short, this is the Ad Hoc Committee’s way of saying to the Judge that Diamond Comics can’t rush this sale without proving ownership properly, and they need to be made to slow down and do it properly — or not at all.
You can use these Diamond tabs to keep up with the latest on Bleeding Cool. Here’s a timeline if you want to catch up…
On the announcement of Chapter 11 on the 14th of January, Diamond started a 13-week bankruptcy process run by financial firm Raymond James, got financing to operate, and announced an auction for its assets.
Those assets included Diamond Comic Distribution, Alliance Gaming Distribution, Diamond Select Toys, CGA and Diamond UK
Universal Distribution was named the Stalking Horse bidder for Alliance Games and Diamond UK, which required a purchase commitment of thirty-nine million dollars, but with certain discounts and privileges for taking that position.
The auction took place, and it went late. There was food and breakfast billed for.
And Alliance Entertainment, or AENT, was named the top bidder for the assets of $72,245,000, though not for Diamond UK. This was widely announced, including by Diamond themselves.
Then we learned that a joint bid by Universal Distribution and Ad Populum came second and was named the back-up bid, with a bid of $69,130,000. With Universal getting Alliance Gaming and Diamond UK, and Ad Populum getting Diamond Comics, Diamond Select Toys and everything else. Basic Fun was third with fifty million.
Bruce Ogilvie, AENT chairman, was invited onto a podcast with comic book retailers Dennis Barger and Jesse James after, apparently, watching my performance on the Beyond Wednesdays podcast in which he talked about AENT and Diamond.
A court hearing with the Honorable Judge Rice in Courtroom 9-D at the United States Bankruptcy Court for the District of Maryland at 10 am was intended to ensure the legality of the bid and the process.
But instead, over that weekend, the debtors declared that they had chosen the back-up bid from Universal and Ad Populum instead of AENT, despite AENT having bid more. No reason was given.Diamond’s Dick Move: the
AENT filed a lawsuit regarding this decision.
It took the bankruptcy court to reverse that decision and state that AENT, with the higher bid, had won, though they would have to withdraw their lawsuit.
AENT has terminated their winning bid and purchase.
Universal Distribution and Ad Populum were back in the running
Diamond declared “business as usual” but the courts threatened Chapter 7 over late paperwork.
AENT sued Diamond, claiming fraud
Diamond says it’s all in hand and went back to court, wanting to be owned by Universal and Ad Populum.
Sale of Diamond to Universal and Ad Populum was approved by the courts.
Though Ad Populum paid more than we thought.
Podcast blamed/credited with the current state of affairs
Diamond tells Skyrush to stop claiming they won CGA.
As part of court filings, Diamond released details for every comic store on account.
We have some finality.
Ad Populum and Universal Distribution officially acquire Diamond and related assets.
The layoffs have begun.
And continue.
Diamond Select Toys has closed
Diamond try and reassure retailers over ComicSuite
Courts withdraw Chapter 7 bankruptcy threat
We look at the future of Diamond Previews again
PRH pulls out of Diamond entirely
Well, not entirely, the UK can stay.
Hermes Press says Diamond doesn’t want to distribute their comics anymore… or anyone’s.
But Diamond pushes back on that, as they publish a new Previews.
And they assure comic book stores that everything is going to be fine. Honest.
Then send a letter to publishers which looks like it isn’t
Now they are looking for more money and longer to pay it back.
Dynamite would like half a million now, please.
Udon and Manga Classic have now cancelled all Diamond orders.
Then so did Drem Productions
And PRH starts to close their special retailer joining offer
Diamond gets a fourth wave of funding and deadlines.
Philbo Distribution launches.
Alliance Entertainment hire seven senior Diamond staffers.
Universal Distribution rumoured to be hiring Diamond staffers to enter the US market.
Massive Distribution expands within Lunar
Diamond has cancelled all their PRH orders.
There are problems with Ad Populum’s first payments to comics publishers
Ad Populum sues AENT alleging breaches of confidentiality and staff poaching.
Ad Populum still ghosting publishers.
Bankruptcy timeline revealed it began in July 2024
Diamond ends cash on delivery sales
Hermes Press hires Steve Leaf
Diamond responds to Dynamite
Diamond closes No Cost Orders, sends out reminder emails to comic book stores
Boom Studios makes layoffs.
Zenescope pulls out of Diamond.
AENT Says Diamond Claim They Poached Staff “Fails As A Matter Of Law”
It’s Claimed New Diamond Owner Said He’s “Playing Chicken With Idiots”
Mike Schimmel Talks, Under Oath, About The Diamond Comics Firings
Dynamite jumps to Lunar Distribution
Diamond takes Previews digital only
Universal Distribution to distribute in the USA as well as Canada, starting with DC Comics
Conflicting Statements Over Diamond, AENT And Ad Populum Lawsuits
This Week, There Are Only Five Comics On Diamond’s FOC
Robert Gorin, Chief Restructuring Officer Of Diamond Comics, And Geek
Titan Has Not Received Payments From Diamond Comics, Stops Supplying
Fantagraphics Says That Diamond Is Holding Their Comics Hostage
Kathy Govier, Chief Marketing & Communications Officer, Out At Diamond
Confirmed, AENT Tried To Buy Diamond In October To Avoid Bankruptcy
Dynamite Pulls Their Comics Out From Diamond Comic Distributors
Diamond Moves To Liquidate All Consigned Comics “Held Hostage”
FairSquare Graphics Calls Diamond “Thieves & Bandits”, Brings Receipts
Ultimate Comics Chain Refuses To Buy Diamond Liquidation Stock
This One Trick Means Bandai Get Their Pokémon Cards Back From Diamond?
Dren Productions Want To Know If Diamond Shipped Their Recent Comics?
Publishers Have 3 Weeks To Object To Diamond Comics’ Liquidation Plans
Emily Botica, Vice President At Diamond Comics, Is Leaving Next Week
SDCC Gossip: What’s Happening With Diamond At San Diego Comic-Con?
Universal To Offer DC Comics To US Retailers At Same Lunar Discount
Comic Publishers To File Paperwork Against Diamond Comics This Week
Diamond Pulls Its Pullbox And Cancels Its ComicSuite For Comic Shops
The Exit Interviews Of Diamond Comic Distributor Staff In Full
Andrew Aiello, Tom Derby & Ben Davis Buy CGA After Diamond Bankruptcy
Dynamite Owed A Million By Diamond, Can’t Make Payroll Next Week
Ad Populum Can’t Yet Deal Directly with Diamond Consignment Vendors
As Court Denies Dynamite Over Diamond, Comic Creators Rally Round
Paizo speaks out about their Diamond troubles
TwoMorrows Legally Objects To Diamond Bankruptcy Liquidation Of Stock
Graphitti Designs & Magma Comix File Legal Paperwork Against Diamond
Dynamite, Fantagraphics, Drawn & Quarterly Team Up Against Diamond
Sealed Transcripts Over The Diamond Comics Bankruptcy Auction, Opened
Diamond’s Reason To Reject Alliance Entertainment Was Down To One Hour
AENT Claims “The Fix was Definitely in” on Diamond Bankruptcy Auction
Diamond Comics Was Already Looking For A New Buyer Back In 2023
Mad Cave Studios makes layoffs
Dynamite Signs With Simon & Schuster For Bookstore Comics Distribution
Avatar Press Joins Anti-Diamond Liquidation Publisher Coalition
Bankruptcy Court Moves Diamond Hearings Till After San Diego Comic-Con
Image Says Diamond’s Goal Is “Stealing” $3,000,000 of Comics From Them
JPMorgan Chase Reminds Diamond Comics As To Who Gets The Money
Universal Makes DC Comics Available To US Shops Via Alliance Gaming
Diamond Comics Sells Diamond UK For Over $2 Million To… Diamond UK
How A Podcast “Created A Lot Of Problems” For Diamond Bankruptcy
Diamond Comic Distributors More Than Doubles Its Shipping Prices
The Empty Spaces Of Diamond And Dsltry At San Diego Comic-Con
Alliance Claims Diamond Bankruptcy Auction “Rigged From The Beginning”
Publishers Don’t Know Who’s Selling The Comics Coming Out of Diamond
Remember, Remember, The 18th Of August For Diamond Comics Bankruptcy
Overstreet Comics Price Guide Delayed Six Months by Diamond Bankruptcy
Dynamite Fundraising Humble Bundle Last Day – $1600 Of Comics For $16
Comic Book Publishers Vs Diamond… And What’s Up With Steve Geppi?
Diamond Comics Was Losing $1.3 Million Dollars A Week This April Alone
Publishers Whose Diamond Liquidation Objections Are Not Being Heard
The Human Fly’s IPI Comics of Australia Pulls Out Of Diamond As Well
Ad Hoc Publishers Cite Precedents in Diamond Comics Bankruptcy Battle
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