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Diamond Moves To Liquidate All Consigned Comics "Held Hostage"

Diamond Comic Distributors wants to liquidate all the consigned comics and toys they are holding "hostage".

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"Held Hostage" This was the phrase that Fantagraphics used about Diamond Comic Distributors' refusal to return the stock that Diamond had been holding on consignment from Fantagraphics and other publishers. Comics, trade paperbacks, graphic novels and merchandise that Diamond had received, hadn't paid for, but wouldn't return. And now it seems Diamond is looking to liquidate it all.

In new filed paperwork with the Bankruptcy Courts as part of its ongoing Chapter 11 bankruptcy proceedings, Diamond is outlining procedures for the sale of consigned inventory "free and clear of all liens, claims, interests, and encumbrances," which they say is "aiming to maximise value". Now, given that many of those people owed money are the publishers whose product would be liquidated by this action, there would seem to be some question as to whether it will maximise value for those to whom the debtor owes money.  The matter will certainly be taken up by the courts.

Consigned inventory is product that publishers and manufacturers allowed Diamond to hold in their warehouses so that they could supply comic book stores instantly. Diamond hadn't ordered those products, but they held an agreed-upon amount to supply stores quickly. After sales had slowed, the remaining stock might be returned or maybe sold in a sale agreed by both publisher and distributor.

The filed paperwork says that they are "in possession of significant inventory that was shipped… on a consignment basis.  The consignors have not satisfied the requirements under applicable law to perfect their interests in this consigned inventory." And that gives Diamond "the right to transfer title to this inventory free and clear of the consignor's interests."

And they "seek to sell or otherwise dispose of the consigned inventory free and clear of the interests, if any, of the consignors." And "The Debtors seek to sell or otherwise dispose of the consigned inventory pursuant to the procedures described in this motion (the "Consignment Sale Procedures") to maximize its value for their estates." In other words, the claim is that this inventory may be sold by Diamond independent of the interests of the consigning publishers.  And instead of paying publishers the proceeds from the liquidation of their inventory, the publisher's inventory will be disposed of to maximize its value for the debtor's estates.

The Bankruptcy courts have not yet agreed to this, but I can see a tremendous amount of pushback from publishers. And lots of people looking to Titan Comics, sitting on the Unsecured Creditors Committee on the Chapter 11 bankruptcy proceedings over this.

 

Will Diamond's Bankruptcy Process Go After Comic Shop Debt?
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Rich JohnstonAbout Rich Johnston

Founder of Bleeding Cool. The longest-serving digital news reporter in the world, since 1992. Author of The Flying Friar, Holed Up, The Avengefuls, Doctor Who: Room With A Deja Vu, The Many Murders Of Miss Cranbourne, Chase Variant. Lives in South-West London, works from The Union Club on Greek Street, shops at Gosh, Piranha and FP. Father of two daughters. Political cartoonist.
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