The week in Diamond: Consignment Group asks for reimbursement; Fisher appeals

Following my massive catch-up post on Diamond Bankruptcy doings on Monday, things have continued to unfold this week. It may just be wishful thinking, but there seems to be an urgency to some of the filings that suggests – to this observer, anyway  – that things are wrapping up, and the players are trying to get their claims in before it all falls apart. At least, the matter of the consignment inventory  – which I will henceforth call “Who Gets the Comics?” – seems to have picked up speed. 

§ Speaking of that inventory, the Consignment Group (Aspen, Black Mask Studios, DSTLRY, Dark Horse, Dynamic Forces/Dynamite, Heavy Metal, Magnetic Press, Massive Publishing, Oni-Lion Forge Publishing, Panini UK, Punk Bot Comics/Alien Books, Titan Publishing, and Vault Comics) filed an OMNIBUS MOTION FOR APPROVAL OF ADMINISTRATIVE EXPENSE CLAIMS. They are also asking for applicable attorneys’ fees and interest. After all everyone else is getting paid, why shouldn’t the creditors?

The claim covers the inventory – ie comic books and so on – that were sold before, during, and after the bankruptcy filings:

The Consignment Group’s Administrative Expense Claims are comprised of (a) 11 U.S.C. §503(b)(9) claims for the value of goods delivered to the Debtor in the twenty (20) days preceding the Petition Date (December 24, 2024 to January 14, 2025); (b) Postpetition goods delivered and unpaid (January 14, 2025 to May 15, 2025); and (c) Postpetition goods delivered and unpaid (May 16, 2025 to December 31, 2025), The Consignment Group has delivered goods for which they have not been paid as set forth below. 

The chart shows a total of $1,698,360.22 in sales that publishers have not been paid for, the majority from Dynamite. 

However, the Consigners point out that this amount may be written off against the value of their inventory. In other words, if they get their inventory back, that value can be applied to the administrative costs. The Group has already been paid $144,000 (from Sparkle Pop for sales after they acquired the company) but that hasn’t been applied to the total yet. 

And of course, there is the matter of all the adversary proceedings (fancy bankruptcy term for a lawsuit) which are wending their way to January 2027 court date. So this is not a final number. 

This seems to this observer to be a way to persuade the trustee to make a deal to get the inventory back to the publishers, instead of selling it to Sparkle Pop. 

§ BUT (there is always a but) the trustee in the case, Morgan W. Fisher, has filed an appeal of the judge’s decision to deny Fisher’s motion to extend the deadline to accept or reject all the contracts, including the consignment agreements. Judge Rice initially denied the motion because it was filed too late – a pretty clear procedural matter. 

This is quite interesting, as it delays everything yet again. The publishers/creditors are claiming that with the Chapter 7 filing, all those contracts are void and they get their stuff back. While the matter is under appeal, obviously, the matter of Who Gets the Comics is still undecided. 

For those still following along (and you are a doughty bunch) it might be interesting to look at the timeline here:

12/16/25: Diamond’s bankruptcy is converted to Chapter 7

12/23/25: Morgan J. Fisher is appointed trustee for the new case. The trustee is essentially a neutral party who looks at what assets remain, sells them off, and distributes the remaining money to creditors. 

1/5/26: Zvi Guttman is hired as lawyer for the trustee, after withdrawing from previously representing NECA in the Chapter 11 case. 

1/9/26: Larry Strauss, CPA is put forth to be hired as accountant for the trustee

2/5/26: Fisher files a motion to employ Stearns, Weaver, Miller, Weissler, Alhadeff & Sitterson, P.A as bankruptcy counsel in the case because of its complexity:

Upon his interim appointment, the Trustee immediately began securing the estate’s assets and books and records and evaluating these cases. He consulted with the Debtors’ counsel, the secured lender’s counsel, the United States Trustee, and other parties in interest to understand the status of the cases upon conversion to chapter 7. As part of his initial assessment, the Trustee engaged Zvi Guttman as general counsel to assist him. The Trustee’s initial determination is that these chapter 7 cases are highly complex and extraordinary; this current Application to employ Stearns Weaver as bankruptcy counsel is the byproduct. 

The Trustee inherited these cases with thirty-five pending adversary proceedings, $47 million (book value) of inventory, tens of millions of dollars of unfiled avoidance litigation, and over 29,000 creditors and parties in interest. This case requires a large, full-service law firm with expertise in both bankruptcy law and commercial litigation and after careful consideration, the Trustee has determined that Stearns Weaver is well-suited to assist the Trustee in his administration of the estates, including the complex commercial litigation related thereto. Simply put, it is the Trustee’s business judgment that retaining Stearns Weaver offers the estates the best opportunity for a meaningful recovery. As set forth below, going forward, Mr. Guttman will transition to serving as local counsel and conflicts counsel as needed. Both Mr. Guttman and Stearns Weaver will coordinate closely to avoid any duplication of efforts.

2/6/26: A big meeting is held with all the relevant parties including Fisher, Chase, Old Diamond, and various creditors. 

2/19/26: Fisher files an emergency motion to extend the deadline to “assume or reject executory contracts related to certain consigned goods.” The filing argues that the Consigners consider rejecting the contracts a termination (They Get The Comics), while Fisher/the debtors consider it merely a breach. So they need more time to prevent the publishers from getting their stuff back.   

In addition, as we noted before, Fisher just needed more time:

While the Trustee has done his best to get up to speed in these chapter 7 cases as quickly as possible, there is no hiding the fact that he inherited converted chapter 11 cases with substantial history and pending litigation. He only became the permanent trustee less than two weeks ago. 

2/25/26: The Consignment Group files a strong objection to the motion to extend, saying, basically, that there is no Diamond anymore, so the contracts are voided, and the Trustee has no jurisdiction to extend them. 

2/25/26: The Ad Hoc Committee also files an objection, calling this a delaying tactic that will rack up yet more legal bills against a non-existent company, and anyway, Diamond hasn’t been living up to the contracts so they are in breach. 

2/26/26: Out of nowhere, Fisher files a proposed settlement agreement between the estate and Sparkle Pop, which it is claimed, will “finally resolve the above captioned bankruptcy estates’ interests in the Consigned Goods, the Distribution Agreements, and the Consignment Litigation (as those terms are defined in the Motion) a component of which is the potential sale and assignment of the estates’ interest therein.” The terms call for selling the inventory to Sparkle Pop for $1 million, plus 75% of the first $1.5 million in sales of the inventory (thats $1,125,000). Considering that the consignment inventory has a book value of $47 million and a retail value of $113 million that seems a bit……low. 

2/26/26: Judge Rice denies the motion to extend on technical ground – it was filed too late.

Upon consideration of the Emergency Motion to Extend Time to Assume or Reject Executory Contracts Related to Consigned Goods [Docket No. 1156] (the “Motion”) filed by the Morgan W. Fisher, the Chapter 7 Trustee, and the Court having held a hearing on February 26, 2026, and considered the objections thereto [Docket Nos. 1163 & 1164], and for the reasons stated on the record at the conclusion of the hearing the Court having determined that the Motion was untimely filed under 11 U.S.C. §§ 348(c) & 365(d), it is, by the United States Bankruptcy Court for the District of Maryland; ORDERED, that the Motion is denied.

3/7/26: The Ad Hoc Committee files a motion to get their consignment stock back due to the termination and breach of the contracts. 

3/11/26: Consignment Group files for administrative expenses. 

3/12/26: Fisher appeals the decision to reject the motion to extend the deadline. 

Clearly, there has been a lot of back-channel negotiating going on here, as well as court ordered mediation – did anything ever come of that? Both the Ad Hoc committee and the Consignment Group are turning up the heat to Get Their Comics Back on the basis of the Chapter 7 terminating the existing agreements. Meanwhile Fisher is trying to delay this decision as long as possible. And although he’s been overwhelmed by the complexity of the case…he’s decided to settle it all by getting $2 million from Sparkle Pop to clear up all the outstanding claims. Do I have that right?

Word on the street is that Judge Rice is fed up with all these shenanigans, but  I guess something is better than nothing where a bankruptcy is concerned. 

It’s worth noting that Fisher has served as trustee in many previous bankruptcy cases. However, this Diamond one is…a doozy. But even so, we could be hurtling towards a resolution, appeal or no.