What Diamond’s Chapter 7 filing might mean, and digging into those billable hours

Today marks yet another courtroom showdown in the Diamond Bankruptcy case. By the time you’re reading this, a hearing will be underway in the chambers of the Honorable Judge David E. Rice to convert Diamond’s Chapter 11 to a Chapter 7 bankruptcy. That it will be so ordered seems a foregone conclusion, and then we start a whole new process…but my understanding is that this may be a better outcome for publishers in both the Consignment Group (Aspen, Black Mask, DSTLRY,  Dynamite Entertainment, Heavy Metal, Magnetic Press, Massive Publishing, Oni, Panini UK, Alien Books, Graphic Mundi, Titan, Vault, and Dark Horse) and the Ad Hoc Committee( Ablaze, American Mythology, Avatar, Battle Quest, Action Lab, Drawn & Quarterly, Fantagraphics, Green Ronin, Hermes Press, Living the Line, Paizo, UDON and Zenescope) – both groups have been fighting to get their consignment inventory back from Diamond.

I’m told that under a Chapter 7 the goal will be to liquidate all assets as quickly as possible. While publishers were trying to get their inventory back via the mediation process this was taking a long time and the asking price was higher than expected. Under Chapter 7 they might be able to buy it back at a much lower price. Fingers crossed. 

Also, hard to believe but Sparkle Pop is still involved in this mess: the consignment inventory is stored in the Olive Branch warehouse which Sparkle Pop is now running, and they are charging storage fees, as we’ll get to below. 

But before we get to that, Brett Schenker at Graphic POlicy unearched a few more tidbits:  Diamond has won its adversary cases against three publishers who failed to file a response within the stated time. 

Digital Manga Inc., Netcomics, and Valiant all had judgement by default ordered against them on December 5, 2025. The three publishers didn’t respond to the court within the 30 days they are required to do so. That resulted in Diamond asking for the judgement in October. The three publishers could have numerous reasons to do so, such as the value of the inventory is less than what they’d need to pay a lawyer, something Diamond could have been counting on.

Diamond is now free to sell the inventory if they choose.

There were quite a few filings yesterday, the most interesting of which was from the Ad Hoc committee, objecting to some of the stipulations in Diamond’s motion to convert to Chapter 7. Not the actual conversion, but some of the language. I’ll boil it down although the actual filing is quite easy to understand. 

• The first objection was to the 14 day time frame to file an objection to the Final Fee Applications of the various lawyers and administrators – they simply want more time. 
• The Ad Hoc committee also objected to a $193,250 payment to to “KEIP/KERP” recipients. KEIPs (Key Employee Incentive Plans) and KERPs (Key Employee Retention Plans) are aimed at keeping key personnel during a restructure but as the Ad Hoc Committee points out…..Diamond no longer has any employees. “Given that the Debtors have no current employees, are not operating businesses, and are about to convert, paying nearly $200,000 to key employees seems both imprudent and unnecessary.”
• They also object to a $375,000 payment to the professionals involved, given that the case is in a state of flux due to the conversion. “While the professionals employed by the Debtors’ estate may be entitled to receive compensation, without the benefit of an appointed trustee who can better understand their current financial position, the magnitude of administrative claims, and the Debtors’ ability to make such a payment, the Consignors object to these payments at this time.”
• Yet another objection is to $128,286 for  “Nov Storage Fees – Consignment.” And here’s the juicy part: “It is the Consignors’ understanding that Sparkle Pop, LLC (“Sparkle Pop”) has underreported the amount of sales made on account of consigned stock that was ordered by the Debtors and delivered post-petition. (Sparkle Pop has filed declarations that report sales of goods on hand as of May 15, 2025, but has failed to report sales activity for goods received after that date.) Furthermore, Sparkle Pop may owe additional sums to the Debtors that have not been paid, since the Budget indicates that “Sparkle Pop incentive Payment due 12/17/25 – not factored into Adjusted Ending Balance.” If the Debtors have an amount that should offset what is due to Sparkle Pop for rent, they should not pay nearly $130,000 to Sparkle Pop until those amounts are reconciled. Furthermore, like the professional fees, rent payments would be an administrative claim that should not be paid until a trustee is appointed and administrative solvency is established.” 
• Finally, the Ad Hoc Committee objects to the automatic stay on all the the lawsuits and adversary proceedings, since “as stock continues to sit subject to Debtors’ claims, some of the stock loses value each and every day. Rather than maintaining any status quo, a continued stay benefits only the Debtors and the DIP Lender, while it harms each and every consignor that is a counterparty to these pending adversary proceedings. Moreover, Sparkle Pop is in possession and control of this stock, and while it has agreed to stop selling the stock, the Debtors are NOT under any agreement with Sparkle Pop and have no knowledge as to whether the storage conditions and security of the warehouse containing the stock are being addressed sufficiently by Sparkle Pop.” 

As you can see, Sparkle Pop still seems to have some part to play in this. And all the evidence we’ve seen is that they are not the most cooperative people. 

In a surreal reminder of just how bad this bankruptcy case has become, yesterday several applications for compensation from some of the biggest administrative participants were filed. It is painful reading. For instance Saul Ewing, Old Diamond’s lawyer, filed his November expenses, which came to $168,179.20. His total fee to date (after a 20% reduction) is $3,792,189.60. I know lawyers are expensive and that’s how expensive.

Even more bizarre is the compensation report from Getzler Henrich & Associates, the firm handling the bankruptcy administration under restructuring officer Robert Gorin. Their November bill comes to $215,141.50 and another $4,924.93 for things like flying in to the November 19th hearing, and taking an Uber to the train station. Normal stuff. But then there are the billables. Oh the billables. Here is just a teeny, tiny excerpt of a two day period.

I know this is how business works but it’s so absurd. On November 7th, Ramy Aly, who does much of the paperwork in the case, spent all of 12 minutes preparing for a weekly bank update, for which Getzler Henrich billed $129. Anyone who ever held an office job knows that “preparing” means they opened a file. And then probably Casey stopped by and asked what Ramy thought of Frankenstein, and he lost his train of thought. Later that day he got back to it and spent two hours and six minutes actually reconciling the accounts. Given that other filings show that Old Diamond has no income and no employees, two hours seems like a long time to go over things, but maybe he got distracted by thinking about how excellent Jacob Elordi was in Frankenstein and pondering whether Elordi would get an Oscar nomination. (OK, I’m making some jokes, but I’m sure Ramy Aly is a diligent worker.)

And so on and so on. Getzler Henrich is definitely a top firm when it comes to administering bankruptcies, and a quick search shows many cases where they were involved. Granted these were small cases and not the astonishing mess that is the Diamond Bankruptcy so it’s hard to make any comparisons, but let’s just say their billable hours were far less.

And Robert Gorin is very good at what he does. He was just named Co-Executive Director of Getzler Henrich, succeeding the actual Getzler and Henrich who founded the company.

We’ll keep our ear to the ground regarding today’s hearing. There’s probably only two or three more years of this to go.