Diamond Comic Distributors–which filed for bankruptcy in January–has asked the bankruptcy court to allow it to sell its consignment inventory in order to pay off its creditors.
Consignment inventory is stock which the distributor stores but does not own (as opposed to stock which the distributor has purchased from the manufacturer). The distributor then sells the books via retail stores. The manufacturer or publisher does not get paid until the stock is sold at retail–typically receiving 40%-50% of the retail price (the rest going to the retail store and the distributor itself).
Diamond has listed 128 companies for which it currently holds consignment stock. Some of these are tabletop game companies, as well as many comic-book publishers, and include Goodman Games, Green Ronin, and Paizo Publishing. Others include comic-book publishers like Marvel and DC, along with a number of toy companies. Some publishers are saying that they are owed payments for retail sales from late 2024, just prior to Diamond’s bankruptcy filing in January 2025, in addition to having stock currently in Diamond’s possession.
Normally, unsold stock, which still belongs to the publishers, would be returned to them. Diamond has asked the bankruptcy court to allow it to take ownership of that stock and sell it for the benefit of its creditors.
One of Diamond’s biggest creditors is Chase Bank, which will likely be at the top of the priority list of creditors to be reimbursed.
In its filing, Diamond says it is in possession of “significant inventory that was shipped… on a consignment basis” and that “consignors have not satisfied the requirements under applicable law to perfect their interests in this consigned inventory”. Diamond claims that this gives them the right to “transfer title to this inventory free and clear of the consignor’s interests”. Essentially, some important paperwork (a ‘U.C.C.-1 financing statement‘) was not filed by consignment vendors like Marvel, DC, and the tabletop gaming companies mentioned earlier prior to the bankruptcy in January, and this means that they forfeit their rights to the stock in question. Diamond’s filing says “None of the vendors that provided consigned inventory to any of the Debtors filed a U.C.C.-1 financing statement against any of the Debtors prior to the Petition Date.”
Following the closing of the sales of a substantial majority of their assets, the Debtors are in possession of significant inventory that was shipped to the Debtors on a consignment basis.
- The consignors have not satisfied the requirements under applicable law to perfect their interests in this consigned inventory. As further explained below, this give the Debtors the right to transfer title to this inventory free and clear of the consignor’s interests.
- The Debtors accordingly seek to sell or otherwise dispose of the consigned inventory free and clear of the interests, if any, of the consignors.
- To that end, the Debtors seek approval of Consignment Sale Procedures (as described and defined herein) to permit them to market, sell, and/or otherwise dispose of consigned inventory expeditiously, minimizing costs and maximizing recoveries in order to generate the best result for the estates.
UPDATE — Paizo Publishing has announced that its upcoming releases will not be available at major bookstores or at Amazon because the company has stopped shipping products to Diamond. This includes 12 August releases and 10 September releases, such as Starfinder Player Core, Starfinder GM Core, Pathfinder Battlecry, and more.
The court has scheduled a hearing on July 21 to hear objections from the affected vendors. The full list of vendors can be seen below.
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