Sparkle Pop, the Ad Populum company that acquired Diamond Comic Distributors’ comic distribution and toy company assets, has responded to Diamond’s motion on its sales of consignment inventory, alleging that its sales of the inventory were due to lack of action by Diamond, that it had stopped selling consignment inventory prior to Diamond’s motion, and that it has sequestered funds from the sales and is waiting for the bankruptcy court to determine what company or companies to pay for the goods.
The Diamond motion, filed on August 26, asked the court to order Sparkle Pop to stop selling consignment inventory, to pay for what it had sold, and to pay Diamond for fees and damages (see “Diamond Asks Court to Order Sparkle Pop”).
In its objection to Diamond’s motion, Sparkle Pop alleges that Diamond did not remove consignment inventory listings from the website it turned over to Sparkle Pop at closing, and left the consignment inventory co-mingled with the inventory it sold Sparkle Pop in its Olive Branch warehouse, now occupied by Sparkle Pop.
Sparkle Pop’s objection said that once it realized that consignment inventory was being sold, it continued to fill orders out of concern that it would be liable for damages if it did not fill the orders and the value of the inventory declined. It said that it had stopped selling consignment inventory prior to the Diamond motion, and was holding the funds from the sales because it did not know who the court would ultimately determine should be paid for the inventory.
The status of the consignment inventory is very much in dispute, with a hearing scheduled for late this month on one key issue (see “Next Steps on Consignment Inventory”).
Sparkle Pop’s valuation of the inventory sold was higher than the amount in Diamond’s motion: some $1.57 million in inventory, $515,866 of which was received from consignment vendors after closing (Sparkle Pop did not assume any consignment agreements as part of the sale).
Sparkle Pop also noted that it had incurred over $433,000 in shipping and other costs to fulfill the orders, which it argued that Diamond was obligated to pay.
Diamond’s motion “…is nothing short of an attempt to circumvent their ongoing dispute between Debtors and the consigners in hopes that the Court will award debtors damages with respect to the Consigned Inventory prior to any determination that Debtors even hold a valid ownership interest…,” the objection argued.
Both the Ad Hoc Committee of Consignors and The Consignment Group, the two large groups of consignment vendors fighting Diamond’s attempted seizure and sale of their inventory, have filed objections to Diamond’s motion against Sparkle Pop, asking the court to protect proceeds of the sales until the dispute over ownership is resolved.
Source: ICv2
