Trapped in the Valley vault
The Valley Media/DNA bankruptcy ball ping-ponged back and forth a few times in late December and early January (see “Valley of Darkness,” SN&R, December 13). Conflicting “ownership” messages were issued by the skeletal DNA staff to the many beleaguered independent label owners whose CDs are still locked up in a warehouse in Woodland.
On December 6, one such label owner, John Geldbach of Devil Doll Records, got the news by e-mail that he had been hammering DNA for: “They would return my approximately $100,000 worth of product to me.”
Less than two weeks later, a darker e-mail arrived notifying Geldbach just the opposite. It said that the Unsecured Creditors Committee challenged Valley/DNA’s decision to return “consignment” label product, effectively putting a freeze on all shipments back to labels.
The key document that would have averted these ownership issues, the standard contract that DNA gave consignment labels to sign back in happier days, didn’t contain language to indicate the nature of the distribution relationship—simply, that the label owned the product, even if was sitting in the Valley warehouse.
Barring a proper contract, the document these labels needed is one that is a mystery to most indy labels—and was not discussed during the courting and signing with DNA. It is a simple one-page form available from the Secretary of State’s office—the Uniform Commercial Code-1 form—that identifies the security interest of the label owner.
In other words, it lists the CDs as the “collateral” that the debtor (i.e. Valley Media/DNA) is distributing and, most critically, establishes the owner in the case of the debtor’s bankruptcy. Of course, it’s a form that must be filed before a bankruptcy is declared, as Valley did November 20.
As of January 11, DNA consignment record labels received another communiqué, cordially giving them the opportunity by Valley Media/DNA to make a bid to buy their own product back—CDs that were not paid for by Valley/DNA in the first place. According to DNA, “liquidators have informed us they want bids to be a minimum of 25 percent of inventory value.”
D-Day for these little labels is January 30—the day the bankruptcy judge in Wilmington, Delaware, will hear the motion presented by the counsel for the Unsecured Creditor Committee, made up mostly of the major labels and the Hollywood studio home video arms.
They are requesting the court immediately allow the auctioning off to the highest bidder of all of Valley’s assets, including all the locked-up CDs of the tiny indy label. The judge will also hear opposing motions filed by several of the consignment labels. Stay tuned.