Board Thread:Questions and Answers/@comment-2037710-20140818081831/@comment-1173941-20140818190646

I think it was explained something like, Killing someone in a party will give you some of their items, but the party has a pool of items that they picked up while in that party, and these items go to the last survivor, until he dies and drops them.

So Leafa's group in Episode 16 had farmed items from killing mobs, before the salamander party attacked. The players that died probably lost a couple items (as well as skill progression) but the items they gained while in that party were saved in a pool, until only Leafa was left. After retutning to Swilvaine, she gave the items to Recon.