Court Battles

Judge dismisses NRA bankruptcy filing

A judge on Tuesday dismissed the National Rifle Association’s (NRA) bankruptcy case, ruling that the organization cannot use the bankruptcy code to relocate from New York, where it faces a lawsuit, to Texas, a more gun-friendly state.

“The question the Court is faced with is whether the existential threat facing the NRA is the type of threat that the Bankruptcy Code is meant to protect against. The Court believes it is not,” U.S. Judge Harlin Hale wrote in the decision

“The Court finds there is cause to dismiss this bankruptcy case as not having been filed in good faith both because it was filed to gain an unfair litigation advantage and because it was filed to avoid a state regulatory scheme,” Hale added.

With this decision, the gun rights advocacy group will remain incorporated in New York.

“The NRA remains committed to its members and our plan for the future,” NRA CEO and Executive Vice President Wayne LaPierre said in a statement to The Hill.

LaPierre said the group is “disappointed in some aspects of the decision” but added that “there is no change in the overall direction of our association, its programs, or its Second Amendment advocacy.”

“We remain an independent organization that can chart its own course, even as we remain in New York to confront our adversaries. The NRA will keep fighting, as we’ve done for 150 years,” LaPierre added.

The organization filed for bankruptcy in January and planned to reincorporate in Texas. The plan, it said at the time, “involves utilizing the protection of the bankruptcy court.”

The NRA said it was leaving “what it believes is a corrupt political and regulatory environment in New York.”

The NRA’s legal action followed an August lawsuit from New York Attorney General Letitia James (D), which called for dissolving the organization.

The lawsuit alleged that the group violated state law government nonprofit organizations, which contributed to a loss of more than $64 million over three years.

Earlier this month, James’s office had argued in court that the NRA declared bankruptcy specifically to avoid oversight, calling for the case to be dismissed.

James praised the ruling in a statement, writing, “No one is above the law.”

“Weeks of testimony have demonstrated that the NRA and Wayne LaPierre simply filed chapter 11 bankruptcy to avoid accountability,” James added.

“This trial underscored that the NRA’s fraud and abuse continued long after we filed our lawsuit. Without a doubt, the board was deceived when bankruptcy language was hidden in Mr. LaPierre’s contract earlier this year. Today’s order reaffirms that the NRA does not get to dictate if and where it will answer for its actions,” she continued.

“The rot runs deep, which is why we will now refocus on and continue our case in New York court. No one is above the law, not even one of the most powerful lobbying organizations in the country,” James concluded.

The court dismissed the case without prejudice, meaning the NRA can try to file for bankruptcy again in the future. Hale wrote, however, that the court would “immediately take up some of its concerns about disclosure, transparency, secrecy, conflicts of interest of officers and litigation counsel, and the unusual involvement of litigation counsel in the affairs of the NRA.”

He added that these circumstances could lead to the appointment of a trustee “out of concern that the NRA could not fulfill the fiduciary duty” as required by the bankruptcy code. The trustee, according to Reuters, would oversee the organization’s affairs.

On a press call following the court’s decision, James said her office will continue with its lawsuit in New York that calls for the dissolution of the NRA.

James said the lawsuit is in the discovery period, which extends until the early part of next year. A trial will not be held until “some point in time in 2022,” James said.

The attorney general said her office is seeking relief, including the dissolution of the NRA, the removal of LaPierre from the group’s leadership, full restitution “to the tune of tens of millions of dollars” for donors, and barring the four named current and former NRA executives, including LaPierre, from ever serving on the board of a charity in New York State.

James said the “only reason why” the NRA filed for bankruptcy in New York was because it was “afraid of” dissolution.

“This process has basically confirmed what we knew all along, and that is that this petition was not filed in good faith, but instead was filed in an effort to gain an unfair advantage and to avoid the regulatory authority of our office,” James said.

“There are individuals and officers who are using the NRA as their personal piggy bank, and they need to be held accountable,” she added.

Gun control organization Moms Demand Action slammed the NRA in a statement following the court’s decision, writing that the ruling painted “the clearest picture yet” of an organization that prioritizes its executives over rank-and-file members.

“The testimony, evidence, and resolution of the trial have further damaged what little is left of the NRA’s reputation, painting the clearest picture yet of a non-profit organization that prioritized extravagant perks and insider payments to its executives at the expense of its rank-and-file members,” Shannon Watts, founder of Moms Demand Action, said in a statement.

John Feinblatt, the president of Everytown for Gun Safety, reacted to the court’s decision, writing in a statement that the ruling is a “huge gain for the gun safety movement.”

“Today’s disastrous decision for the NRA shows that they can’t even file for bankruptcy correctly, which doesn’t bode well for the many lawsuits and investigations they must now face,” Feinblatt said.

“The NRA was forced to hang its dirty laundry out for the world to see, and has nothing to show for it but another stack of legal bills. Their loss is a huge gain for the gun safety movement, and for the vast majority of all Americans who want stronger gun safety laws,” he added.

Updated at 6:19 p.m.

Tags Bankruptcy Lawsuit National Rifle Association NRA
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