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Federal Judge Dismisses NRA Bankruptcy Case; ‘Not in Good Faith’

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Article first appeared on Ammoland.com

U.S.A. –-(AmmoLand.com)- A federal bankruptcy judge in Texas has handed the National Rifle Association a stinging defeat in the organization’s effort to leave New York State, where it has been incorporated since 1871, and relocate in Texas.

The ruling by Judge Harlin Hale sets the stage for New York State Attorney General Letitia James to move ahead with her lawsuit that seeks to dissolve the association, according to Bloomberg News. The ruling came after 11 days of trial in Texas. Earlier this year, NRA filed for bankruptcy, telling members that it was part of a strategy to relocate to the Lone Star State.

But Judge Hale noted in the closing lines of his 38-page ruling, “The Court finds that the NRA did not file the bankruptcy petition in good faith because this filing was not for a purpose intended or sanctioned by the Bankruptcy Code.”

Judge Hale added, “The Court is not dismissing this case with prejudice, but should the NRA file a new bankruptcy case, this 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, which could cause the appointment of a trustee out of a concern that the NRA could not fulfill the fiduciary duty required by the Bankruptcy Code for a debtor in possession.”

James filed her lawsuit last August, asserting NRA had diverted millions of dollars “to fund luxuries for officials including long time Chief Executive Wayne LaPierre,” Reuters reported.

NRA spokeswoman Amy Hunter provided AmmoLand News with the following statement via email:

“The NRA remains committed to its members and our plan for the future,” says NRA CEO & EVP Wayne LaPierre. “Although we are disappointed in some aspects of the decision, there is no change in the overall direction of our Association, its programs, or its Second Amendment advocacy. Today is ultimately about our members – those who stand courageously with the NRA in defense of constitutional freedom. 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.” 

The judge explained upfront in his ruling, “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. For the reasons stated herein, 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. The Court further finds the appointment of a trustee or examiner would, at this time, not be in the best interests of creditors and the estate.”

The NRA has been under fire for more than two years, beginning with what has been described as an “attempted coup” at the annual members’ meeting in Indianapolis in 2019. There was a shakeup at the top, with then-NRA President Lt. Col. Oliver North departing, and LaPierre surviving the alleged coup.

As noted by Reuters, “President Joe Biden’s administration opposed the NRA in the trial. The Justice Department’s bankruptcy watchdog, the U.S. Trustee, urged Hale to dismiss the bankruptcy.”

Biden would like nothing better than a damaged NRA, which has been his major speed bump over the years as he backed or championed various gun control efforts. Biden brags that he “beat the NRA twice” on gun control issues, and he is now pushing an anti-gun agenda that includes a ban on so-called “assault weapons” and “high capacity magazines.”

While James made several allegations in her August 2020 lawsuit, NRA has fired back, counter-suing and asserting the legal action is politically motivated.

During a conference call with the media, James asserted, “The NRA continues to engage in mudslinging but the reality is the rot runs deep.”

She told reporters she intends to pursue the legal action, which is now in the discovery phase and that will continue into early next year. There will then be a trial and she repeatedly stated her intent to seek restitution, and that could include dissolution of the organization.

LaPierre and NRA have denied any wrongdoing, a fact Reuters was careful to include in its coverage.

It is not clear what NRA’s next move will be. Judge Hale left the door open for the association to file a new bankruptcy case.

Back on Jan. 15, in an open letter to NRA members, LaPierre contended, “You know that our opponents will try to seize upon this news and distort the truth. Don’t believe what you read from our enemies. The NRA is not ‘bankrupt’ or ‘going out of business. The NRA is not insolvent. We are as financially strong as we have been in years.”

But with Judge Hale’s ruling, James can now become more aggressive. The road ahead could be rocky for the 150-year-old gun safety organization, which even now should not be underestimated.

About Dave Workman

Dave Workman is a senior editor at TheGunMag.com and Liberty Park Press, author of multiple books on the Right to Keep & Bear Arms, and formerly an NRA-certified firearms instructor.

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