After a week-long trial, a federal judge in Dallas on Tuesday dismissed the National Rifle Association’s bid to declare bankruptcy and reorganize as a nonprofit in Texas. The decision will force the influential pro-gun organization to face a formidable lawsuit in New York.
The group filed for chapter 11 bankruptcy in January at the direction of the NRA’s Executive Vice President and Chief Executive, Wayne LaPierre, though the move came as a surprise to members of the organization’s board of directors and top officials.
At the time the decision was announced, LaPierre wrote in a letter to members: “Today, the NRA announced a restructuring plan that positions us for the long-term and ensures our continued success as the nation’s leading advocate for constitutional freedom – free from the toxic political environment of New York. The plan can be summed up quite simply: We are DUMPING New York, and we are pursuing plans to reincorporate the NRA in Texas.”
Legal experts, however, have weighed in and argued that the announcement was more a legal maneuver to avoid an aggressive lawsuit by New York Attorney General Letitia James than a physical relocation. In August, James had accused NRA leaders of fraudulently using the group’s funds “years of illegal self-dealings” that funded a “lavish lifestyle” and aimed to put the group out of business.
Describing the NRA’s filing as resembling cases “in which courts have found bankruptcy was filed to gain an unfair advantage in litigation or to avoid a regulatory scheme,” U.S. Bankruptcy Judge Harlin Hale in Dallas said he was dismissing the case because the NRA had not filed its bankruptcy proceedings in good faith.
“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,” Hale wrote. “The NRA is a solvent and growing organization using this bankruptcy as a tool to win its dissolution lawsuit, and that is not an appropriate use of bankruptcy.”
“What concerns the Court most though is the surreptitious manner in which Mr. LaPierre obtained and exercised authority to file bankruptcy for the NRA. Excluding so many people from the process of deciding to file for bankruptcy, including the vast majority of the board of directors, the chief financial officer, and the general counsel, is nothing less than shocking,” the Northern District of Texas judge wrote.
In a statement, LaPierre said, “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.”
The ruling paves the way for the New York case to proceed.
“The NRA does not get to dictate if and where it will answer for its actions, and our case will continue in New York court,” James tweeted. “We sued the @NRA to put an end to its fraud and abuse, and now we will continue our work to hold the organization accountable.”