Judge Dismisses Nra Bankruptcy Case In Blow To Gun Group
DALLAS A federal judge dismissed the National Rifle Associations bankruptcy case Tuesday, leaving the powerful gun-rights group to face a New York state lawsuit that accuses it of financial abuses and aims to put it out of business.
The judge was tasked with deciding whether the NRA should be allowed to incorporate in Texas instead of New York, where the state is suing in an effort to disband the group. Though headquartered in Virginia, the NRA was chartered as a nonprofit in New York in 1871 and is incorporated in the state.
Judge Harlin Hale said in a written order that he was dismissing the case because he found the bankruptcy was not filed in good faith.
The Court believes the NRAs purpose in filing bankruptcy is less like a traditional bankruptcy case in which a debtor is faced with financial difficulties or a judgment that it cannot satisfy and more like cases in which courts have found bankruptcy was filed to gain an unfair advantage in litigation or to avoid a regulatory scheme, Hale wrote.
His decision followed 11 days of testimony and arguments. Lawyers for New York and the NRAs former advertising agency grilled the groups embattled top executive, Wayne LaPierre, who acknowledged putting the NRA into Chapter 11 bankruptcy without the knowledge or assent of most of its board and other top officers.
LaPierre pledged in a statement to continue to fight for gun rights.
Nra In The News: Is Bankruptcy Justified
Concurrent with its bankruptcy filing, the NRA stupidly made a public statement that it isnt insolvent or bankrupt saying it is in its strongest financial condition in years. This was not a very smart thing to do, as the US Bankruptcy Code is to help insolvent people and companies. That is just begging for a bankruptcy dismissal.
In Canada, in order to do a traditional bankruptcy filing under the Bankruptcy and Insolvency Act , the debtor must be insolvent. The BIA defines an insolvent person as an individual or company who:
- is not bankrupt;
- who lives, carries on business or has assets in Canada;
- whose debts owing to creditors that are provable claims total at least one thousand dollars, and also:
- for any type of reason unable to pay their debts when due;
- has stopped paying liabilities in the regular course as they usually come due; or
- the aggregate of the property is not, at a fair assessment, enough, if sold at a properly conducted sale, to pay off all debts currently or about to become due.
A licensed insolvency trustee should not accept an assignment in bankruptcy from anyone filing bankruptcy from a party whose Statement of Affairs shows they are not insolvent and if accepted, should not be allowed by the Office of the Superintendent of Bankruptcy. A court would certainly not make a Bankruptcy Order in such a situation.
How Does The Pending New York Dissolution Case Affect The Nras Proposed Bankruptcy Reorganization
Incorporation in New York, where the group was founded 150 years ago, means that state regulates the nonprofit and thereby regulates the NRAs finances. During the legal proceedings to dissolve the NRA in New York, the NRA may not transfer its assets. While the NRA could set up a new corporation in Texas, the entitys assets would not be released without consent from New York authorities. The NRA would need the bankruptcy court to have the ability to control the NRAs assets to have a successful reorganization.
In short, given New Yorks laws governing nonprofits, the NRA cannot dissolve without the states blessing. And James responded to the NRAs announcement by expressing her firm opposition to reincorporation in Texas.
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Nra In The News: Why Did The Nra File For Bankruptcy
The National Rifle Association is Americas gun advocacy organization being the gun rights champion of Second Amendment rights. This independent organization promotes the right to bear arms. Last January 15 it filed for bankruptcy. The bankruptcy declaration did not expose that it was in a financial mess. The NRA, which is known for its aggressive efforts to lobby against gun control laws, filed not because of its financial condition, but for a different reason.
In my January 20, 2021 blog titled: NATIONAL RIFLE ASSOCIATION FILES FOR BANKRUPTCY ANNOUNCES PLAN TO MOVE TO TEXAS FOR FREEDOM, I described why it made its voluntary petition bankruptcy filing under Chapter 11 of the United States Federal Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas in Dallas.
In that Brandon Blog, I described why New York Attorney General Letitia James filed a lawsuit looking to dissolve the National Rifle Association, the largest most significant pro-gun organization in the USA. Attorney General James claims the organization with financial misconduct and unlawful conduct including financial abuses, spending millions of dollars on things like personal expenses, personal trips and other questionable expenditures. The purpose of the NRA bankruptcy filing was to dissolve itself in New York State while evading prosecution. It then planned to reincorporate in the State of Texas.
Nra In The News: Judge Dismisses Nra Bankruptcy Case Heightening Risk For Dissolution Of Group
Given the Justice Departments legal challenge to the NRA filing, there needed to be a bankruptcy trial. The controversial NRA has had a rough few years in the media, with everything from their pro-guns stance to their lack of concern about the deaths of American schoolchildren being brought up. However, it seems their woes are not over yet.
NRA in the news arose yet again. Federal Judge Harlin Hale dismisses the NRA Chapter 11 bankruptcy case due to the fact that he viewed the bankruptcy as not filed in good faith. Judge Harlin stated that he believed the NRAs objective in filing bankruptcy is much less like a typical bankruptcy case in which a debtor is faced with financial problems, such as a judgment that it cannot pay off. Rather, it was filed in bad faith like instances in which courts have discovered bankruptcy was filed for gaining an unfair advantage in litigation or to avoid a regulatory scheme.
The ruling followed a lengthy 12-day bankruptcy trial in Dallas, Texas. NRA president, Wayne LaPierre, acknowledged keeping the NRA into Chapter 11 bankruptcy filing secret without the understanding or acceptance of the majority of the groups 76-memberboard of directors as well as various other top officers.
NRA in the news
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In August 2020 New York Attorney General Letitia James A Democrat Sued The Nra Based On Allegations That The Associations Top Executives Diverted Millions Of Dollars For Their Personal Trips
On Friday, the US National Rifle Association , the most powerful gun lobbyist in the country, filed for bankruptcy in an effort to avoid being investigated by New Yorks Attorney General.
The association, which will now reincorporate in Texas, voluntarily filed for bankruptcy under Chapter 11 of the bankruptcy code along with a subsidiary in the US Bankruptcy Court for the Northern District of Texas, Dallas Division. A bankruptcy filed under Chapter 11 is often referred to as reorganisation bankruptcy and allows businesses to stay alive and pay their creditors over time, as per a US government website.
The Nra Bankruptcy: What You Need To Know About The National Rifle Associations Recent Chapter 11 Filing
The National Rifle Association , along with its wholly owned Texas subsidiary, filed for chapter 11 bankruptcy protection on January 15, 2021 in the Bankruptcy Court for the Northern District of Texas.; The case already has presented several threshold issues and challenges that are of interest to both bankruptcy practitioners and the market as a whole.
Background
According to a press release that the NRA issued on the day it filed for bankruptcy, the group is dumping New York, which it describes as a corrupt political and regulatory environment. As a result, the NRA is seeking to utilize bankruptcy procedures to reincorporate in Texas.; New York attorney general Letitia James, who is leading a pending lawsuit against the NRA seeking to dissolve the organization for diverting millions of dollars away from the groups mission, immediately responded with a statement titled: NRAs Financial Status Finally Matches Moral Status: Bankrupt.; The attorney general emphasized that she will not allow the NRA to evade accountability and offices oversight.; As evidenced by the heated statements , the NRAs bankruptcy case is off to a rocky start and is likely to face additional legal challenges along the way as discussed more fully below.
Venue
Good faith filing
Police power exception to automatic stay
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Attorney General James Wins Dismissal Of Nras Fraudulent Bankruptcy Fight For Dissolution To Continue In New York
NRAs Scheme to Avoid Accountability Fails in Federal Court
AG James to Hold Press Call on Decision Shortly, Information to Follow
NEW YORK New York Attorney General Letitia James today scored a major victory in her case against the National Rifle Association when a federal bankruptcy court in Texas rejected the organizations claims of bankruptcy after the NRA sought to reorganize in Texas,;stating, that the NRA did not file the bankruptcy petition in good faith.;Despite its attempts to escape New Yorks jurisdiction, Attorney General James will now continue to pursue her enforcement action against the NRA, in addition to seeking a number of other forms of relief she requested when initially filing her lawsuit last summer.
Weeks of testimony have demonstrated that the NRA and Wayne LaPierre simply filed chapter 11;bankruptcy to avoid accountability, said Attorney General James. This trial underscored that the NRAs fraud and abuse continued long after we filed our lawsuit.;Without a doubt, the board was deceived when bankruptcy language was hidden in Mr. LaPierres contract earlier this year. Todays order reaffirms that the NRA does not get to dictate if and where it will answer for its actions. 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.
Us: National Rifle Association Loses Bankruptcy Bid
A Texas court has rejected the NRA’s bankruptcy case, calling it an attempt to avoid prosecution on fraud charges. The ruling judge said the NRA filing was made to gain “unfair advantage” in litigation.
The US firearms lobbying group, the National Rifle Association , lost its bid to declare bankruptcy on Tuesday, hampering an attempt to avoid a lawsuit in New York.
Federal Judge Harlin Hale issued his decision from Dallas, Texas, saying that the gun rights group had not filed for Chapter 11 protection in good faith, but rather to avoid oversight by New York Attorney General Letitia James.
A successful bankruptcy declaration would have given the NRA an “unfair litigation advantage,” the judge said.
The group filed for bankruptcy in January after the state of New York brought financial fraud and misconduct charges back in August.
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Nra In The News: How Might Bankruptcy Help The Nra Reincorporate
When a person or company makes insolvency filing, that generally stops actual or pending litigation while giving more time to analyze exactly how to manage the financial difficulties. In Canada, the stoppage of lawsuits is called a stay of proceedings. However, in Canada, the stay of proceedings just relates to lawsuits for the collection of a debt.
Litigation, such as the pending lawsuit of the New York attorney general against the NRA, has nothing to do with proving or collecting on a debt. Rather, it is to prove that laws have been broken. My view is that in Canada, if the insolvency filing was not thrown out entirely, such as it was in this case, for sure the government would be able to get leave of the court to either begin or continue its litigation.
So the powerful gun-rights group thought that if it filed its voluntary Chapter 11 bankruptcy petition for bankruptcy protection, it could buy itself the time it needed to dissolve, stop the New York State legal action and then reincorporate in the gun-friendly state of Texas.
NRA in the news
Nra Files For Bankruptcy Says It Will Reincorporate In Texas
- ;The National Rifle Association filed for bankruptcy protection as part of a restructuring plan aimed at moving the influential gun rights group to Texas.
- The filing comes six months after New York state’s attorney general filed a lawsuit seeking to dissolve the NRA for allegedly misappropriating funds.
- AG General Letitia James accuses the organization’s leadership of diverting millions for their own personal use, resulting in a $64 million loss to the NRA.
WASHINGTON ;The National Rifle Association on Friday filed for bankruptcy protection as part of a restructuring plan aimed at moving the influential gun rights group to Texas.
The filing comes six months after New York state’s attorney general filed a lawsuit seeking to dissolve the NRA for allegedly misappropriating funds.
The advocacy group said that it would restructure as a Texas nonprofit to exit from what it described as “a corrupt political and regulatory environment in New York,” where it is currently registered
The NRA, which said it was not financially broke, filed for protection under Chapter 11 in U.S. Bankruptcy Court in Dallas.
In its filing, the group said it has assets of between $100 million and $500 million, and liabilities in the same dollar range.
The NRA’s largest unsecured creditor was its former ad agency Ackerman McQueen, which is owed $1.27 million, according to the filing. The gun group and the ad company have filed contentious lawsuits against one another.
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How Might Bankruptcy Help The Nra Reincorporate
When nonprofits file for bankruptcy, that generally halts pending litigation while providing more time to pay off creditors. But there is an exception for actions by governments, such as the pending lawsuit the New York attorney general filed in 2020. The bankruptcy case could give the NRA more time to proceed with reincorporation by stopping claims from creditors and also allow the bankruptcy court to decide how to distribute and organize the NRAs assets. This shift in decision-making authority for the NRAs assets may help the NRA with its reincorporation efforts.
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New York The National Rifle Association of America, the nation’s foremost gun lobby, has filed for bankruptcy, according to court documents filed Friday in the Northern District of Texas.
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Why Does The Nra Want To Reincorporate In Texas
In seeking reincorporation, the NRA would be changing its legal home and changing which states laws will govern it. Reincorporation would not require the NRA to relocate its main offices, which are in Fairfax, Virginia.
Texas is seen as a pro-gun and debtor-friendly state, and observers believe that it may offer the NRA more protection against claims from its creditors. That is, the NRA may hope that a federal bankruptcy court located in Texas will be more likely to rule in its favor regarding amounts owed to creditors than a New York or Virginia court.
However, the NRA faces significant challenges with both its bankruptcy case and the attempt to reincorporate. The Texas court may throw out the bankruptcy petition or move the bankruptcy case to another location with more substantial ties, such as a court in Virginia or New York.
Another hurdle for the NRA to clear is demonstrating whether the Chapter 11 reorganization it wants to undergo is necessary. If not, the bankruptcy judge could determine this move is a ploy to try to evade New Yorks power to potentially take control of the NRAs assets. The NRA maintains that it filed for bankruptcy in good faith.
What Did The Judge Say
Judge Hale singled out the chief executive of the NRA, Wayne Lapierre, for his lack of input from other members within the organization when filing the bankruptcy claim.
“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,” Hale wrote.
“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,” Hale added. “The court believes it is not.”
LaPierre appeared to accept the decision, saying that the NRA would stay independent “even as we remain in New York to confront our adversaries.”
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Nra In The News Summary
I hope you enjoyed the NRA in the news Brandon Blog post. A bad faith insolvency filing is luckily rare in Canada. However, something like the NRA filing could happen. Canadian courts have the ability to either annul or set aside a filing by a non-insolvent debtor filed for a fraudulent purpose or to misuse the Canadian insolvency system.
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nra in the news
