A federal judge in Dallas ruled on Tuesday that the National Rifle Association cannot use bankruptcy to reorganize in gun-friendly Texas, dealing a serious blow to the influential gun rights group’s effort to avoid a lawsuit in New York seeking its dissolution.
U.S. Bankruptcy Judge Harlin Hale said the NRA did not file for Chapter 11 protection in good faith, but rather did so to avoid oversight by New York Attorney General Letitia James and gain an “unfair litigation advantage” over her.
In dismissing the bankruptcy bid, Hale singled out Wayne LaPierre, the NRA’s longtime chief executive, for criticism.
James sued the NRA last August, accusing it of corruption and misspending. Her lawsuit said the NRA diverted millions of dollars to fund luxuries for officials including LaPierre and awarded lucrative contracts to associates and relatives of senior officials.
Closely aligned with Republicans including former President Donald Trump, the NRA has long been instrumental in thwarting Democratic-backed gun control measures in the U.S. Congress.
Hale assailed LaPierre for deciding without input from others inside the NRA to put it into bankruptcy.
“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.”
Hale ruled after a 12-day trial, which ended on May 3.
The NRA did not immediately respond to requests for comment. LaPierre and the group have denied wrongdoing.
James, a Democrat, welcomed Hale’s decision.
“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 wrote on Twitter.
Hale’s dismissal is without prejudice, meaning the NRA can try again to file for bankruptcy. But the judge said problems in how the group is managed could lead to the appointment of a trustee to oversee its affairs.
The NRA had filed for Chapter 11 in January, with a goal of reincorporating in Texas and escaping what it called a corrupt political and regulatory environment in New York, where the group was founded in 1871.
LaPierre testified during the trial that he put the NRA into bankruptcy because he feared James would try to put it into receivership.
The NRA has also faced internal upheaval in recent years, including an effort to oust LaPierre over alleged mismanagement.
Texas is a Republican-dominated state whose leaders are friendly to the NRA’s positions on gun rights.
James and former NRA advertising agency Ackerman McQueen have said the bankruptcy was filed in bad faith and to escape New York’s oversight, with a lawyer for James calling the bankruptcy a “circus sideshow” during closing arguments.
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.
A spate of mass shootings in the United States this year prompted Biden in April to call gun violence “a national embarrassment.”
The Democratic president has taken some gun control steps by executive action and has called for broader measures that would require congressional passage including banning military-style assault weapons and large-capacity ammunition magazines. read more
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