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NRA Bankruptcy Fight

NRA Bankruptcy Fight

(Shutterstock photo)

The NRA has always liked being the central spokesman of the gun rights community and it has never liked the spotlight taken off of it. Well, that attitude finally caught up to them and Wayne LaPierre when the New York Attorney General filed a civil suit against them citing gross financial mismanagement last August. Now, the NRA and its leadership are locked in a virtual death match with the organization's future on the line. So many gun owners are rightfully nervous on what the future holds, which is why many were overjoyed by the recent announcement that the NRA was leaving to New York for Texas. Yet, sadly, they are using rose-colored glasses as they ignore the Chapter 11 Bankruptcy part of this process and the ensuing legal hurdles to see that this is far from over. It’s a mess more tangled than a bowl of cooked spaghetti. In pursuit of the truth we will help provide a clearer picture of what is transpiring.

Now the first thing to make clear to people is that the NRA is not going to be moving the physical part of their operation to Texas if everything goes in their favor with the court rulings. The organization's headquarters will still remain in Virginia along with its staff. Like its current situation, with its relationship to New York State, the NRA would simply be operating as a non-profit corporation under Texas state laws for non-profit groups. The major reason for why the NRA didn't make this move years sooner is that NY laws are what's currently shielding Wayne LaPierre and company from criminal prosecution. Otherwise, the state's hostile attorney general's office would have filed such charges.

Upon consulting with a few sources, including legal contacts, this whole bankruptcy and relocate strategy likely serves two main goals for LaPierre. The first is that this could have been offered as the best strategy by his legal team for him to maintain his control as they saw the NY court battle going horribly wrong while the second, if correct, is more deceptive. The NRA likely needs more money for its war chest in this fight and only some major statement of defiance, like moving to Texas, would get the blindly tribal members to open up their wallets even more to provide that much needed cash.

The latter concept is pretty straight forward as you need money, so your attorney can keep filing motions and at least delay if not find the right argument to win the case. While the first point will require a lengthier road map to understand.

The underlying foundation of the Chapter 11 bankruptcy filing is to first attempt to halt the NY state civil suit. In 28 U.S.C. Subsection 1452, the bankruptcy laws, the federal court does have the authority to halt any civil proceedings against the corporation in question. However, that is at the discretion of the federal judge. In the meantime, the NY civil courts are not letting go and denied the NRA's motion to dismiss the civil case pending the bankruptcy outcome. It will take some time so it’s very possible that the NRA can still suffer from rulings out of New York if allowed to move to Texas, especially since the civil suit specifically names LaPierre and three others.

Complicating the matter is that Dave Dell'Aquila, a major NRA donor, will likely file his own complaint to the same bankruptcy court (Northern District of Texas in Dallas) to prevent the NRA from discharging a significant amount of debt, over $60 million, which is part of the fraud allegations. He's allowed to do this because the NRA filed for bankruptcy in the first place. Now Chapter 11 focuses around allowing the company to restructure, but it still requires that the company show it has become significantly financially stressed. Stressed to the point that continuing under its current obligations will lead to possible ruin! That's a point we will get back to later. Dell'Aquila could be the first of many members that could get involved in the bankruptcy case and create a third faction in this fight that could easily hinder the current leadership from getting what they want.

Moving to Texas is not at all a done deal. The first major hurdles are establishing that it’s a proper venue and that this filing is in good faith (paraphrasing legal terms). A company in one state under the purview of one court district can't just file anywhere. The NRA is using an affiliate to establish that it can file in this district. The listed affiliate is Sea Girth, LLC and only recently came into existence in late November 2020. Strangely, in a required document, a Form 204, a listing of outside creditors is not present. That would suggest their sole customer is the NRA. Along with that is a meager listing of assets provide a thin and dubious basis for the next portion, good faith. If the judge disagrees he could dismiss the case, he even could bounce the filing to the Southern District of New York (NYC) for them to handle the case. That would definitely not be an improvement.

Even after all that, there are still are pitfalls remaining based on the circumstances of the civil case. As mentioned earlier there is an issue revolving around the $60 million associated with claims of fraud. It has been claimed by both the NYAG and by Dell'Aquila. If the judge decides these claims have merit, he can also decide to change the filing from Chapter 11 to Chapter 7 and appoint a trustee to operate the corporation with final authority and investigate said fraud claims while the trustee will maintain privilege for the organization that would not extend to LaPierre himself.

This is just a streamlined overview of the situation and there are many other facets of bankruptcy law and case precedent that could come into play. Until all the chips of this drawn out affair fall into place, it’s a complete gamble to try to predict the outcome of this power struggle. The only thing for certain is that until the services of the Brewer law firm are no longer required, they will be undisputed winner of this contest. They will walk away with millions in fees all paid for by the NRA membership. The clear loser here is the 2nd Amendment as this will deplete both energy and resources for its defense in the current administration. So, everyone can just stay tuned to the dueling updates that both sides put out in the meantime as they will make for quite the spectacle of this unnecessary tragedy.

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