A federal judge dismissed on Tuesday a bankruptcy case by the National Rifle Association that would have allowed it to reorganize as a nonprofit in gun-friendly Texas, dealing a blow to the gun rights group that is facing a lawsuit in New York that could put it out of business.
The NRA filed for Chapter 11 bankruptcy in January and announced it planned to move to Texas. But legal experts said 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 for decades and aimed to put the group out of business.
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Republican state officials, including Gov. Greg Abbott, had welcomed the NRA's plan to relocate, emphasizing the state's business and gun-friendly environment and embracing the gun rights group's stance that it was fleeing a "toxic political environment" in New York.
But after a hearing that lasted 11 days, 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 filing was less like a "traditional bankruptcy case" 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," he wrote.
Though a successful bankruptcy may not have ended the New York attorney general's enforcement actions, Hale added, they could have taken away the attorney general's ability to dissolve the nonprofit, which would have given the NRA a distinct litigation advantage.
While the NRA's headquarters and much of its operations are in Fairfax, Virginia, the group was chartered as a nonprofit in New York and is incorporated in the state.
The group's CEO Wayne LaPierre said in a statement that while the NRA was disappointed in some aspects of the decision, it remains committed to its members and its future.
"We remain an independent organization that can chart its own course, even as we remain in New York to confront our adversaries," LaPierre said. "The NRA will keep fighting as we've done for 150 years."
Hale said the NRA’s conduct during the case continued to give him concern. He cited secrecy and a lack of transparency from the group’s leaders, including LaPierre, who filed for bankruptcy without the knowledge or support of most of the group’s board and top officers. LaPierre he kept the move a secret to prevent leaks from the group’s 76-member board, which is split in its support of him.