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Newly Bankrupt and Texan, but NRA Can’t Duck New York Lawsuit

The powerful gun-rights group learned Thursday that overcoming the dissolution suit brought by New York’s attorney general will take more than filing for bankruptcy and uprooting from the Empire State.

MANHATTAN (CN) — Seeking a fresh start six months after New York officials targeted it for dissolution, the tax-exempt National Rifle Association announced last week that it filed for Chapter 11 protection in Texas.

The NRA said it pulled up stakes from New York, where it was first chartered in 1871, for reincorporation in the Lonestar State to get away from a “toxic political environment.”  

If not toxic, the surroundings here have certainly been litigious for the lobbying group after New York Attorney General Letitia James accused it in August of turning a blind eye to decades of executives looting that diverted tens of millions of dollars from the NRA’s charitable mission and into the “personal piggy bank” of the group’s president and CEO Wayne LaPierre and others.

With that case underway in Manhattan Supreme Court, James’ office wrote to the judge Wednesday for an assurance that the dissolution proceedings will remain on track. 

The letter notes that the individual defendants to the state’s suit are not debtors in the NRA’s bankruptcy case, and it says that the automatic stay that the bankruptcy petition effectuated is not applicable to a regulatory matter like dissolution.

"Any moneys the attorney general recoups will be returned to the NRA or, upon a judicial dissolution, used in accordance with donor intent or with Court direction and approval for a purpose substantially similar to the mission of the NRA," Assistant Attorney General James Sheehan wrote. 

Following a two-hour hearing on Thursday, Justice Joel Cohen of the New York County State Supreme Court ordered that the case continue right where it is.

"It would be inappropriate to find that the attorney general couldn't pursue her claims in state court just because one of the defendants wants to proceed in federal court," Cohen said. 

Rejecting the NRA’s claim of inconvenient venue, the judge noted that the NRA chose to sue Manhattan, before him in fact, in 2019 when it accused its former president Oliver North of a conspiracy. “So it didn’t seem terribly inconvenient to litigate in New York City at that point,” he said. 

Attorney General James applauded the judge’s decision. 

“Today’s order reaffirms what we’ve known all along: the NRA does not get to dictate if and where they will answer for their actions,” she said in a statement Thursday afternoon.  

The NRA had pushed to have the case put on hold, dismissed outright or moved to Albany, where the 150-year-old group claims to have been incorporated. It says the group has other pending litigation in New York’s Northern District, and that the state’s case against it is a political one, with James even telling Ebony magazine in 2018 that the NRA was a “terrorist organization.”

“The NRA is fighting for its very existence,” NRA attorney Sarah Rogers said on Thursday.

“To the extent that there’s any ambiguity,” she added, “why not let us fight for our existence in the place that we chose?”

The hearing on Thursday was conducted remotely by videoconference due to the ongoing Covid-19 pandemic. 

According to the 16-page Chapter 11 filingin Dallas, the NRA says it has hundreds of creditors, with up to $500 million each in assets and liabilities.

Despite not having offices in Texas, the NRA asserted in the Chapter 11 filing that the venue is appropriate based on the domicile of an affiliate it formed in November 2020, Sea Girt LLC. 

The group says it has “no immediate plans” to relocate its headquarters from Fairfax, Virginia, outside Washington, but is forming a special committee to investigate further. 

Assistant Attorney General Sheehan said on Thursday he expects the New York case to go to trial early next year. 

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