National Rifle Association of America – Files Chapter 11 to Protect Against NYAG Efforts to Dissolve NRA; “Dumps” New York State in Favor of Texas

Register, or to view the article

January 15, 2021 – The National Rifle Association of America and one affiliated Debtor (the “NRA” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Northern District of Texas, lead case number 21-30085. The Debtors, a not-for-profit, tax exempt organization with a "mission to uphold Second Amendment rights," are represented by Patrick J. Neligan, Jr of Neligan LLP. Further board-authorized engagements include Brewer, Attorneys and Counselors ("BAC") as special counsel.

At filing, the Debtors note between 200 and 1,000 creditors; estimated assets between $100.0mn and $500.0mn; and estimated liabilities between $100.0mn and $500.0mn. Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) Ackerman McQueen, Inc  ($1.3mn disputed trade claim, (ii) Membership Marketing Partners LLC ($962k trade claim) and (iii) Gould Paper Corporation ($856k trade claim).

Highlights

  • NRA to "Dump" New York State, Reincorporate in Texas
  • Chapter 11 used to "seek protection from New York officials" 
  • Move comes as response to NYAG's November 2020 suit to dissolve NRA
  • NRA Intends to continue actions against NYAG and New York Governor Andrew Cuomo
  • Chapter 11 Plan to provide "for payment in full of all valid creditors’ claims"

Goals of the Chapter 11 Filing

In a press release announcing the Chapter 11 filings, the Debtors provide: "The NRA….will restructure the Association as a Texas nonprofit to exit what it believes is a corrupt political and regulatory environment in New York.

To facilitate its strategic plan and restructuring, the NRA and one of its subsidiaries filed voluntary chapter 11 petitions in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division.

The restructuring plan aims to streamline costs and expenses, proceed with pending litigation in a coordinated and structured manner, and realize many financial and strategic advantages….The NRA will propose a plan that provides for payment in full of all valid creditors’ claims. The Association expects to uphold commitments to employees, vendors, members, and other community stakeholders."

“Under this plan, the Association wisely seeks protection from New York officials who it believes have illegally weaponized their powers against the NRA and its members,” says William A. Brewer III, counsel to the NRA in those cases.

Transfer from New York and NYAG Lawsuit

The press release continues: “The NRA plan, which involves utilizing the protection of the bankruptcy court, has the Association dumping New York and organizing its legal and regulatory matters in an efficient forum. The move comes at a time when the NRA is in its strongest financial condition in years.

The Association will seek court approval to reincorporate the Association in the State of Texas – home to more than 400,000 NRA members and site of the 2021 NRA Annual Meeting in Houston.

By exiting New York, where the NRA has been incorporated for approximately 150 years, the NRA abandons a state where elected officials have weaponized the legal and regulatory powers they wield to penalize the Association and its members for purely political purposes.

In the summer of 2018, then New York Attorney General candidate Letitia James vowed that, if elected, she would use the powers of her office to investigate the 'legitimacy” of the NRA. 

Without a shred of evidence to support the claim, she called the Association a 'terrorist organization' and a 'criminal enterprise.' As promised, she commenced an 'investigation' upon being elected to the Office of NYAG and, predictably, filed a lawsuit seeking to dissolve the NRA just prior to the November 2020 national election."

The Debtors’ CEO & EVP Wayne LaPierre commented: “Obviously, an important part of this plan is ‘dumping New York.’ The NRA is pursuing reincorporating in a state that values the contributions of the NRA, celebrates our law-abiding members, and will join us as a partner in upholding constitutional freedom. This is a transformational moment in the history of the NRA."

NRA Suit Against NYAG and New York State

Again, the press release: "The NRA filed a lawsuit in August 2020 against the NYAG similar to its lawsuit against New York Governor Andrew Cuomo and the New York State Department of Financial Services, filed in 2018. The NRA pursues the defendants for attempting to 'blacklist' the organization and its financial partners in violation of their First Amendment rights. The NRA will continue those legal actions.

About the Debtors

According to the Debtors: “Established in 1871, the National Rifle Association is America’s largest and oldest civil rights organization. Approximately five million members strong, NRA continues its mission to uphold Second Amendment rights and is the leader in firearm education and training for law-abiding gun owners, law enforcement and the military."

Read more Bankruptcy News