Judge Dismisses NRA’s Bankruptcy Petition, Allowing New York AG Lawsuit To Move Forward

Judge Dismisses NRA’s Bankruptcy Petition, Allowing New York AG Lawsuit To Move Forward

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New York (CNN)A federal judge has dismissed the National Rifle Association’s petition for bankruptcy, saying it was filed in “bad faith” in order to avoid litigation by the New York Attorney General Letitia James’ Office, which has sued to dissolve the NRA for allegedly misusing charitable funds.

Tuesday’s decision means the NRA will not have bankruptcy protections, which it has said are needed to protect against a “barrage of litigation” the organization is facing. It also means that the NRA cannot reorganize in the state of Texas without approval from the New York Attorney General’s Office, James said Tuesday. The NRA had requested to be reincorporated in Texas when it filed for bankruptcy, a move hailed by Texas politicians.

In a statement to CNN, the NRA said it will still “pursue establishing business operations in Texas, and the organization will continue to explore moving its headquarters there from Virginia.”

    The decision from Judge Harlin Hale, of the Northern District of Texas, came after a monthlong trial in which NRA attorneys and officials argued that their bankruptcy case should move forward in Texas. James’ office intervened in the case and asked to dismiss the petition, saying the NRA’s decision to file for bankruptcy in Texas and ask to be reincorporated there was a way to “remove the NRA from regulatory oversight.”

      Hale agreed with James’ office’s argument in his ruling issued Tuesday.

        “The Court finds there is cause to dismiss this bankruptcy case as not having been filed in good faith both because it was filed to gain an unfair litigation advantage and because it was filed to avoid a state regulatory scheme,” Hale wrote in his decision.

        Hale also declined to appoint a trustee or examiner to oversee the NRA’s finances.

          “Today’s order reaffirms that the NRA does not get to dictate if and where it will answer for its actions,” James said in a statement. “The rot runs deep, which is why we will now refocus on and continue our case in New York court. No one is above the law, not even one of the most powerful lobbying organizations in the country.”

          Hale declined to dismiss the case with prejudice, meaning the NRA could still decide to file a bankruptcy petition in another venue, but Hale warned that if the NRA chooses to file a new bankruptcy case, his court would immediately take up some of its concerns about “disclosure, transparency, secrecy, conflicts of interest of litigation counsel,” among others, which could lead to the appointment of a trustee to oversee the organization’s affairs. A spokesman for the NRA had no comment when asked by CNN if it plans to file for bankruptcy elsewhere.

          “The NRA will continue to defend the interests of the Association in New York,” William A. Brewer III, an attorney for the NRA, said in a statement to CNN. “Our client has faith in its leadership, and its demonstrated commitment to good governance.”

          Brian Mittendorf, a professor of accounting at Ohio State University who has followed the NRA’s finances for several years, said the ruling has implications for the various lawsuits the NRA is facing, as well as its financial future.

          “In many ways it was a high-risk gambit to think that a bankruptcy court would allow th

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          Judge dismisses NRA’s bankruptcy petition, allowing New York AG lawsuit to move forward

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