Thu 01/21/2021 18:23 PM
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New York state court Judge Joel Cohen today denied a request by the National Rifle Association to dismiss, transfer or stay the lawsuit filed by New York Attorney General Letitia James, alleging the diversion of millions of dollars from the NRA’s charitable mission. The ruling came after oral argument today. Continue reading for our Americas Middle Market team's analysis of the NRA motion to dismiss denial and Request a Trial for access to our coverage of thousands of other stressed/distressed debt situations as well as access to the linked documents.

The lawsuit, which includes Executive Vice President Wayne LaPierre and other executives as defendants, says the defendants failed to manage the NRA’s funds and seeks to dissolve the pro-gun rights group. The case was a main driver for the NRA’s chapter 11 filing. The lawsuit alleges that the individual defendants used “millions upon millions” from NRA reserves for personal use, including trips to the Bahamas, private jets, expensive meals and other private travel. During Wednesday’s first day hearing, the NRA’s counsel said that it is “not afraid” of the New York litigation and was not attempting to escape regulatory supervision.

At the New York court’s request, the attorney general’s office submitted a letter to the state court on Wednesday, Jan. 20, arguing first that the automatic stay was not applicable to the regulatory enforcement action and second that the bankruptcy has no effect on the action with respect to the individual defendants that are not debtors. Though the attorney general said that it respects “the jurisdiction of the Bankruptcy Court over the NRA as a debtor and over its assets while the bankruptcy matters are pending,” it also contended that the state court may exercise its concurrent jurisdiction to decide the applicability of the automatic stay.

The NRA also submitted a letter on Wednesday to address the impact of the NRA’s chapter 11 proceeding, saying that it was available to proceed with the hearing and adjudication of its motion to transfer venue to Albany County and motion to dismiss or stay the action. The NRA added that it “reserves its rights and remedies under the Bankruptcy Code, including its right to apply to the Bankruptcy Court, if appropriate, for any ‘order, process, or judgement that is necessary or appropriate’ to carry out its reorganization,” but did not “intend to make any imminent application” to interfere with today’s oral argument.

Judge Cohen ordered that the defendants answer the complaint by Feb. 22 and set a preliminary conference for March 9 at 11:30 a.m. ET.
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