IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN .

2y ago
14 Views
2 Downloads
716.78 KB
41 Pages
Last View : 16d ago
Last Download : 2m ago
Upload by : Lilly Andre
Transcription

Case 21-30085-hdh11 Doc 156 Filed 02/12/21Entered 02/12/21 16:34:29Page 1 of 41IN THE UNITED STATES BANKRUPTCY COURTFOR THE NORTHERN DISTRICT OF TEXASDALLAS DIVISIONIN RE:NATIONAL RIFLE ASSOCIATIONOF AMERICA and SEA GIRT LLC,Debtors.1§§§§§§CASE NO. 21-30085-hdh-11CHAPTER 11Jointly AdministeredTHE STATE OF NEW YORK’S MEMORANDUM OF LAWAND BRIEF IN SUPPORT OF MOTION TO DISMISS,OR, IN THE ALTERNATIVE, TO APPOINT CHAPTER 11 TRUSTEEGerrit M. PronskeState Bar No. 16351640Eric M. Van HornState Bar No. 24051465Jason P. KathmanState Bar No. 24070036SPENCER FANE LLP2200 Ross Avenue, Suite 4800 WestDallas, TX 75201(214) 750-3610 – Telephone(214) 750-3612 – Telecopier-and5700 Granite Parkway, Suite 650Plano, TX 75024(972) 324-0300 – Telephone(972) 324-0301 – TelecopierEmail: gpronske@spencerfane.comEmail: ericvanhorn@spencerfane.comEmail: jkathman@spencerfane.comCOUNSEL FOR THE PEOPLE OFTHE STATE OF NEW YORK, BYLETITIA JAMES, ATTORNEY GENERALOF THE STATE OF NEW YORKJames SheehanPro Hac ViceEmily SternPro Hac ViceMonica ConnellPro Hac ViceStephen ThompsonPro Hac ViceOFFICE OF THE ATTORNEY GENERAL OFTHE STATE OF NEW YORK28 Liberty StreetNew York, NY 10005(212) 416-8401Email: James.Sheehan@ag.ny.govEmail: Emily.Stern@ag.ny.govEmail: Monica.Connell@ag.ny.govEmail: Steven.Thompson@ag.ny.govCOUNSEL FOR THE PEOPLE OFTHE STATE OF NEW YORK, BYLETITIA JAMES, ATTORNEY GENERALOF THE STATE OF NEW YORKThe last four digits of the Debtors’ taxpayer identification numbers are: 6130 (NRA) and 5681 (Sea Girt). TheDebtors’ mailing address is 11250 Waples Mill Road, Fairfax, Virginia 22030.1

Case 21-30085-hdh11 Doc 156 Filed 02/12/21Entered 02/12/21 16:34:29Page 2 of 41TABLE OF CONTENTSTABLE OF CONTENTS .Error! Bookmark not defined.TABLE OF AUTHORITIES . iiiPRELIMINARY STATEMENT . 1BACKGROUND . 2I.The NYAG’s Regulatory Enforcement Action. 2II.The NRA’s Attempts and Failure to Delay and Prevent Litigation of the NYAGEnforcement Action in the NY State Court . 4A. The NRA attempts to litigate counterclaims to the NYAG Enforcement in theNorthern District of New York . 4B. The NRA attempts, and fails, to. 4C. The NRA attempts, and fails, to move the NYAG Enforcement Action to theUnited States District Court for the Northern District of Texas through theJudicial Panel on Multidistrict Litigation. . 5III.The NRA’s Bankruptcy Petition to “Primarily” Avoid the NYAG’s EnforcementAction . 6IV.New York’s Regulation of the Dissolution of New York Charities . 8ARGUMENT AND AUTHORITIES . 9I.The Debtor’s Cases Should Be Dismissed for Cause Because They Were NotFiled in Good Faith . 9A. Lack of good faith as a basis for dismissal. . 9B. The Debtor’s cases were filed to obtain a litigation advantage. . 12II.Alternatively, the Court Should Appoint a Chapter 11 Trustee. . 15A. Cause exists to appoint a Chapter 11 trustee under 11 U.S.C. § 1104(a)(1). . 17B. Appointment of a trustee is also appropriate under § 1104(a)(2) . 33CONCLUSION . 34BRIEF IN SUPPORT OF MOTION TO DISMISS, OR, IN THE ALTERNATIVE APPOINT CHAPTER 11TRUSTEE – PAGE iiDA 2056220.7

Case 21-30085-hdh11 Doc 156 Filed 02/12/21Entered 02/12/21 16:34:29Page 3 of 41TABLE OF AUTHORITIESCasesCitizens United v. Schneiderman,882 F.3d 374 (2d Cir. 2018) . 32Commodity Futures Trading Comm’n v. Weintraub,471 U.S. 343 (1985) . 17Matter of Elmwood Dev.,964 F.2d 508 (5th Cir. 1992) . 11,12In re 1031 Tax Group, LLC,374 B.R. 78 (Bankr. S.D.N.Y. 2007) . 18In re Antelope Techs., Inc.,431 Fed. Appx. 272 (5th Cir. 2011) . 13In re Art Midwest, Inc.,No. 04-91225-RFN-11, 2006 WL 306894 (Bankr. N.D. Tex. Jan. 5, 2006) . 11In re Bibo, Inc.,76 F.3d 256 (9th Cir. 1996) . 20In re Cajun Elec. Power Co-op, Inc.,69 F.3d 746 (5th Cir. 1995) . 18In re Cedar Shore Resort, Inc.,235 F.3d 375 (8th Cir. 2000) . 11,12In re Delta Ag Grp., LLC,596 B.R. 186, (Bankr. W.D. La. 2019) . 12In re Evans,48 B.R. 46 (Bankr. W.D. Tex. 1985) . 18,31,36In re G-I Holdings, Inc.,385 F.3d 313 (3d Cir. 2004) . 19In re Humble Place Joint Venture,936 F.2d 814 (5th Cir. 1991) . 10In re Ionosphere Clubs, Inc.,113 B.R. 164 (Bankr. S.D.N.Y. 1990) . 36BRIEF IN SUPPORT OF MOTION TO DISMISS, OR, IN THE ALTERNATIVE APPOINT CHAPTER 11TRUSTEE – PAGE iiiDA 2056220.7

Case 21-30085-hdh11 Doc 156 Filed 02/12/21Entered 02/12/21 16:34:29Page 4 of 41In re Liberate Techs.,314 B.R. 206 (Bankr. N.D. Cal. 2004) . 16In re Little Creek Dev. Co.,779 F. 2d 1068 (5th Cir. 1986) . 10In re Marvel Entm’t Group, Inc.140 F.3d 463 (3d Cir. 1998) . 18,19,37In re Mirant,No. 03-46590, 2005 WL 2148362 (Bankr. N.D. Tex. Jan. 26, 2005) . 14In re Patman Drilling Int’l, Inc.,No. 07-34622-SGJ, 2008 WL 724086 (Bankr. N.D. Tex. 2008) . 18In re Professional Accountants Referral Svcs., Inc.,142 B.R. 424 (Bankr. D. Color. 1992) . 20In re PRS Insurance Group, Inc.,274 B.R. 381 (Bankr. D. Del. 2001). 20In re SGL Carbon Corp.,200 F.3d 154 (3d Cir. 1999) . 14,15,16In re Sharon Steel Corp.,871 F.2d 1217(3d Cir. 1989) . 18,19,20In re Sherwood Enterprises, Inc.,112 B.R. 165 (Bankr. S.D. Tex. 1989) . 12In re Silberkaus,253 B.R. 890 (Bankr. C.D. Cal. 2000) . 14Investors Group, LLC v. Pottorff,518 B.R. 380 (N.D. Tex. 2014) . 13Pipkins-Thomas v. United States,223 Fed. Appx. 310 (5th Cir. 2007) . 11Statutes11 U.S.C. § 1104(a)(1) . 1711 U.S.C. § 1112(b)(1) . 9,1211 U.S.C. § 1112(b)(2) . 1311 U.S.C. §1112(b)(4) . 9EPTL § 8-1.9 . 32N-PCL § 715 . 33BRIEF IN SUPPORT OF MOTION TO DISMISS, OR, IN THE ALTERNATIVE APPOINT CHAPTER 11TRUSTEE – PAGE ivDA 2056220.7

Case 21-30085-hdh11 Doc 156 Filed 02/12/21Entered 02/12/21 16:34:29Page 5 of 41N-PCL § 715-a . 32, 33N-PCL § 907-a . 8N-PCL § 907-b . 8N-PCL § 1001(d)(3) . .9N-PCL § 1008(a)(15) . 9N-PCL § 1115(a). 9BRIEF IN SUPPORT OF MOTION TO DISMISS, OR, IN THE ALTERNATIVE APPOINT CHAPTER 11TRUSTEE – PAGE vDA 2056220.7

Case 21-30085-hdh11 Doc 156 Filed 02/12/21Entered 02/12/21 16:34:29Page 6 of 41TO THE HONORABLE HARLIN D. HALE,CHIEF UNITED STATES BANKRUPTCY JUDGE:The People of the State of New York, by Letitia James, Attorney General of the State ofNew York (“NYAG”), a party in interest in the above-referenced bankruptcy case, hereby submitthis Memorandum of Law and Brief (“Brief”) in Support of Motion to Dismiss, or, in theAlternative, Appoint Chapter 11 Trustee (“Motion”). In support of the Motion, the NYAGrespectfully states as follows:PRELIMINARY STATEMENT1.The NYAG asks this Court to dismiss these bankruptcy cases as having been filedin bad faith pursuant to 11 U.S.C. § 1112. In the alternative, the NYAG asks that the Court to orderthe appointment a Chapter 11 trustee pursuant to 11 U.S.C. § 1104(a). Such relief is called forgiven the extraordinary facts present here.2.The National Rifle Association of America, Inc. (“NRA”) seeks bankruptcyprotection while claiming to be solvent and “in its strongest financial condition in years.” It invokesthe jurisdiction of this Court while publicly proclaiming that it filed its petition because it is“dumping New York,” “utilizing the protection of the bankruptcy court,” and “organizing its legaland regulatory matters in an efficient forum,” essentially fleeing or seeking an end run around apending regulatory enforcement action in New York (“NYAG Enforcement Action”).3.The NRA’s bankruptcy petition, and that of its wholly-owned shell company SeaGirt LLC (“Sea Girt”), established in Texas three months ago as a toehold for these proceedings,were signed by the NRA’s highest officer, Executive Vice President, Wayne LaPierre(“LaPierre”). LaPierre is himself charged in the NYAG Enforcement Action with having“exploited the organization for his financial benefit, and the benefit of a close circle of NRA staff,board members, and vendors,” engaging in extensive self-dealing and corruption, and undertakingBRIEF IN SUPPORT OF MOTION TO DISMISS, OR, IN THE ALTERNATIVE APPOINT CHAPTER 11TRUSTEE – PAGE 1DA 2056220.7

Case 21-30085-hdh11 Doc 156 Filed 02/12/21Entered 02/12/21 16:34:29Page 7 of 41efforts “to intimidate, punish, and expel anyone at a senior level who raised concerns about hisconduct.” LaPierre is accused of looting the NRA, yet he has made the determination and signedthe petitions in an effort to use the bankruptcy court to remove the NRA from regulatory oversight.The NYAG respectfully submits that the NRA’s conduct in filing this bankruptcy while claimingsolvency and seeking to evade regulatory oversight is in bad faith such that dismissal under 11U.S.C. § 1112 is appropriate under well-settled law.4.Further the NYAG Enforcement Action sets forth extensive allegations ofpervasive and persistent illegal conduct by the NRA and the individual defendants therein,including LaPierre and current Secretary and General Counsel John Frazer (“Frazer”). The actionhas survived motions to dismiss, as well as multiple efforts by the NRA to halt or transfer it, andis now in discovery. Based upon the facts alleged in the NYAG Enforcement Action, includingthose set forth below, and given the demonstrated dishonesty, fraud, and gross mismanagement bythe NRA’s current management, including LaPierre and Frazer, if these bankruptcy cases are notdismissed, appointment of a trustee is appropriate under 11 U.S.C. § 1104(a).BACKGROUNDI.The NYAG’s Regulatory Enforcement Action.5.On August 6, 2020, after a fifteen-month-long investigation that involved theexamination of numerous witnesses, including current and former NRA officers and employees,and review of tens of thousands of documents, the NYAG commenced the action styled People ofthe State of New York, by Letitia James, Attorney General of the State of New York v. The NationalRifle Association of America, Inc., et. al. Index No. 451625/2020. The 163-page VerifiedComplaint (“NYAG Enforcement Complaint”) filed in the Supreme Court of the State of NewYork (the “NY State Court”) presents detailed factual allegations of pervasive illegal conduct atBRIEF IN SUPPORT OF MOTION TO DISMISS, OR, IN THE ALTERNATIVE APPOINT CHAPTER 11TRUSTEE – PAGE 2DA 2056220.7

Case 21-30085-hdh11 Doc 156 Filed 02/12/21Entered 02/12/21 16:34:29Page 8 of 41the NRA that, when taken together, reflect a system of widespread misuse of assets by LaPierreand his circle of insiders for their own private benefit. Inadequate internal controls, weak financialmanagement systems easily susceptible to override, and lack of appropriate Board oversight leadto tens of millions of dollars being diverted away from the NRA’s charitable mission andaccordingly the reduction in expenditures for core program services. Further, the NRA consistentlyignored, and in some cases retaliated against, those who raised concerns about its operation andfinances, including members of its finance staff, multiple board members, and one former NRAPresident.26.As a result of the persistent violations of law alleged in the NYAG EnforcementAction, the NYAG asserted eighteen (18) distinct causes of action against both the NRA andcertain individual defendants, including LaPierre, Frazer, Wilson Phillips, and Joshua Powell.3The NYAG Enforcement Complaint seeks the following forms of relief: restitution of fundsimproperly paid to current and former officers, which will be returned to the NRA; a ban on certaincurrent and former officers, including LaPierre and Frazer, from serving as fiduciaries of any NewYork charity; voiding of certain transactions; and, if a court determines that it is in the best interestof the NRA’s members and the public, the dissolution of the NRA, in which case the NRA’srestricted assets will be distributed to organizations pursuing a mission similar to the one the NRApurports to pursue.2See generally NYAG Enforcement Complaint, attached as Exhibit 1 to the Appendix in Support of the New YorkAttorney General’s Motion to Dismiss, or in the Alternative, to Appoint Chapter 11 Trustee (“Appendix”). All pagenumber citations for the Appendix refer to the “Appx.” number stamped in the bottom right hand corner.3Wayne LaPierre, Wilson Phillips, John Frazer, and Joshua Powell shall be collectively referred to as the “IndividualDefendants.”BRIEF IN SUPPORT OF MOTION TO DISMISS, OR, IN THE ALTERNATIVE APPOINT CHAPTER 11TRUSTEE – PAGE 3DA 2056220.7

Case 21-30085-hdh11 Doc 156 Filed 02/12/21II.Entered 02/12/21 16:34:29Page 9 of 41The NRA’s Unsuccessful Attempts to Interfere with Litigation of the NYAGEnforcement Action in the NY State Court.7.As of the January 15, 2021 petition date herein (“Petition Date”), the NRA hadcommenced two other federal proceedings and made multiple motions in an effort to avoidlitigating the merits of the NYAG Enforcement Action in NY State Court. Those efforts have beenrejected by two courts, while a third court considers the NYAG’s fully briefed motion to dismiss.The NRA attempts to litigate counterclaims to the NYAG EnforcementAction in the Northern District of New York.8.On August 6, 2020, hours after the NYAG Enforcement Action was commenced,the NRA filed a countersuit against the NYAG in the United States District Court for the NorthernDistrict of New York (“NDNY Action”).4 In the NDNY Action, the NRA asserts claims, interalia, under the First and Fourteenth Amendments arising out of the NYAG’s investigation andrequest for dissolution in the NYAG Enforcement Action. The NYAG’s motion to dismiss thatfederal action was fully briefed as of January 4, 2021.The NRA attempts, and fails, to “remove” the NYAG Enforcement Actionthrough motions to change venue and dismiss.9.In addition to filing the NDNY Action, the NRA sought to prevent the NYAGEnforcement Action from proceeding in NY State Court with various procedural challengesdesigned to transfer the NYAG’s state law claims to federal court.10.Six days after the Petition Date, on January 21, 2021, the NY State Court held ahearing on the NRA’s motions, and after hearing the arguments of the parties, denied the NRA’srequests to dismiss, transfer, or stay the NYAG Enforcement Action in their entirety.5 The NYState Court held: “[T]his is an action by New York’s Chief Law Enforcement Officer pursuant to4See National Rifle Association of America v. Letitia James, Case No, 20-cv-00889, currently pending before theUnited States District Court for the Northern District of New York.5Appendix Exhibit 2 at 235-50, which contains a true and correct copy of the transcript of the hearing held on January21, 2021 in the NYAG Enforcement Action.BRIEF IN SUPPORT OF MOTION TO DISMISS, OR, IN THE ALTERNATIVE APPOINT CHAPTER 11TRUSTEE – PAGE 4DA 2056220.7

Case 21-30085-hdh11 Doc 156 Filed 02/12/21Entered 02/12/21 16:34:29Page 10 of 41her supervisory authority over a New York not-for-profit corporation for violation of New Yorklaw. . . . I’m not aware and the parties have not cited any case applying forum non conveniens tomove a case from a state court to a federal court in the same state. And that is not what forum nonconveniens is about.”6 The court concluded, “it would be inappropriate, in these circumstances, tofind that the Attorney General cannot pursue her claims in state court because one of the defendantswould prefer to proceed in federal court.”7 Discovery is now proceeding in that action.The NRA attempts, and fails, to move the NY

brief in support of motion to dismiss, or, in the alternative appoint chapter 11 trustee – page 1 da 2056220.7 to the honorable harlin d. hale, chief united states bankruptcy judge:

Related Documents:

May 02, 2018 · D. Program Evaluation ͟The organization has provided a description of the framework for how each program will be evaluated. The framework should include all the elements below: ͟The evaluation methods are cost-effective for the organization ͟Quantitative and qualitative data is being collected (at Basics tier, data collection must have begun)

Silat is a combative art of self-defense and survival rooted from Matay archipelago. It was traced at thé early of Langkasuka Kingdom (2nd century CE) till thé reign of Melaka (Malaysia) Sultanate era (13th century). Silat has now evolved to become part of social culture and tradition with thé appearance of a fine physical and spiritual .

On an exceptional basis, Member States may request UNESCO to provide thé candidates with access to thé platform so they can complète thé form by themselves. Thèse requests must be addressed to esd rize unesco. or by 15 A ril 2021 UNESCO will provide thé nomineewith accessto thé platform via their émail address.

̶The leading indicator of employee engagement is based on the quality of the relationship between employee and supervisor Empower your managers! ̶Help them understand the impact on the organization ̶Share important changes, plan options, tasks, and deadlines ̶Provide key messages and talking points ̶Prepare them to answer employee questions

Dr. Sunita Bharatwal** Dr. Pawan Garga*** Abstract Customer satisfaction is derived from thè functionalities and values, a product or Service can provide. The current study aims to segregate thè dimensions of ordine Service quality and gather insights on its impact on web shopping. The trends of purchases have

UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF NEW YORK ECF NEWSLETTER . 14 (347) 394 "Go Live Day" January 19, 2021 . United States Bankruptcy Court . Eastern District of New York . Conrad B. Duberstein United States Bankruptcy Courthouse . 271-C Cadman Plaza East, Suite 1595 . Brooklyn, NY 11201-1800 -1700 press 6. United States .

Mar 02, 2021 · LOCAL RULES OF BANKRUPTCY PRACTICE LR 1001. TITLE AND SCOPE OF RULES. (a) Title. These are the Local Rules of Bankruptcy Practice of the United States Bankruptcy Court, District of Nevada. This part governs cases and proceedings before the United States Bankruptcy Court of this D

LOCAL BANKRUPTCY RULES FOR THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF MONTANA Honorable Benjamin P. Hursh Chief United States Bankruptcy Judge