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NRA Examiner Motion

posted by Adam Levitin

As I predicted, things were not going to go so smoothly for the National Rifle Association in bankruptcy. Today, the Hon. Phillip Journey, a Kansas state judge who was recently elected to the NRA's board of directors, filed an examiner motion in the case. There are some bombshells in Judge Journey's motion, including that the NRA board was never informed of the bankruptcy filing or the creation of the venue-hook subsidiary! 

That cause me to go back and look at the NRA's bankruptcy petition. There's no board authorization of the filing attached! Instead, there's an authorization by the NRA's special litigation committee. The special litigation committee's purported authority to file the NRA for bankruptcy is language in its enabling resolution about undertaking actions to "reorganize or restructure the affairs of the Association". Is that a grant of authority for a chapter 11 filing? I'm skeptical. I would have expected express language about filing "for bankruptcy under title 11 of the United States Code" or the like. "Reorganize or restructure the affairs" could include a lot of things other than bankruptcy, and given the importance of bankruptcy for corporate governance, this doesn't seem like the sort of power to be given by implication. 

February 8, 2021 at 1:16 PM

Comments

Looking at the bylaws. Article 6, section 2, forbids the executive committee to change the bylaws, change the nature of the organization, so it’s real estate, or create a merger with another corporation. Article 11, section 5, says no special or standing committee may exercise of power forbidden to the executive committee. It sounds like this special committee on litigation has no power to do the things that will be necessary to achieve the plan. See also article 16, requiring elaborate measures before the articles of incorporation can be changed.

Posted by: Ron Cole | February 08, 2021 at 04:20 PM

I haven't looked at the bylaws, but it's starting to sound like the Gang that Couldn't Shoot Straight...

Posted by: Adam Levitin | February 08, 2021 at 04:23 PM

In consumer cases, bankruptcy courts routinely hold that a general financial power of attorney that authorizes any and all actions is insufficient to allow a bankruptcy filing unless that is explicitly allowed

Posted by: Ed Boltz | February 08, 2021 at 05:19 PM

I was a NRA Director from 1991 to 2000. The EVP (Wayne) and the staff treated the Directors individually and when on Board Committees like the proverbial mushrooms.

Posted by: Joe Olson | February 11, 2021 at 11:10 PM

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