NY AG seeking Dissolution: A bridge too far?

On August 6, 2020, the New York Attorney General Letitia James filed a complaint against the NRA seeking restitution from officers and directors, removal of officers and directors, and the dissolution of the nonprofit organized in New York in 1871. While it looks like few think the suit for restitution and removal wrong, many are criticizing the AG for bringing the dissolution action.

I think she was right to bring the dissolution action, but I doubt a court will grant it, and I think that is all fine.

The AP provided a good rundown of the case and immediate reactions.

Last year when leadership in the NRA was in disarray and widely predicting that the misuse of the nonprofit by its officers and directors could lead to its dissolution, I wrote that this was highly unlikely:

"At the same time, I think it’s possible that the New York authorities investigating the group might remove officers and members of its 76-member board of directors. There is even a slight possibility, as NRA CEO Wayne LaPierre warned in a fundraising letter, that New York authorities could cause the NRA “to shut down forever.” But I doubt it."

Ruth Marcus has questioned the NY AG.

The NRA has filed a lawsuit challenging the AG action on many grounds including first amendment grounds, defamation, and procedural grounds trying to nullify the dissolution action. Asher Stoker has a nice tweet thread explaining why the procedural effort was unlikely to work. The NY AG amended its complaint to comply with the strict requirements of filing a dissolution.

The AG lays out the basis for dissolution on page 138-39 of the complaint:

562. Under N-PCL § 112(a)(5), the Attorney General is authorized to maintain an action or special proceeding to dissolve a corporation under Article 11 (Judicial dissolution).
563. Under N-PCL § 1101(a)(2), the Attorney General may bring an action seeking the dissolution of a charitable corporation when “the corporation has exceeded the authority conferred upon it by law, or … has carried on, conducted or transacted its business in a persistently fraudulent or illegal manner, or by the abuse of its powers contrary to public policy of the state has become liable to be dissolved.”

Here is the N-PCL. 

Many question the AG's partiality because she is a Democrat and so vocally stated she would investigate the NRA during her campaign, and called it a terrorist organization.

I encourage everyone to read the complaint. When you read the allegations of a long running, substantial, and extensive fraud on the members of the NRA, I am left wondering when the AG may use the dissolution provision that is in New York nonprofit law, if she does not use it now. 

Importantly, and I think interestingly for the process, the New York statute states that the AG “may” bring a dissolution action under these circumstances. But, the judge then still has to decide. 

N-CPL 1109 tells the judge what to take into consideration. It says:

(a) In an action or special proceeding under this article if, in the court's discretion, it shall appear that the corporation should be dissolved, it shall make a judgment or final order dissolving the corporation.

(b) In making its decision, the court shall take into consideration the following criteria:

(1) In an action brought by the attorney-general, the interest of the public is of paramount importance.

(2) In a special proceeding brought by directors or members, the benefit to the members of a dissolution is of paramount importance.

(c) If the judgment or final order shall provide for a dissolution of the corporation, the court may, in its discretion, provide therein for the distribution of the property of the corporation to those entitled thereto according to their respective rights.  Any property of the corporation described in subparagraph one of paragraph (c) of section 1002-a (Carrying out the plan of dissolution and distribution of assets) shall be distributed in accordance with that section.

It seems to me that the appropriate way for this process to play out is for the AG to bring the dissolution action. She should present the evidence for that claim. It may be that the power structure associated with what we consider the NRA today is so impossibly entangled with the wrongdoers that it would be impossible for the NRA to be reformed to actually further the mission of the NRA. If that is the case, dissolution is the answer. I am just skeptical that this is the answer. 

Though I do not believe in the same ideological beliefs that the NRA seeks to further, I do believe a robust defense of the Second Amendment should be a part of American life. I think the large membership is entitled to an organization that honestly and fairly furthers that mission. I believe we are better off in a world where the folks that believe in that right have good representation. Because of that, I find it hard to believe it will be impossible to reform the entity with that substantial membership in mind. That said, I think it possible the AG could prove her case. I think she should be allowed the respect to bring that forward. I think we will be better for it, including especially those who are conservatives. AG James is insisting on a rule of law. We should all be grateful to her for that commitment.

I shared my general thoughts with BBC World Tonight on the day the complaint was filed. You can listen to those starting at about 27:45 in on this link.

Many have wondered whether the NRA can just move out of New York to avoid the problem. The NY AG has the direct answer by tweet. No.

It is also worth watching the DC AG complaint against the NRA Foundation. 

If you want a deep and rich understanding of the matter of the NRA I highly recommend the Gangster Capitalism podcast on the NRA.

By Philip Hackney