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Signage for the National Rifle Association
(Bloomberg) -- The National Rifle Association of America must face a fraud lawsuit by New York's attorney general, who is seeking to dissolve the gun rights organization, after a state judge denied its request for a dismissal.
New York State Supreme Court Justice Joel M. Cohen started a hearing on Thursday by saying he would proceed with various motions, including the one to get the case thrown out, another to move it from state court in Manhattan to federal court in Albany, and a third to put a temporary hold on it. Cohen said he would move ahead even though the NRA has filed for bankruptcy.
"It is not the exclusive province of the bankruptcy court" to make that determination, he said.
"I would not be proceeding unless I was confident, based on my own research, that there were reasonable grounds to do so," Cohen said.
Read More: NRA Seeks to Escape N.Y. Pressure by Filing Bankruptcy in Texas
New York Attorney General Letitia James alleges that the NRA diverted charitable donations for years to enrich its top executives in violation of laws governing nonprofits. The case, filed in August amid a power struggle between former NRA president Oliver North and longtime leader Wayne LaPierre, may pose one of the biggest legal threats the NRA has faced since its founding in New York in 1871.
Bankruptcy Wrinkle
The NRA has called the suit a baseless, premeditated attack on the Second Amendment that was timed to have maximum impact during the election cycle.
James had argued in a letter on Wednesday for the case to go forward, even though bankruptcy filings often result in litigation against a debtor being put on hold. A letter by the NRA suggested it might seek a stay later but agreed to go forward with Thursday's hearing.
The NRA "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 judgment that is necessary or appropriate' to carry out its reorganization," the group wrote.
Read More: N.Y. Seeks to Dissolve NRA With Claims of Financial Fraud
Addressing the group's request to move the case to federal court, its attorney Jennifer Rogers said at Thursday's hearing that the NRA is "locked in multiple federal lawsuits" with the state.
'Lurid Allegations'
The NRA itself has a suit pending against New York in federal court in Albany, accusing regulators of illegally targeting it for political reasons. In court on Thursday, Rogers said the state had brought its case with "unprecedented fanfare" and making "lurid allegations."
New York argued that state court is the best place for a lawsuit by the state's attorney general enforcing state charity laws.
The NRA also said that one of its lawyers, Carl Liggio, who was rushed to the hospital with Covid-19 last week, has died.
The fraud case is New York v. National Rifle Association of America, 451625/2020, New York Supreme Court, New York County (Manhattan). The bankruptcy case is National Rifle Association of America, 21-30085-11, U.S. Bankruptcy Court for the Northern District of Texas (Dallas).
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