People v. Nat'l Rifle Ass'n of Am., Inc.

• Decision Date: 02 March 2022
• Docket Number: Index No. 451625/2020
• Citation: 74 Misc.3d 998,165 N.Y.S.3d 234
• Parties: The PEOPLE of the State of New York, BY Letitia JAMES, Attorney General of the State of New York, Plaintiff, v. The NATIONAL RIFLE ASSOCIATION OF AMERICA, INC., Wayne LaPierre, Wilson Phillips, John Frazer, Joshua Powell, Defendants.
• Court: New York Supreme Court

74 Misc.3d 998
165 N.Y.S.3d 234

The PEOPLE of the State of New York, BY Letitia JAMES, Attorney General of the State of New York, Plaintiff,
v.
The NATIONAL RIFLE ASSOCIATION OF AMERICA, INC., Wayne LaPierre, Wilson Phillips, John Frazer, Joshua Powell, Defendants.

Index No. 451625/2020

Supreme Court, New York County, New York.

Decided on March 2, 2022

165 N.Y.S.3d 238

Counsel for Plaintiff Letitia James, Attorney General of the State of New York: Jonathan D. Conley, Yael Fuchs, Stephen Thompson, Erica James, NYS OFFICE OF THE ATTORNEY GENERAL, 28 Liberty Street, New York, New York 10005

Counsel for Defendant NRA: William A. Brewer III, Sarah B. Rogers, Mordecai Geisler, David J. Partida, BREWER, ATTORNEYS & COUNSELORS, 750 Lexington Avenue, 14th Floor, New York, New York 10022

Counsel for Defendant John Frazer: William B. Fleming, GAGE SPENCER & FLEMING LLP, 410 Park Avenue, Suite 810, New York, New York 10022

Counsel for Defendant Wayne LaPierre: P. Kent Correll, CORRELL LAW GROUP, 250 Park Avenue, 7th Floor, New York, New York 10177

Joel M. Cohen, J.

74 Misc.3d 1003

The Attorney General's allegations in this case, if proven, tell a grim story of greed, self-dealing, and lax financial oversight at the highest levels of the National Rifle Association. They describe in detail a pattern of exorbitant spending and expense reimbursement for the personal benefit of senior management, along with conflicts of interest, related party transactions, cover-ups, negligence, and retaliation against dissidents and whistleblowers who dared to investigate or complain, which siphoned millions of dollars away from the NRA's legitimate operations.

The Attorney General's Complaint seeks restitution and other monetary relief from four current and former NRA officers (to be repaid to the NRA), as well as their removal from NRA employment and permanent injunctions against serving as officers, directors, or trustees of any not-for-profit or charitable organization incorporated or authorized to conduct business or solicit charitable contributions in New York. However, the Complaint's boldest claims target the NRA itself. Despite elsewhere

165 N.Y.S.3d 239

casting the organization as the victim of its executives’ schemes, the Attorney General seeks an order "[d]issolving the NRA and directing that its remaining assets and any future assets be applied to charitable uses consistent with the mission set forth in the NRA's certificate of incorporation."

The NRA and two of the four Individual Defendants (Wayne LaPierre and John Frazer) now move to dismiss all claims asserted against them in the Complaint. For the reasons described in this decision, Defendants’ motions are granted as to the first,

74 Misc.3d 1004

second, sixteenth, and eighteenth causes of action in the Complaint, but are otherwise denied. In summary:

The Attorney General's claims to dissolve the NRA are dismissed. Her allegations concern primarily private harm to the NRA and its members and donors, which if proven can be addressed by the targeted, less intrusive relief she seeks through other claims in her Complaint. The Complaint does not allege that any financial misconduct benefited the NRA, or that the NRA exists primarily to carry out such activity, or that the NRA is incapable of continuing its legitimate activities on behalf of its millions of members. In short, the Complaint does not allege the type of public harm that is the legal linchpin for imposing the "corporate death penalty." Moreover, dissolving the NRA could impinge, at least indirectly, on the free speech and assembly rights of its millions of members. While that alone would not preclude statutory dissolution if circumstances otherwise clearly warranted it, the Court believes it is a relevant factor that counsels against State-imposed dissolution, which should be the last option, not the first.¹

The Attorney General's remaining claims against the NRA and the Individual Defendants for violations of the Not-For-Profit Corporations Law ("N-PCL"), the Estates Powers and Trusts Law ("EPTL"), and the Executive Law are sustained. Two other claims — common law unjust enrichment and violation of the Prudent Management of Institutional Funds Act, which seek essentially the same financial relief as other claims — are dismissed on statutory grounds.

BACKGROUND

A. The NRA

The National Rifle Association of America was chartered under New York law on November 17, 1871 (Amended and Supplemental Verified Complaint ["Complaint"] ¶¶ 17, 58 [NYSCEF 333]). The NRA's stated purpose, at the time, was "the improvement of its members in marksmanship, and to promote the introduction of a system

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of army drill and rifle practice, ... and for those purposes to provide a suitable range ... in the vicinity of the City of New York" (id. ¶ 58; see NYSCEF 117 at 5 [copy of certificate of incorporation]). To that end, in 1872 the New York Legislature granted $25,000 in public funds to the fledgling group, for the purchase of land at Creed Farm in Queens County (Compl. ¶ 59). This land, which came to be known as "Creedmoor," served as a rifle range for the NRA and the New York National Guard (id. ¶ 59).

165 N.Y.S.3d 240

Over 150 years later, the NRA has "established itself as one of the largest, and oldest, social-welfare charitable organizations in the country" (id. ¶ 60). Though today the NRA's principal place of business is in Virginia, it is still legally domiciled in New York, its ancestral home (id. ¶¶ 17-18). And because it is a New York not-for-profit corporation, the NRA is subject to the oversight of the New York Attorney General ("NYAG").

The NRA is registered with the NYAG's Charities Bureau to conduct business and solicit donations (id. ). And the NRA is exempt from federal and certain state taxation pursuant to section 501 [c] [4] of the Internal Revenue Code and New York law, conditioned upon the NRA's compliance with certain statutory requirements discussed in more detail infra (id. ¶¶ 18, 60).

The scope of the NRA's activities has, of course, substantially outgrown its modest 1871 charter. As set forth in its bylaws, the NRA's stated mission now comprises five distinct objectives:

"i. To protect and defend the Constitution of the United States, especially with reference to the God-given inalienable right of the individual American citizen guaranteed by such Constitution to acquire, possess, collect, exhibit, transport, carry, transfer ownership of, and enjoy the right to use, keep and bear arms, in order that the people may exercise their individual rights of self-preservation and defense of family, person, and property, and to serve in the militia of all law-abiding men and women for the defense of the Republic and the individual liberty of the citizens of our communities, our states and our great nation;

ii. To promote public safety, law and order, and the national defense;

74 Misc.3d 1006

iii. To train members of law enforcement agencies, the armed forces, the National Guard, the militia, and people of good repute in marksmanship and in the safe handling and efficient use of small arms;

iv. To foster, promote and support the shooting sports, including the advancement of amateur and junior competitions in marksmanship at the local, state, regional, national, international, and Olympic levels; and

v. To promote hunter safety, and to promote and defend hunting as a shooting sport, for subsistence, and as a viable and necessary method of fostering the propagation, growth and conservation, and wise use of our renewable wildlife resources." (id. ¶ 19).

Today, the NRA consists of several large divisions, eight officers to oversee them, a 76-member Board of Directors, and dozens of standing and special Committees, all governed by a comprehensive set of bylaws, policies, and procedures (see generally id. ¶¶ 63-136).

B. The Individual Defendants

1. Wayne LaPierre

The focus of the Attorney General's Complaint "is on the governance of the organization under the leadership of Wayne LaPierre" (id. ¶ 62). LaPierre has been the Executive Vice President of the NRA since the early 1990s and is responsible for overseeing all of the divisions and the day-to-day affairs of the NRA (id. ¶ 137). The NYAG alleges that LaPierre routinely abused his authority as Executive Vice President of the NRA to cause the NRA to improperly incur and reimburse LaPierre for expenses that were for LaPierre's personal benefit and violated NRA policy, including private jet travel for purely personal reasons; trips to the Bahamas to vacation on a yacht owned by the principal of numerous NRA vendors; use of a travel consultant for costly black car services; gifts for favored friends and vendors;

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lucrative consulting contracts for...