May 15, 2021
A recent Law 360 story by Vince Sullivan, “NRA Reaches Deal To Pay Creditors’ Ch. 11 Fees” reports that days after the National Rifle Association's Chapter 11 case was dismissed, the organization told a Texas bankruptcy judge that it had reached an agreement with the official committee of unsecured creditors to handle payments of professional fees. During a status conference requested by the committee, its attorney Louis Strubeck Jr. of Norton Rose Fulbright said the committee had pending fee applications in the case and would likely have at least a further request for payment of professional fees, which are typically paid for by the debtor in a Chapter 11 case.
Since the case was dismissed via an order from U.S. Bankruptcy Judge Harlin D. Hale, Strubeck said he wanted to present the situation to the court to be sure it was being handled properly. "We wanted to make sure there was full transparency around this," Strubeck said. "We didn't want to agree to anything that wasn't going to be discussed with the court to make sure we weren't doing something differently." After the dismissal order came down, Strubeck said he engaged in discussions with Patrick J. Neligan Jr. of Nelligan LLP, the NRA's bankruptcy counsel, to figure out how to move forward.
At the hearing, Nelligan said he was of the legal opinion that once the Chapter 11 dismissal order was issued, the bankruptcy court relinquished its jurisdiction over the parties and restored them to their prebankruptcy circumstances. That means, he said, that the NRA would treat any invoices from the committee's professionals incurred before the dismissal as it would treat any other unsecured obligation.
"The impact of a dismissal ... is that as we put the entities into their prebankruptcy positions, we need to go forward with payment of the unsecured creditors on their prep claims," Nelligan said. "The NRA is preparing to make those payments. Out of an abundance of caution we have not gone forward with those payments until this status conference." Any disputes among the parties about any invoices will be resolved as they normally would as if the bankruptcy had never occurred, Nelligan said.
The dismissal also restores the parties to their prebankruptcy standing with regard to the litigation in which the NRA is involved, Nelligan said. As he understands it, the case brought by the New York attorney general seeking to dissolve the organization will continue uninterrupted in New York state court, he said. The NRA's litigation against its former media consulting firm Ackerman McQueen will also resume in Texas state court, he said.
Attorneys for NRA board member Phillip Journey — whose motion seeking the appointment of an examiner in the Chapter 11 case was denied — said their client is considering whether to appeal the denial of his motion, or whether to pursue an administrative expense claim against the NRA for the fees incurred in litigating the examiner and dismissal motions.
Ackerman McQueen attorneys also said they were exploring whether the dismissal of the Chapter 11 case for a lack of good faith in making the bankruptcy filing could give rise to the shifting of legal fees. After taking some time to consider the issues, Judge Hale said he wouldn't be altering his dismissal order to retain jurisdiction over the fee issues, saying he trusted the parties and their counsel to resolve any disputes professionally and amicably.