The National Rifle Association, sued last summer by the Attorney General of New York seeking to dissolve the organization and recover large sums from top officials for breach of fiduciary duty, has failed in an effort to use bankruptcy as a vehicle to move the corporation to Texas. A Bankruptcy Court in the Northern District of Texas has ruled that the case was not filed in good faith. The Court agreed with the Attorney General of New York that the NRA was attempting to use the bankruptcy proceeding to address a regulatory enforcement problem, not a financial one. Because it was not filed “for a purpose intended or sanctioned by the Bankruptcy Code,” the Court said, it was not filed in good...

The Bankruptcy Code provides that all pending or potential claims against the debtor are automatically stayed and may not be pursued when the debtor formally files for bankruptcy protection. But the law also provides that cases are not stayed against non-debtors, including the individual officers of a bankrupt organization. The officers may be sued in their individual capacity except in narrow and unusual circumstances, such as when there is such an identity between the debtor and the third party defendant that the debtor may be said to be the real party defendant and a judgment against the third party defendant will in effect be a judgment against the debtor. The issue of whether the...