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How Suspended Lawyer Derailed NRA Donors’ $1 Billion Claim (1)

Aug. 10, 2022, 2:28 PMUpdated: Aug. 10, 2022, 5:12 PM

For a Tennessee lawyer used to shepherding personal bankruptcies for $1,250 a pop, the case that landed in Elliott Schuchardt’s lap offered the potential reward of a lifetime: A legal fee worth millions and a class-action victory against one of the most powerful interest groups in US history.

Schuchardt in 2019 helped build a case alleging that the National Rifle Association had bilked donors to pay for the lavish lifestyles of its leaders. The lawsuit sought the return of possibly hundreds of millions in contributions to once-loyal NRA members. By one estimate, the case could have cost the NRA $1 billion.

But behind the scenes, it was on a path to failure.

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Before he formally joined the case, Schuchardt’s license to practice in federal court had been suspended amid a dispute with a bankruptcy judge in Knoxville who questioned his fees, professionalism and competency. Then his bid to enlist some heavyweight help against the NRA— a partner from New York’s Boies Schiller Flexner— crashed when they couldn’t resolve Schuchardt’s role or how much he should be paid.

Now, no lawyer represents the NRA donors, and a judge has set an Aug. 17 deadline, warning that he’ll toss the proposed class action without a new lawyer to get it back on track.

Why no firm has signed on to a case that won an early ruling—and could get a boost from a parallel investigation by New York Attorney General Letitia James—remains something of a mystery.

The lead plaintiff, Nashville gun rights activist David Dell’Aquila, blames Schuchardt for dooming their chances in court, and, more importantly, Dell’Aquila’s bid to reform the organization. Schuchardt waited more than a year after his suspension to withdraw from the case and has since tussled with Dell’Aquila over who’s responsible for finding new representation.

“This was a great case,” Dell’Aquila said in an interview, “until Elliott put his greed ahead of everybody.”

In two short phone conversations with Bloomberg Law, Schuchardt was reluctant to discuss the case, but said Dell’Aquila was trying to shift blame for his own failure to find a lawyer. He declined to discuss the fee dispute but threatened to sue if his former client slandered him.

Schuchardt, 55, also said he has retired from practicing law. In one of the calls, he defended his record.

“This was excellent legal work that I was performing for all of these clients,” he said.

An Unlikely Advocate

The story of how a massive lawsuit against America’s most prominent gun rights organization floundered in the hands of a suspended lawyer begins with the death of Dell’Aquila’s father in 2017.

A former lawyer in Pittsburgh, the elder Dell’Aquila left an estate valued around $500,000. His son, who says he’s a self-made millionaire and had promised as much as $10 million to the NRA, was tasked with settling his father’s estate with his siblings.

After asking around for attorney recommendations, including a chat with an NRA lawyer, Dell’Aquila was referred to Schuchardt.

A 1993 Columbia University School of Law graduate, Schuchardt worked as an associate at white-shoe firms including Paul Weiss Rifkind Wharton & Garrison and Dechert before hanging his shingle in Knoxville in 2003.

Among the career accomplishments he cites are lawsuits he filed against the Obama and Trump administrations, alleging the National Security Agency illegally intercepted Americans’ emails, claims based on documents obtained by whistleblower Edward Snowden. While Schuchardt won an early victory granting him the standing to sue, a federal appeals court ultimately tossed the case, finding his evidence too flimsy to be admissible in court.

That case exemplifies Schuchardt’s legal career. He seems to relish playing the David to a Goliath, even if his slingshot occasionally misfires.

By 2019, Schuchardt had signed on as Dell’Aquila’s probate lawyer. His client’s attention soon turned toward a case he was building against an organization he loves.

Dell’Aquila had been a longtime NRA member, and his largesse gave him access to its leaders, including private dinners with CEO Wayne LaPierre and others. But he had grown disillusioned.

David Dell’Aquila, left, and his wife, Marita, with NRA leader Wayne LaPierre in 2016
Courtesy of David Dell’Aquila

Reports alleging financial malfeasance at the top matched his own concerns. Dell’Aquila said he couldn’t get answers to his questions about how the NRA was spending gifts from six-figure donors.

He decided to halt his donations until the group removed the leadership he viewed as distracting from the goal of preserving and expanding Second Amendment rights.

“I’m not pro-Mr. LaPierre, and I’m not anti-Mr. LaPierre, I’m just simply being objective and trying to save a historic institution from itself,” Dell’Aquila told the New York Times in a 2019 story about NRA donors lobbying for reform.

His decision to sue to the group, he reasoned, was about effecting change more than winning a payout. In August 2019, Dell’Aquila persuaded Schuchardt to help him draft the lawsuit; he filed it himself.

“I paid him $5,000 and he wrote it up,” Dell’Aquila said in an interview. “Chances are, we weren’t going to get standing. Nobody thought we would. But we did.”

A Bankruptcy Break

At the time, Schuchardt had been dealing with the fallout of a war he’d waged with a bankruptcy judge in Knoxville, with his ability to work in Tennessee federal courts dangling in the balance.

The judge, Suzanne Bauknight, had accused Schuchardt of overcharging clients, incompetence and of falsely accusing her of improper communications with a US trustee in one of his cases.

Schuchardt asserted he was being targeted because the judge and the local trustee—who serves as a sort of referee protecting bankrupt individuals’ interests—had an axe to grind against his new employer, Upright Law. The firm, which has stirred controversy and scrutiny over its tactics, signs up clients through its website and a Chicago-based intake center then doles them out to local partners across the country.

Bauknight did not appreciate the accusation; she started disciplinary proceedings. In a January 2018 order, Bauknight had raised questions about Schuchardt’s conduct and competency in 17 cases, saying he exhibited “either a lack of basic bankruptcy knowledge” or “a refusal to adequately research issues.”

Schuchardt agreed to a six-month moratorium on handling bankruptcy petitions in the Eastern District of Tennessee, but their detente didn’t last. That June, Bauknight accused him of continuing to represent clients—an allegation he denied— and sought steeper sanctions.

Schuchardt fought back, and the case sat unresolved for a year. Then, on Dec. 10, 2019, the district’s chief judge, Pamela Reeves, suspended Schuchardt for two years, citing a lack of ethics and professionalism. “His conduct has fallen below that required of members of the bar of the Eastern District of Tennessee,” she wrote.

The penalty also automatically barred Schuchardt from practicing in the Middle District of Tennessee, which includes Nashville, and required him to alert that court of his status. He didn’t.

Instead, nine days after being suspended, Schuchardt formally entered his appearance to represent Dell’Aquila and other NRA members in the proposed class action.

Schuchardt told Bloomberg Law he believed he was compliant with all the rules of the Middle District when he entered his appearance there. He acknowledged he had been “slow in reporting the suspension” but declined to elaborate.

A Texas Two-Step

Unaware of the suspension, US District Judge William Campbell handed the plaintiffs an early decision they saw as a victory. In September 2020, he dismissed the racketeering claim against the NRA and a separate one against LaPierre—but allowed the fraud charge against the NRA to move forward.

The class-action theory is that the NRA solicited donations promising they’d be spent advocating the Second Amendment, not funding LaPierre’s trips. If the plaintiffs successfully argue that all donations to the NRA were collected fraudulently, they could seek to recoup contributions made from late 2015 through early 2019— a sum in excess of $330 million, records show. If the RICO allegation had held, or was reinstated, the damages would triple.

Michael Kanovitz, a Chicago-based lawyer at Loevy & Loevy who’s handled large class-action claims and reviewed the case for Bloomberg Law, said a billion-dollar award was “probably pie-in-the-sky money” but that the claim otherwise has merits. “It’s absolutely a viable lawsuit,” he said.

A key issue, he said, would be how broad the judge views the alleged fraud. Would donors have given the NRA nothing if they knew the wasteful spending was occurring? Or do they deserve lesser compensation, closer to the amount wasted by the executives?

The NRA contends the lawsuit is baseless. “The majority of Mr. Dell’Aquila’s claims have been rejected by the courts—evidence this is a frivolous pursuit,” NRA lawyer William A. Brewer III said in a statement. “The NRA’s commitment to good governance is clear.”

But Dell’Aquila and Schuchardt’s case got a potential boost from an unlikely source. In August 2020, the New York Attorney General had announced her own, similar fraud case against the NRA, a nonprofit incorporated in the Empire State. She sought to dissolve the group.

The gun-rights group assailed the New York Democrat’s suit as politically motivated. But by January 2021 the NRA had filed for bankruptcy protection in Texas, saying it would reincorporate there—an effort James panned as a tactic to evade her investigation.

That meant Dell’Aquila, because of his lawsuit, became a creditor in the bankruptcy proceeding there, and that the class-action would be stayed in Tennessee. It also meant he needed lawyers in Texas.

Dell’Aquila enlisted Dallas-based attorney Walter Herring to represent him personally and find Texas lawyers to jump into the case. But the political calculations were tricky.

“The class-action lawyers I talked to, some of them hate the NRA and were excited just to file a lawsuit against them,” Herring said. “Another group I talked to said, ‘These people you’re talking to hate the NRA. They want to take on this case because they want to destroy the NRA.’ So it was curious bedfellows in that regard.”

A Deal Falls Apart

In the end, the bankruptcy case was short-lived. A judge tossed it in May 2021, finding the NRA was improperly trying to use it “to address a regulatory enforcement problem.”

So the class-action, with Schuchardt at the helm, was back on the front-burner in Tennessee federal court. But he needed help; the NRA already had five lawyers enter appearances on its behalf, including Brewer, one of the alleged “insiders” cited in Dell’Aquila’s complaint.

Schuchardt turned to one of the nation’s most prominent firms: Boies Schiller. Founded by trial lawyer David Boies, its litigators had successfully waged class-action battles against powerful adversaries. Just months earlier, it had negotiated a $2.7 billion antitrust settlement with Blue Cross Blue Shield that was poised to net lawyers more than $600 million.

By late last summer, Schuchardt had a signed agreement from Peter Skinner, a former Manhattan federal prosecutor and the head of Boies Schiller’s government investigations and white-collar practice group. At the time, Skinner had just finished representing Nike in the federal extortion case against celebrity lawyer Michael Avenatti.

Then Schuchardt told Skinner about his suspension. The Boies lawyer was floored; in emails Dell’Aquila shared with by Bloomberg Law, Skinner insisted Schuchardt had to fully back out of the case.

Despite his suspension, Schuchardt played hardball, telling his would-be co-counsel he deserved a flat percentage of any award, and brushing aside any suggestion he was just in it for the money.

“My track record speaks for itself,” Schuchardt wrote in one email. “As for finances, I am richer than you think.”

Skinner repeatedly told the Knoxville lawyer he was entitled to some compensation for his work to that point but that he couldn’t expect a percentage fee of any award. Skinner said judges decide how lawyers get paid in class-action cases and that’s based on the amount of work each lawyer performs.

For weeks, the two lawyers argued how to move forward, according to the emails. Skinner’s final offer: “You play no role going forward and are paid on a proportional basis for the work you did before you withdrew.”

Schuchardt again demanded a 9% fee; Skinner terminated the agreement three days later. “As the only attorney of record in the case, I am sure you will do whatever is necessary to zealously represent your clients,” he wrote.

After reading Skinner’s termination letter, Dell’Aquila sent Schuchardt an email demanding he withdraw from the case or else be fired. “Once again, this is about reforming the NRA and not about you and your desire to obtain a multi-million-dollar payout!” he wrote.

The Dallas bankruptcy attorney, Herring, also intervened and urged Schuchardt to reconcile with the New York lawyers. It didn’t happen.

“He’s a solo practitioner trying to make a living,” Herring said in an interview. “I do think the money became the issue there.”

Schuchardt finally disclosed his suspension to court officials in Nashville, and, in September, was informed he’d been ineligible to practice there before he even filed an appearance in the NRA case. He halted work on the class-action, but never formally withdrew his appearance. The case sat dormant for months.

In April, a lawyer representing Dell’Aquila in a separate matter wrote Schuchardt and told him it was his responsibility to find alternate counsel in the class action or be held liable for any losses.

That same month, the NRA lawyer, Brewer, called Schuchardt to discuss the case and learned he no longer represented Dell’Aquila and the others.

Brewer then petitioned Judge Campbell to dismiss the suit for lack of prosecution. That motion is pending.

A Relationship Ends

A judge in March rejected the New York attorney general’s effort to dissolve the NRA. But two months later, she won new momentum on the fraud claims, when a judge rejected the NRA’s argument that James lacked the authority to bring her suit.

Meanwhile, Dell’Aquila has struggled to persuade anyone to take his case; he said he’s talked to at least 50 lawyers. But the firms he’s cold-called often don’t return his calls, he said, and even his conversations with prominent figures in Second Amendment circles haven’t been fruitful.

He wonders if the case is too political or if public interest has waned around the NRA’s spending.

“Elliott worked on [enlisting] Peter for three months,” he said. “It’s not as easy as you think.”

He’s also battling Schuchardt on another front. His father’s estate is not yet wound down, and his former lawyer is suing him for nearly $100,000 in unpaid legal fees in the probate case.

Dell’Aquila said Schuchardt needs to request his fees from the probate judge. He’s also filed a complaint against Schuchardt with the Tennessee Board of Professional Responsibility.

Skinner, who left Boies Schiller in May, declined to comment.

In one phone call with Bloomberg Law, Schuchardt said he remains committed to “clearing his name,” insisting his law license was unfairly attacked over his affiliation with Upright Law. He said Dell’Aquila hadn’t paid him hourly fees for the NRA work, noting “I have not yet sued him” for that money. (Dell’Aquila denies he owes the lawyer anything for the case.)

Last month, the Knoxville lawyer asked an appeals court to rescind his suspension, arguing the bankruptcy judge was biased against him and that he was denied a hearing.

But it’s not clear he wants to be a lawyer again. On his Wikipedia page, Schuchardt says he has retired from the practice of law, and is now writing a book.

He hopes to take on another giant. In a conversation with Bloomberg Law last week, he didn’t want to discuss the book other than sharing its subject: “problems with the US currency.”

Late Tuesday, less than a week after being asked to review the case for this article, Kanovitz, the Chicago lawyer, told Bloomberg Law he thought it was so promising, he had reached out to Dell’Aquila to discuss taking the case.

Both men said they hope to sign an agreement this week. The next step: find a Tennessee lawyer to join the case.

(Adds March ruling striking down effort to dissolve the NRA in first paragraph of last section. )

To contact the reporter on this story: Roy Strom in Chicago at rstrom@bloomberglaw.com

To contact the editors responsible for this story: John Martin at jmartin1@bloombergindustry.com and Chris Opfer at copfer@bloombergindustry.com.