A recent decision by the Federal District Court of Massachusetts has potentially significant implications for private equity funds whose portfolio companies contribute to multiemployer pension plans or sponsor defined benefit pension plans, as well as for parties in bankruptcy proceedings. In Sun Capital Partners III, L.P., et. al. v. New England Teamsters and Trucking Industry Pension Fund, the District Court held that two separate Sun Capital Partners investment funds acted as a “partnership-in-fact” and, therefore, were jointly and severally liable for multiemployer plan withdrawal liability. This was held to be the case even though the two investment funds (Sun Capital Partners III and Sun Capital Partners IV) each had an indirect ownership interest in the portfolio company that was less than the 80 percent ownership threshold for purposes of the controlled group liability rules of Title IV of the Employee Retirement Income Security Act of 1974 (ERISA). Of particular concern, the Sun Funds were not parallel funds that regularly invested in the same portfolio companies, and had largely non-overlapping investors.

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