Our recent client alert provides an overview of a recent lower court case confirming the risks to commonly managed private equity funds when they collectively own directly or indirectly 80% or more of certain operating companies.

On remand from the First Circuit, the District Court for Massachusetts held private equity funds managed by Sun Capital Advisors, Inc. liable for ERISA withdrawal liability owed by a bankrupt portfolio company to a multiemployer pension plan. The First Circuit’s decision in Sun Capital Partners III, LP v New England Teamsters and Trucking Industry Pension Fund and the District Court’s application of the principles set forth by the First Circuit break new ground for determining withdrawal liability under the Multiemployer Pension Plan Amendments Act (MPPAA). As explained in our alert, the case shows that two or more private equity funds that are managed by the same persons can constitute a “deemed partnership” thereby exposing the funds to ERISA withdrawal liability.  The decisions also establish a roadmap for minimizing risk.