Is ERISA Case Serious (Trade or) Business for PE Funds? 1st Cir. Asks if Portfolio Co. Pensions are Under "Control"

On July 24, 2013, the U.S. Court of Appeals for the First Circuit, in Sun Capital Partners III L.P. v. New England Teamsters and Trucking Industry Pension Fund, a case of first impression, held that a private equity fund can constitute a “trade or business” for purposes of “controlled group” liability under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) for withdrawal liability to a multiemployer pension plan.  Although the case addresses controlled group liability for multiemployer pension plan withdrawal liability, the same analysis may likely apply to other ERISA controlled group liabilities (i.e., with respect to single employer pension plans). 

This Stroock Special Bulletin discusses the Sun Capital Partners III L.P. decision, and the First Circuit’s reasoning, under which a private equity fund can be held jointly and severally liable for certain controlled group liability incurred by a commonly controlled portfolio company.