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Abstract: 

In the aftermath of the recent financial crisis, one question that has arisen is who bears responsibility for unfunded pension plan liabilities in the wake of a bankruptcy. In its recent Sun Capital decision, the U.S. District Court for the District of Massachusetts ruled that two private equity investment funds managed by Sun Capital Partners, Inc. were not liable for their bankrupt portfolio company’s multiemployer pension plan withdrawal liability. This ruling comes as welcome news to private equity funds that (either together or through related funds) own 80 percent or more of a portfolio company with underfunded pension liabilities or withdrawal liability, but it is a matter of concern for the Pension Benefit Guaranty Corporation and multiemployer pension plans seeking to assert liability on these funds.

Keywords: controlled group liability, trade or business, common control, evade or avoid, joint and several liability

Affiliations:  1: Proskauer Rose LLP; 2: Proskauer Rose LLP.