Alert Update: District Court Holds Sun Capital Funds Liable for Portfolio Company Pension Obligations
This Alert summarizes the latest ruling in the Sun Capital pension litigation in which a union pension has sought to impose liability on funds managed by Sun Capital Partners for pension obligations of the funds’ insolvent portfolio company. On March 28, 2016, the U.S. District Court for Massachusetts ruled that (1) multiple Sun Capital Partners funds that jointly invested in a portfolio company with pension fund withdrawal liability constituted a “trade or business” for purposes of the ERISA “controlled group” rules and (2) the separate-but-related funds should be deemed to be engaged in a “partnership-in-fact” for purposes of establishing 80% or more ownership of the portfolio company with corresponding ERISA “controlled group” liability to the deemed partnership. As a result, the court disregarded the actual corporate ownership structure and found the Sun Capital funds jointly and severally liable for the portfolio company’s pension debts.