U.S. Supreme Court Denies Cert in Sun Capital Appeal; Leaves Door Open for Private Equity Fund Liability for Portfolio Company Pension Liabilities
In the latest development in the Sun Capital line of cases, on October 5, 2020, the U.S. Supreme Court denied certiorari review of New England Teamsters & Trucking Industry Pension Fund v. Sun Capital Partners. The Sun Capital cases center around the issue of whether affiliated private equity funds, Sun Capital Partners III and Sun Capital Partners IV (collectively, the ?Ç£Funds?Ç¥), can be held liable for the pension fund withdrawal liability of a portfolio company, Scott Brass Inc. (?Ç£SBI?Ç¥), which went into bankruptcy while owned by the Funds. In 2013, the First Circuit held that multiple private equity funds could be jointly and severally liable under ERISA for the withdrawal liability of a portfolio company if such funds were (i) a trade or business and (ii) in the company?ÇÖs controlled group (see our prior blog post on that court decision here). On remand by the First Circuit in 2016, the… Continue Reading
Sixth Circuit Holds that a Union?ÇÖs Indemnification of an Employer?ÇÖs Withdrawal Liability Does Not Violate Public Policy
In a case of first impression, the U.S. Court of Appeals for the Sixth Circuit held that a union?ÇÖs agreement in a collective bargaining agreement to indemnify an employer for its withdrawal liability under a multiemployer plan does not violate public policy and is therefore enforceable. In this case, the General Drivers, Warehousemen and Helpers Local Union No. 89 specifically agreed in its collective bargaining agreement with Shelter Distribution, Inc. that the union ?Ç£shall indemnify [Shelter] for any contingent liability which may be imposed under the Multiemployer Pension Plan Amendment Acts of 1980.?Ç¥ The court reasoned that (i) the indemnity was analogous to obtaining a policy from an insurance company to cover any potential liability for fiduciary breaches as described in Section 1110(b) of the Multiemployer Pension Plan Amendments Act; (ii) the indemnity is not a violation of any ?Ç£well defined and dominant?Ç¥ public policy; and (iii) the goals of… Continue Reading
The Pension Benefit Guaranty Corporation (PBGC) released a Technical Update providing temporary guidance on compliance with certain reportable events requirements under Section 4043 of ERISA. The update addresses two issues: (1) valuing assets, vested benefits and unfunded vested benefits for plan years beginning in 2012, and (2) the waiver of or a simplified notice for reporting certain missed quarterly contributions for small plans for the 2012 plan year. This guidance is available here.
?á The Third Circuit ruled that the purchaser of assets of an employer obligated to contribute to a multiemployer plan may, under certain circumstances, be held liable for the seller’s delinquent contributions to that plan.?á?áAccording to the Court,?ásuccessor liability?ámay?áexist where the purchaser had notice of?áthe liability prior to the sale and there exists sufficient evidence of continuity?áof operations?ábetween the purchaser and seller.?á Einhorn v. M.L. Ruberton Construction Co., No. 09-4204 (3rd Cir. Jan. 21, 2011).