Multiemployer Plan May Pursue Equity Funds for Withdrawal Liability

The recent court decision in Sun Capital Partners, III, LP v. New England Teamsters and Trucking Industry Pension Fund gives a multiemployer pension fund a claim for withdrawal liability from equity fund investors in a company that withdrew from the fund. In 2013, in Sun Capital Partners, III, LP v. New England Teamsters & Trucking Industry Pension Fund, the First Circuit Court of Appeals found that one of two equity funds invested in the withdrawing company was engaged in a “trade or business” because its activities were more than passive investment. The Court referred to this as “investment plus.” On remand for factual determinations, the lower court has now found that a second equity fund was also engaged in a “trade or business” on the same basis, and the two equity funds should be treated as a “partnership-in-fact.” The consequence of the partnership finding was that the court combined the ownership interests of the two equity funds (70% and 30%) to find that they were in a controlled group with the withdrawing company, and thus liable for withdrawal liability payments.