On November 22, 2019, the First Circuit Court of Appeals held in Sun Capital Partners III, LP, et al. v. New England Teamsters & Trucking Industry Pension Fund, that two private equity funds, Sun Capital Partners III, LP and Sun Capital Partners IV, LP were not liable for approximately $4.5 million in multiemployer pension plan withdrawal liability of their bankrupt portfolio company.  The First Circuit reversed a 2016 District Court decision finding that the funds had created an implied partnership-in-fact.

Although the First Circuit found in favor of the funds, its opinion suggests that courts might imply a partnership-in-fact, and private equity funds could be found liable for the pension obligations of their portfolio companies, depending on the relevant facts and circumstances.  While the decision relates to a private equity fund, and thus has several important implications for private equity firms, the issues at play could also have implications for other alternative investment managers, including venture capital funds, family offices and sovereign wealth funds.

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