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Sun Capital Update: Successor Investment Funds Not Members of an ERISA Controlled Group

Client memorandum | December 12, 2019

On November 22nd, the U.S. Court of Appeals for the First Circuit published its latest decision in the Sun Capital litigation—a long-running dispute over whether a multiemployer pension fund to which a struggling company contributes can look to private equity fund owners to satisfy the company’s withdrawal liability under ERISA. Please see our previous Client Memoranda, “First Circuit Concludes Private Equity Fund Can Be Liable for Pension Obligations of Portfolio Company,” and “District Court Concludes Private Equity Fund Is Liable for Pension Obligations of Its Portfolio Company” for a more in-depth discussion of the regulatory background and the facts and procedural history of Sun Capital.  Although this decision does not address one of the core conclusions of the initial Sun Capital decision (whether a private equity fund can be regarded as engaged in a “trade or business” for ERISA purposes), it does offer some relief for funds that may, from time to time, make investments side by side with unaffiliated funds or with non-parallel funds (such as predecessor/successor funds) that are sponsored by the same sponsor or affiliated sponsors.

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