First Circuit Puts the ‘Fund’ in Pension Underfunding

On July 24, 2013, the United States Court of Appeals for the First Circuit in Sun Capital Partners III LP v. New England Teamsters & Trucking Industry Pension Fund, held that a private equity fund was a “trade or business” under the controlled group rules of ERISA, and, as a result, could be held jointly and severally liable for the pension obligations of a bankrupt portfolio company. The memorandum discusses the facts and holdings of the case, analyzes the Circuit Court’s reasoning and discusses the broader implications the decision potentially could have for private equity funds investing in portfolio companies with certain types of U.S. pension liabilities.