The First Circuit reverses a lower court decision and finds two Sun Capital private equity funds are not liable for portfolio company’s pension plan liabilities under ERISA.

On November 22, 2019, the United States Court of Appeals for the First Circuit (the First Circuit) issued a welcome decision for investment funds investing in portfolio companies with pension liabilities. In Sun Capital Partners III, LP v. New England Teamsters & Trucking Industry Pension Fund (Sun Capital), the court unanimously found that two Sun Capital funds, Sun Capital Partners III, LP and Sun Capital Partners IV, LP (the Funds), could not be held jointly and severally liable for multiemployer defined benefit pension plan withdrawal liability incurred by a portfolio company, because the Funds did not form a de facto partnership (or “partnership-in-fact”) in connection with their investment. This decision reversed a lower court decision to the contrary.