New England Teamsters & Trucking Industry Pension Fund, Burlington, Mass., is asking the Supreme Court to revisit a long-running legal battle over whether private equity firms could be liable for pension liabilities of portfolio companies.
The case involves an appeals court ruling favorable to private equity firm Sun Capital Partners, reversing an earlier court ruling that it was liable to the pension fund for withdrawal liability because two of its funds were actively engaged as a trade or business in a now-bankrupt portfolio company, Scott Brass Inc., rather than merely being passive investors.
The case has gone through numerous appeals and rulings at the district and appellate court levels of the 1st U.S. Circuit Court in Boston.
In March 2014, the Supreme Court declined Sun Capital's petition to intervene in an earlier ruling siding with the pension fund.
In the latest court action, the 1st Circuit declined to impose the pension liability on Sun Capital. The New England Teamsters pension fund wants the Supreme Court to reconsider whether that decision is inconsistent with Supreme Court precedent and creates a conflict with other circuits.
The Aug. 11 petition argues that the decision "has created a judicial exemption shielding private equity funds from withdrawal liability in contravention of the purpose of ERISA and the MPPAA as intended by Congress," and that allowing it to stand "provides a blueprint for such funds to escape withdrawal liability while securing virtually risk-free investments in portfolio companies with known, unfunded pension liability."
A response is due Sept. 14.
If the decision is overturned in the pension fund's favor, it could get $4.5 million that has already been posted in a bond. It is also seeking $3 million in interest and damages, plus legal costs, expenses that could be passed on to the funds' investors, many of which are likely to be pension funds themselves.
