The Supreme Court declined Monday to take up two multiemployer pension cases and a challenge by F-Squared Investments' successor trust over the SEC's power to make it disgorge profits.
One multiemployer pension case petition from the New England Teamsters & Trucking Industry Pension Fund, Burlington, Mass., sought to revisit a long-running legal battle over whether private equity firms could be liable for pension liabilities of portfolio companies. As of Sept. 30, 2018, the fund listed assets of $4.3 billion.
The Supreme Court denied its petition without comment, leaving intact an appeals court ruling favorable to Sun Capital Partners. The appeals court had reversed an earlier court ruling finding the private equity firm liable after two of its funds were actively engaged as a trade or business in a now-bankrupt portfolio company.
The second multiemployer case, National Retirement Fund vs. Metz Culinary Management Inc., sought Supreme Court review of a case questioning whether and when multiemployer pension plan trustees can change actuarial assumptions for calculating a withdrawing employer's liability. An amicus brief filed by the $1.5 billion New York State Teamsters Conference Pension & Retirement Fund said the issue "comes at the worst possible time" for multiemployer plans and for the Pension Benefit Guaranty Corp.
The Supreme Court also declined Monday to hear a petition from F-Squared Investments challenging the Securities and Exchange Commission's disgorgement practices.
In December 2014, F-Squared Investments agreed to disgorge $30 million in profits, pay $5 million and admit wrongdoing to settle SEC charges of defrauding investors with false performance advertising of its flagship strategy, "AlphaSector," an active ETF strategy. The defunct firm is now under the control of a trustee.
The SEC's legal standing to collect disgorgements has been challenged in several cases that wound up at the Supreme Court, and in June, the court backed the SEC's practice of seeking disgorgement of profits from companies involved in fraud and giving it to harmed investors.
In the 8-1 majority opinion, Associate Justice Sonia Sotomayor said the practice is legally permissible equitable relief, as opposed to a punitive action, as long as the SEC disgorges the net profits from the wrongdoing and awards it to victims.