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McDonald Hopkins attorneys jwirtshafter, sriley and jpolinko wrote the article “What Is ‘Investment Plus’? Understanding a Private Equity Fund’s Liability for a Portfolio Company’s Pension Shortfall,” for the Willamette Management Associates’ Insights Winter 2014 publication.


A recent federal court decision calls into question an assumption many private equity firms make regarding their portfolio companies: that the liabilities of such companies are not liabilities of the private equity firm. In Sun Capital Partners III, LP v. New England Teamsters & Trucking Industry Pension Fund, the First Circuit turned that assumption on its head. While the decision applies only in the First Circuit (federal courts in Maine, Massachusetts, New Hampshire, Puerto Rico, and Rhode Island), the holding—that any activity beyond mere investment in a portfolio company could trigger control group liability—should be a concern to all private equity funds, particularly funds that invest in financially distressed companies or participate in Bankruptcy Code Section 363 sales transactions. With a better understanding and with reasoned expert guidance, private equity funds can take steps to insulate themselves from the pitfalls of this type of liability which could potentially include financial distress or bankruptcy of the private equity firm.


Click here to read the full article.


jwirtshafter sriley jpolinko