The Corporate Veil: A Façade?

On July 24, 2013, the U.S. Court of Appeals for the First Circuit decided a case of first impression regarding whether a private equity fund could be liable to a multiemployer pension fund for the withdrawal liability of a bankrupt portfolio company. In Sun Capital Partners III, et al. v. New England Teamsters & Trucking Ind. Pension Fund, the court held that a private equity fund could be so liable on a controlled group theory of liability if common control is established and if the private equity fund is a trade or business. The court rejected an argument that the subject fund merely was a passive investor. Instead, the court concluded that an affiliated management company's active involvement in the management of the portfolio company, among other things, supported a conclusion that the private equity fund was engaged in a trade or business for purposes of establishing withdrawal liability.