The Wall Street Journal reports that the U.S. Supreme Court may soon help resolve a question at the center of disputes in recent years: whether private equity firms can walk away from the pension obligations of companies in which they invest.
In August 2020, the New England Teamsters & Trucking Industry Pension Fund asked the Supreme Court to revisit a lower court ruling that said private equity firm Sun Capital Partners isn’t responsible for $4.5 million in pension liabilities of a bankrupt company that was owned by two of the firm’s funds. The November 2019 appeals court ruling in Sun Capital’s favor overturned a 2016 district court ruling for the Teamsters.
The Wall Street Journal turned to private equity partner David Denious for insight on the Sun Capital decision and how it could impact the Court’s decision to take the Teamsters case.
Denious told The Journal that if the Supreme Court takes on the case, it could help clarify the legally convoluted question of when private equity investors could be held responsible for pension obligations for companies they buy.
Private equity funds “are in a kind of netherworld” on this question, he added, as their liability for pension benefits isn’t firmly established in all cases.