A federal appeals court ruled private-equity firm Sun Capital Partners Inc. isn’t on the hook for a multimillion-dollar penalty for withdrawing from a bankrupt brass manufacturer’s pension fund, WSJ Pro Bankruptcy reported. The U.S. Court of Appeals for the First Circuit in Boston reversed lower court rulings — both district court and bankruptcy — in a recent decision saying Sun Capital Partners isn’t responsible for a $4.5 million penalty after it withdrew from a pension fund for a bankrupt portfolio company. Scott Brass Inc., a Rhode Island-based brass and copper manufacturing business owned by two Sun Capital funds, filed for bankruptcy in 2008 and withdrew from its multiemployer pension fund. The fund, the New England Teamsters and Trucking Industry Pension Fund, said Sun Capital was responsible for the $4.5 million penalty for withdrawing from the pension fund. Sun Capital sued the pension fund in U.S. District Court in 2010. A 2016 lower court decision sided with the pension fund, ruling Sun Capital was on the hook for the penalty. The buyout firm appealed. At issue was whether the two Sun Capital funds that jointly owned Scott Brass could be considered a “partnership-in-fact” and held jointly liable for the pension withdrawal penalty, said Sarah Borders, a partner at the law firm King & Spalding, who wasn’t involved with the case.
