Takeaways
- Despite recent guidance, the status of private equity firms and their affiliates as "employers" for purposes of withdrawal liability remains unsettled.
- Approaches adopted by courts vary, and the difference could result in exposure for significant withdrawal liability incurred by a portfolio company.
- Private equity funds that acquire a controlling interest in a portfolio company with unionized operations should exercise particular caution, since the parameters of the liability determination remain somewhat unclear.
Article
Under ERISA's multiemployer pension plan provisions (the Multiemployer Pension Plan Amendments Act of 1974 or MPPAA), an employer who withdraws from a multiemployer pension plan normally is liable for withdrawal liability. For this purpose, the "employer" includes both the withdrawn entity and all trades or businesses under common control.
Although the U.S. District Court for the Western District of Missouri Western Division's opinion in Longroad Asset Management, LLC v. Boilermaker-Blacksmith National Pension Trust, No. 4:23-cv-00738 (Aug. 19, 2025), provides some guidance for private equity entities' potential status as "employers" for purposes of (and potential exposure for) withdrawal liability, the law remains unsettled in this area.
Fact Pattern
Longroad presents a typical private equity fact pattern. Longroad Capital Partners, LLC ("Limited Partnership") was a pooled investment vehicle that was 99.9% owned by its investors (the limited partners). Longroad Partners III, GP, LLC ("General Partner") was the general partner of the Limited Partnership. The General Partner was a "pass through" entity. The General Partner contracted with Longroad Asset Management, LLC (LAM) to manage the Limited Partnership's business affairs, delegating all Limited Partnership management responsibilities and powers to LAM. As consideration for providing management services to the Limited Partnership, LAM was paid a management fee equal to a percentage of either the Limited Partnership's capital commitments or asset value.
In 2011, the Limited Partnership indirectly acquired the assets of Brown-Minneapolis Tank-Northwest, LLC (BMT-NW), a company with a unionized workforce, through a wholly owned subsidiary of the Limited Partnership ("BMT-NW Acquisition"). BMT-NW Acquisition was signatory to a collective bargaining agreement that obligated contributing to the Boilermaker-Blacksmith National Pension Trust ("Fund"). The Fund is a multiemployer pension plan subject to the withdrawal liability provisions in Part 4 of Title IV of ERISA.
BMT-NW Acquisition failed and ceased all covered operations. As a result, it triggered withdrawal liability of approximately $975,000. Because the company filed for bankruptcy, the Fund sought to collect the...
