United States Court of Appeals 

For the First Circuit 

Nos. 16-1376 

 19-1002 

SUN CAPITAL PARTNERS III, LP; SUN CAPITAL PARTNERS III QP, LP; 

SUN CAPITAL PARTNERS IV, LP, 

Plaintiffs, Appellants, 

v. 

NEW ENGLAND TEAMSTERS & TRUCKING INDUSTRY PENSION FUND, 

Defendant, Third Party Plaintiff, Appellee, 

SCOTT BRASS HOLDING CORP.; SUN SCOTT BRASS, LLC, 

Third Party Defendants. 

APPEALS FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF MASSACHUSETTS 

[Hon. Douglas P. Woodlock, U.S. District Judge] 

Before 

Lynch, Stahl, and Lipez, 

Circuit Judges. 

John C. O'Quinn, with whom John F. Hartmann, Devin A. 

DeBacker, Kirkland & Ellis LLP, Theodore J. Folkman, and Pierce 

Bainbridge Beck Price & Hecht LLP, were on brief for appellants. 

Catherine M. Campbell, with whom Melissa A. Brennan, Renee J. 

Bushey, and Feinberg, Campbell & Zack, PC were on brief for 

appellee. 

Craig T. Fessenden, with whom Judith R. Starr, Kartar S. 

Khalsa, Charles L. Finke, and Louisa A. Soulard were on brief for 

Pension Benefit Guaranty Corporation, amicus curiae. 
November 22, 2019 
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LYNCH, Circuit Judge. The issue on appeal is whether 

two private equity funds, Sun Capital Partners III, LP ("Sun Fund 

III") and Sun Capital Partners IV, LP ("Sun Fund IV"), are liable 

for $4,516,539 in pension fund withdrawal liability owed by a brass 

manufacturing company which was owned by the two Sun Funds when 

that company went bankrupt. The liability issue is governed by 

the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"). 

Under that statute, the issue of liability depends on whether the 

two Funds had created, despite their express corporate structure, 

an implied partnership-in-fact which constituted a control group. 

That question, in the absence of any further formal guidance from 

the Pension Benefit Guaranty Corporation ("PBGC"), turns on an 

application of the multifactored partnership test in Luna v. 

Commissioner, 42 T.C. 1067 (1964). 

If the MPPAA imposes such withdrawal liability, PBGC 

states it assumes the New England Teamsters & Trucking Industry 

Pension Fund ("Pension Fund") intends to look to the private equity 

funds, including their general partners and their limited 

partners, to pay the liability. The issues raised involve 

conflicting policy choices for Congress or PBGC to make. On one 

hand, imposing liability would likely disincentivize much-needed 

private investment in underperforming companies with unfunded 

pension liabilities. This chilling effect could, in turn, worsen 

the financial position of multiemployer pension plans. On the 
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other hand, if the MPPAA does not impose liability and the Pension 

Fund becomes insolvent, then PBGC likely will pay some of the 

liability, and the pensioned workers (with 30 years of service) 

will receive a maximum of $12,870 annually. See 18 U.S.C. § 1322a. 

The district court held that there was an implied 

partnership-in-fact which constituted a control group. We reverse 

because we conclude the Luna test has not been met and we cannot 

conclude that Congress intended to impose liability in this 

scenario. 

I. 

We describe the facts as to the organizational 

structures of the Sun Funds1 and related entities. We also refer 

to the facts set forth in our previous opinion in Sun Capital 

Partners III, LP v. New England Teamsters & Trucking Industry 

Pension Fund, 724 F.3d 129, 135 n.3 (1st Cir. 2013) (Sun Capital 

II). The two Sun Funds are each distinct business entities with 

primarily different investors and investments. But they are 

controlled by the same two men, and they coordinate to identify, 

acquire, restructure, and sell portfolio companies. The Funds 

 1 Sun Fund III and Sun Fund IV are collectively referred 

to as the "Sun Funds" or "Funds." Sun Fund III technically 

comprises two funds: Sun Capital Partners III, LP and Sun Capital 

Partners III QP, LP. Because these are parallel funds, share a 

single general partner, and invest nearly identically, we treat 

them as one entity, as we did in Sun Capital Partners III, LP v. 

New England Teamsters & Trucking Industry Pension Fund, 724 F.3d 

129, 135 n.3 (1st Cir. 2013). 
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form and finance subsidiary LLCs, through which they acquire and 

control portfolio companies, including Scott Brass, Inc. ("SBI"), 

the brass manufacturing company. While the Funds jointly owned 

SBI, it filed for bankruptcy and subsequently withdrew from the 

Pension Fund, a multiemployer pension fund, incurring withdrawal 

liability.2 We restate here only certain facts, and then briefly 

give a procedural history of the litigation leading to the instant 

appeal. 

A. The Organization of the Sun Funds 

Sun Capital Advisors, Inc. ("SCAI") is a private equity 

firm which pools investors' capital in limited partnerships, 

assists these limited partnerships in finding and acquiring 

portfolio companies, and then provides management services to 

those portfolio companies. SCAI established at least eight funds. 

Two of them, Sun Fund III and Sun Fund IV, appellants here, are 

the investors in SBI, and both are organized under Delaware law as 

 2 The price of copper dropped in 2008, reducing the value 

of SBI's inventory, which caused a breach of SBI's loan covenants. 

This prevented SBI from accessing credit and paying its bills, 

causing its bankruptcy and subsequent withdrawal from the Pension 

Fund. Sun Capital II, 724 F.3d at 136. There is no suggestion 

that mismanagement of SBI by the Funds caused, or even contributed 

to, the bankruptcy. It is clear that declining copper prices, 

likely a product of the global recession, caused SBI's bankruptcy. 

The Funds' acquisition of SBI may have prolonged the operation of 

SBI, and so lengthened the employment of its employees, but there 

is no evidence of how the Funds' investment in SBI impacted the 

company. There is also no indication that SBI employees had any 

alternative retirement savings vehicles (e.g., a 401(k) plan). 
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limited partnerships. The Sun Funds themselves do not have offices 

or employees, do not make or sell goods, and report to the IRS 

only investment income. The Funds expressly disclaimed in their 

respective limited partnership agreements any partnership or joint 

venture with each other. The Funds also maintained distinct tax 

returns, financial books, and bank accounts. 

Sun Funds III and IV each have one general partner, Sun 

Capital Advisors III, LP and Sun Capital Advisors IV, LP, 

respectively. These general partners each own respective 

subsidiary management companies, Sun Capital Partners Management 

III, LLC ("SCPM III") and Sun Capital Partners Management IV, LLC 

("SCPM IV"). The two management companies act as intermediaries 

between SCAI and holding companies. The management companies 

contract with SCAI for the management services of SCAI's employees 

and consultants, and then with the holding company to provide these 

management services. 

Sun Funds III and IV, respectively, have 124 and 230 

limited partners. Sixty-four of these limited partners overlap 

between the Funds. The limited partners include both individual 

and institutional investors, including pension funds, other 

private equity funds, family trusts, and universities.3 The Sun 

 3 The identities of the limited partners remain under 

seal. 
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Funds' limited partnership agreements vest exclusive control of 

the Funds in their respective general partners, assign the general 

partners percentages of the Funds' total commitments and 

investment profits, and require the Funds to pay their general 

partners an annual management fee.4 The Sun Funds' general 

partners, which are themselves organized as limited partnerships, 

have limited partnership agreements, which vest exclusive control 

over the general partners' "material partnership decisions" in 

limited partnership committees. These limited partnership 

committees are each made up of two individuals, Marc Leder and 

Rodger Krouse. These two men also founded and serve as the coCEOs and sole shareholders of SCAI. Leder and Krouse were the co-

 4 The Sun Funds owe to their general partners an annual 

management fee equal to two percent of their total commitments. A 

general partner may waive these fees to receive "waived fee 

amounts," which reduce its capital obligations in the event of a 

Sun Fund's future capital call. Additionally, the Sun Funds 

receive an offset to the fees they owe their general partners 

commensurate to a portion of the fees the portfolio companies pay 

the management companies. When a Fund's management fee offsets 

exceed its management fees owed in a six-month period, it receives 

a "carryforward" that may offset the fees owed in the subsequent 

six-month period. 

The district court quite properly found Sun Fund III's 

fee waivers and Sun Fund IV's carryforwards to be direct economic 

benefits because they each provided either current, or potential 

future, financial benefits that a passive investor would not 

accrue. Sun Capital Partners III, LP v. New England Teamsters & 

Trucking Indus. Pension Fund, 172 F. Supp. 3d 447, 453–54 (D. Mass. 

2016) (Sun Capital III). 
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CEOs of the management company SCPM IV.5 

B. The Operation of the Sun Funds and SBI 

The Funds used their controlling share of portfolio 

companies "to implement restructuring and operational plans, build 

management teams, become intimately involved in company 

operations, and otherwise cause growth in the portfolio 

companies." Sun Capital II, 724 F.3d at 134. The Sun Funds owned 

and managed their acquisitions through various corporate 

intermediaries. The Sun Funds together sought out potential 

portfolio companies and, through SCAI, developed restructuring and 

operating plans before acquisition. The Sun Funds then would 

attempt to sell a portfolio company for a profit, typically within 

two to five years of acquisition. The Sun Funds would acquire, 

restructure, and sell companies both independently and together.6

As part of their acquisition of SBI, the Sun Funds formed 

and financed Sun Scott Brass, LLC ("SSB-LLC"). Sun Fund III owned 

30% of SSB-LLC and Sun Fund IV owned 70% of SSB-LLC. These shares 

reflect Sun Fund III investing $900,000 and Sun Fund IV investing 

$2.1 million in SSB-LLC. SSB-LLC in turn formed and financed Scott 

 5 The record does not include SCPM III's Limited Liability 

Company Agreement, and so does not set forth the identity of SCPM 

III's executives. 

6 The record shows that Sun Funds III and IV held interests 

in eighty-eight entities at the relevant times, of which only seven 

overlapped. Only the ownership of SBI is at issue here. 
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Brass Holding Corporation ("SBHC"), a wholly owned, subsidiary 

holding company. SBHC used the Sun Funds' $3 million investment 

in SSB-LLC and $4.8 million in debt to purchase all of SBI's stock. 

The purchase price reflected a 25% discount from the fair market 

value of the SBI stock at acquisition to account for SBI's known, 

unfunded pension liability. The Funds, through SCAI employees 

placed in SBI, jointly operated SBI. 

C. Procedural History 

 In Sun Capital II, we remanded to the district court to 

determine whether the Funds were under common control with SBI and 

whether Sun Fund III engaged in trade or business.7 724 F.3d at 

150. It determined that the Sun Funds had formed a partnershipin-fact sitting on top of SSB-LLC and that this partnership-infact owned 100% of SBI through SSB-LLC, and so concluded the Funds 

met the "common control" test utilized in MPPAA law. Sun Capital 

Partners III, LP v. New England Teamsters & Trucking Indus. Pension 

Fund, 172 F. Supp. 3d 447, 463–66 (D. Mass. 2016). That test is 

derived from tax law. See 26 C.F.R. § 1.414(c)-2(b); 29 C.F.R. 

§§ 4001.2, 4001.3(a) (incorporating regulations promulgated under 

26 U.S.C. § 414(c)). The district court held that this 

 7 On remand, the district court held that Sun Fund III 

engaged in trade or business. Sun Capital III, 172 F. Supp. 3d at 

454–55. The Funds acknowledge that our decision in Sun Capital II 

controlled this holding and do not challenge it on appeal. But 

the Funds "reserve the right to seek further review of this . . . 

decision." 
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partnership-in-fact engaged in "trade or business" in its 

operation of SBI. Sun Capital III, 172 F. Supp. 3d at 466–67. 

Accordingly, the district court held the Sun Funds jointly and 

severally responsible for SBI's withdrawal liability. Id. at 467. 

The Sun Funds appealed the rulings that they were under 

common control with SBI, that they formed a partnership-in-fact, 

and, if a partnership-in-fact did exist, that it engaged in trade 

or business. PBGC filed an amicus brief in support of the district 

court ruling. 

II. 

A. Standard of Review 

This case reaches the court on appeal from a grant of 

summary judgment. "We review a grant or denial of summary 

judgment, as well as pure issues of law, de novo." Sun Capital 

II, 724 F.3d at 138 (citing Rodriguez v. Am. Int'l Ins. Co. of 

P.R., 402 F.3d 45, 46–47 (1st Cir. 2005)). This includes both the 

determination of withdrawal liability and the recognition of a 

partnership-in-fact. See Pension Ben. Guar. Corp. v. Beverley, 

404 F.3d 243, 246, 250–53 (4th Cir. 2005). Because the parties 

filed cross-motions for summary judgment, we "view each motion, 

separately, in the light most favorable to the non-moving party, 

and draw all reasonable inferences in that party's favor." 

OneBeacon Am. Ins. Co. v. Commercial Union Assurance Co. of Can., 

684 F.3d 237, 241 (1st Cir. 2012) (internal quotation marks 
- 11 - 

omitted). 

B. Withdrawal Liability under the MPPAA 

 Congress enacted the MPPAA to ensure defined pension 

benefit plans remain viable, dissuade employers from withdrawing 

from multiemployer plans, and enable a pension fund to recoup any 

unfunded liabilities. See PBGC v. R.A. Gray & Co., 467 U.S. 717, 

720–22 (1984). An employer completely withdraws from a 

multiemployer plan when it "(1) permanently ceases to have an 

obligation to contribute under the plan, or (2) permanently ceases 

all covered operations under the plan." 29 U.S.C. § 1383(a). On 

withdrawal, an employer must pay its proportionate share of the 

plan's "unfunded vested benefits." Id. § 1391; see also id. 

§ 1381; Concrete Pipe & Prods. of Cal., Inc. v. Constr. Laborers 

Pension Tr. for S. Cal., 508 U.S. 602, 608–11 (1993); Sun Capital 

II, 724 F.3d at 138. 

 To prevent evasion of the payment of withdrawal 

liability, the MPPAA imposes joint and several withdrawal 

liability not only on the withdrawing employers but also on all 

entities (1) under "common control" with the obligated 

organization (2) that qualify as engaging in "trade or business." 

29 U.S.C. § 1301(b)(1); see also Sun Capital II, 724 F.3d at 138. 

The imposition by Congress of withdrawal liability on commonly 

controlled group members can have the beneficial effect of delaying 

or preventing pension plans from becoming insolvent, preventing 
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reductions in pension benefits, and limiting claims on public 

monies, i.e., PBGC's multiemployer insurance fund. See PBGC v. 

Dickens (In re Challenge Stamping & Porcelain Co.), 719 F.2d 146, 

150 (6th Cir. 1983). 

C. Common Control 

 The MPPAA's "common control" provision exists to prevent 

the "shirking [of] ERISA obligations by fractionalizing operations 

into many separate entities." Cent. States Se. & Sw. Areas Pension 

Fund v. Messina Prods., LLC, 706 F.3d 874, 878 (7th Cir. 2013) 

(quoting Cent. States, Se. & Sw. Areas Pension Fund v. White, 258 

F.3d 636, 644 (7th Cir. 2001)). ERISA, of which the MPPAA is a 

part, as a remedial statute, is to be construed liberally. 

Teamsters Pension Tr. Fund-Bd. of Trs. of W. Conference v. Allyn 

Transp. Co., 832 F.2d 502, 507 (9th Cir. 1987). We have held, in 

consequence, that the common control provision "in effect, pierces 

the corporate veil and disregards formal business structures." 

Sun Capital II, 724 F.3d at 138. And other circuits which have 

addressed the question agree. See Messina, 706 F.3d at 877 

(holding that the MPPAA can "pierce corporate veils and impose 

[withdrawal] liability on owners and related businesses"); Ceco 

Concrete Constr., LLC, v. Centennial State Carpenters Pension Tr., 

821 F.3d 1250, 1260 (10th Cir. 2016) (holding the same). The 

legislative history is also consistent with this view. See S. 

Rep. No. 383, at 43 (1974) ("[T]he committee, by [§ 1301(b)], 
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intends to make it clear that the . . . provisions cannot be 

avoided by operating through separate corporations instead of 

separate branches of one corporation."); H.R. Rep. No. 807, at 50 

(1974) (same). 

 In 1986, Congress authorized PBGC to promulgate 

regulations for implementing the common control provision 

"consistent and coextensive with regulations prescribed for 

similar purposes by the Secretary of the Treasury under section 

414(c) of Title 26" of the Internal Revenue Code. 29 U.S.C. 

§ 1301(b)(1). 

The MPPAA regulations adopted in 1996 by PBGC, in turn, 

adopt the Treasury Department's regulations governing "common 

control." The regulations state that entities are under common 

control if they are members of a "parent-subsidiary group of trades 

or business under common control."8 26 C.F.R. § 1.414(c)-2(b); 29 

C.F.R. §§ 4001.2, 4001.3(a) (incorporating Treasury regulations 

under 26 U.S.C. § 414(c)). Notably, PBGC has not provided the 

courts or parties with any further formal guidance on how to 

determine common control specifically in the MPPAA context. Nor 

has PBGC updated its regulation on common control, 29 C.F.R. 

§ 4001.3, since that regulation's adoption. 

 8 There are also regulations defining "brother-sister 

groups of trades or businesses under common control," but these 

are not relevant to this appeal. See 26 C.F.R. § 1.414(c)-2(c). 
- 14 - 

The Treasury regulations9 define a "parent-subsidiary 

group" under the term "parent-subsidiary groups of trades or 

businesses under common control" as: 

one or more chains of organizations conducting 

trades or businesses connected through 

ownership of a controlling interest with a 

common parent organization if . . . (i) [a] 

controlling interest in each of the 

organizations, except the common parent 

organization, is owned . . . by one or more of 

the other organizations; and (ii) [t]he common 

parent organization owns . . . a controlling 

interest in at least one of the other 

organizations. 

26 C.F.R. § 1.414(c)-2(b)(1). 

Treasury regulations also establish that there is a 

"controlling interest" if there is "ownership of stock possessing 

at least 80 percent of total combined voting power . . . or at 

least 80 percent of the total value of shares." Id. § 1.414(c)-

2(b)(2)(A). The plain language of these provisions requires us to 

find, and ascribe liability to, the entity that controls (by at 

least 80%) the withdrawn employer. See Dickens, 719 F.2d at 151 

("The purpose of the 80% regulation is obviously to find the party 

in control."). 

D. Federal Partnership Law 

 Like the district court, we inquire into the legal 

 9 We also do not engage the Funds' argument that we should 

consider interpreting present Treasury regulations in light of the 

fate of earlier IRS regulations concerning partnerships and 

corporations which were rejected by some circuits. 
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question of whether the record demonstrates the Funds formed a 

partnership-in-fact, as a matter of federal common law, to acquire 

and operate SBI through SSB-LLC. 

We must look to federal tax law on the partnership-infact issue. We do so because Congress "intended that a body of 

Federal substantive law [would] be developed by the courts to deal 

with issues involving rights and obligations under private welfare 

and pension plans." Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 

134, 156 (1985) (quoting Remarks of Senator Javits, 120 Cong. Rec. 

29,942 (1974)); Bd. of Trs. of W. Conference of Teamsters Pension 

Tr. Fund v. H.F. Johnson, Inc., 830 F.2d 1009, 1014 (9th Cir. 1987) 

(quoting the same with respect to MPPAA withdrawal liability). 

Moreover, by statute, PBGC's "common control" regulations must be 

"consistent and coextensive" with treasury regulations under 

§ 414(c). 29 U.S.C. § 1301(b)(1). These treasury regulations 

incorporate federal tax law's definition of partnership. 26 C.F.R. 

§ 1.414(c)–2(a) (referencing 26 U.S.C. § 7701(a)(2)). And courts 

facing similar issues have relied on federal tax law. See, e.g., 

Connors v. Ryan's Coal Co., Inc., 923 F.2d 1461, 1466–67, 1467 

n.37 (11th Cir. 1991) (relying on federal tax precedent to affirm 

recognition of a partnership and holding one of the partners 

responsible for the other partner's withdrawal liability). 

Federal tax law provides that the choice(s) of 

organizational form under state law does not control this question 
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of whether a partnership-in-fact was established. See Comm'r v. 

Tower, 327 U.S. 280, 287–88 (1946) (holding that federal law 

governs whether parties formed partnership for tax purposes); H.F. 

Johnson, Inc., 830 F.2d at 1014 (concluding that federal law 

governed whether parties formed a partnership and so were liable 

for pension withdrawal under ERISA). But state law, and express 

disclaimers of partnership formation that are determinative under 

state law, do provide some guidance. H.F. Johnson, Inc., 830 F.2d 

at 1014 (holding that, "while [a court] may look to state law for 

guidance," federal law governs whether joint venturers share 

withdrawal liability). 

The Internal Revenue Code defines a "partnership" to 

include "a syndicate, group, pool, joint venture, or other 

unincorporated organization, through or by means of which any 

business, financial operation, or venture is carried on, and which 

is not, within the meaning of this title, a trust or estate or a 

corporation." 26 U.S.C. § 7701(a)(2) (emphasis added). It 

similarly defines "partner" to include "a member in such a 

syndicate, group, pool, joint venture, or organization." Id. 

 We look to the partnership10 factors the Tax Court 

 10 A joint venture differs from a partnership primarily in 

scope, see Podell v. Comm'r, 55 T.C. 429, 432 (1970), and the 

differences do not affect our analysis. Consequently, and like 

the district court and parties to this case, we employ the terms 

"partner" and "partnership" in our analysis. 
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adopted in Luna. 42 T.C. at 1077–78. The factors are: 

1. "The agreement of the parties and their conduct in 

executing its terms"; 

2. "the contributions, if any, which each party has made 

to the venture"; 

3. "the parties' control over income and capital and the 

right of each to make withdrawals"; 

4. "whether each party was a principal and coproprietor, 

sharing a mutual proprietary interest in the net 

profits and having an obligation to share losses, or 

whether one party was the agent or employee of the 

other, receiving for his services contingent 

compensation in the form of a percentage of income"; 

5. "whether business was conducted in the joint names of 

the parties"; 

6. "whether the parties filed Federal partnership returns 

or otherwise represented to respondent or to persons 

with whom they dealt that they were joint venturers"; 

7. "whether separate books of account were maintained for 

the venture"; and 

8. "whether the parties exercised mutual control over and 

assumed mutual responsibilities for the enterprise." 

Id. 
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To the extent the Funds argue we cannot apply the Luna 

factors because they have organized an LLC through which to operate 

SBI, we reject the argument. Merely using the corporate form of 

a limited liability corporation cannot alone preclude courts 

recognizing the existence of a partnership-in-fact. There is 

precedent for recognizing a partnership-in-fact where the parties 

have formed a different entity through an express agreement. 

Wabash Railway Co. v. American Refrigerator Transit Co., 7 F.2d 

335, 342–44 (8th Cir. 1925), cert. denied, 270 U.S. 643 (1926), 

and Shorb v. Beaudry, 56 Cal. 446, 450 (1880), do just that. See 

also In re Hart, Nos. 09-71053, 11-42424, 2014 WL 1018087, at *20 

n.11 (Bankr. N.D. Cal. Mar. 14, 2014) ("Shorb [v. Beaudry], though 

dated, is still authority in California."). Given our 

understanding, we also reject the separate argument made by the 

Funds that the question of liability is resolved by the district 

court's conclusion that "[t]he conventional theories of a general 

partnership -- those that on the face reflect operational and 

institutional overlap between the Funds -- are not evident here." 

Sun Capital III, 172 F. Supp. 3d at 463. 

If the Funds have, under this multi-factored Luna test, 

formed a partnership-in-fact, then under the common control 

regulations they are jointly and severally liable for the debts of 

the partnership, including MPPAA withdrawal liability, if the 

separate trade or business test is also met. E.g., Cent. States, 
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Se. & Sw. Areas Pension Fund v. Johnson, 991 F.2d 387, 391–92 (7th 

Cir. 1993). 

 Importantly, federal common law11 allows a preincorporation venture or partnership to survive the fact of the 

partners incorporating. See Wabash Ry., 7 F.2d at 342–44; cf. 

Chi., Milwaukee & St. Paul Ry. Co. v. Minn. Civic & Commerce Ass'n, 

247 U.S. 490, 498 (1918) (holding, for the purposes of a regulatory 

regime, that a "technically . . . separate," subsidiary 

corporation was "a mere agency or instrumentality" of the two 

railway corporations that wholly controlled it). That is, under 

federal law, if entities have in fact formed a partnership, merely 

creating a corporation through which they pursue the goals of the 

partnership does not necessarily end that partnership. Although 

not as onerous as the common law veil piercing standard, the test 

is rigorous: when parties, including when operating as a 

partnership, "control[] a subsidiary company so that it may be 

used as a mere agency or instrumentality," a court may "deal with 

the substance of the transaction involved as if the corporate 

agency did not exist and as the justice of the case may require." 

Wabash Ry., 7 F.2d at 344. 

 11 See also Jolin v. Oster, 172 N.W.2d 12, 16 n.1 (Wis. 

1969) (collecting cases stating whether jurisdictions recognize 

joint ventures may survive incorporation, and noting the Eighth 

Circuit does). 
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III. 

The MPPAA, ERISA, and tax law require courts to look 

beyond how the parties label, or structure, themselves. Courts 

must rather look to the substance of the relationships. See, e.g., 

Connors, 923 F.2d at 1467–68 (finding MPPAA withdrawal liability 

where individuals formed a partnership despite never explicitly 

agreeing to form one); Johnson, 991 F.2d at 391–94 (adopting the 

test in Connors).12 PBGC regulations direct us to Treasury 

regulations governing common control, which in turn require us to 

determine, under federal partnership law and the Luna test, whether 

the Funds formed a partnership-in-fact. There are some facts here 

under the Luna factors that tend to support a conclusion that the 

Sun Funds formed a partnership-in-fact to assert common control 

over SBI, but consideration of all of the factors leads to the 

opposite conclusion. 

 We first consider the Luna factors that favor a finding 

of de facto partnership. Even before incorporating SSB-LLC, the 

Sun Funds together "[sought] out potential portfolio 

companies . . . in need of extensive intervention with respect to 

their management and operations, to provide such intervention, and 

then to sell the companies." Sun Capital II, 724 F.3d at 142 

 12 Indeed in Tower, the Supreme Court disregarded the 

parties' own identification as a partnership when the substance of 

their relationship did not evidence a partnership. 327 U.S. at 

282, 291–92. 
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(emphasis added). The Funds, through SCAI, developed 

restructuring and operating plans for target companies before 

actually acquiring them through LLCs.13 Id. This behavior is some 

evidence of the Sun Funds "exercis[ing] mutual control over and 

assum[ing] mutual responsibilities for the enterprise" of 

identifying, acquiring, and selling portfolio companies together. 

Luna, 42 T.C. at 1078. Moreover, if the Sun Funds had in fact 

formed a partnership through these pre-incorporation activities, 

the mere creation of SSB-LLC would not, as a matter of law, in and 

of itself end this already-existing partnership-in-fact. See 

Wabash Ry., 7 F.2d at 342–44. 

The organization of the control of the Sun Funds and of 

control over SBI also is some evidence of a partnership-in-fact. 

The two men in control of the Funds' general partners, Leder and 

Krouse, essentially ran things for both the Funds and SBI.14 

 13 This was a usual mode of operation; the Funds similarly 

coinvested and comanaged other companies between 2005 and 2008. 

They adopted the same organizational structure for these companies 

as they did with SBI. 

14 Sun Capital III, 172 F. Supp. 3d at 461–62. As the only 

members of the Sun Funds' general partners' limited partner 

committees, Leder and Krouse wholly controlled the general 

partners and, by extension, the Sun Funds. Sun Capital II, 724 

F.3d at 134. Although the Sun Funds have different limited 

partners, these partners may not participate in management 

decisions, and so Leder and Krouse had sole management authority. 

See B. Cheffins & J. Armour, The Eclipse of Private Equity, 33 

Del. J. Corp. L. 1, 9 (2008) (discussing the role of limited 

partners). 
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Together, and at Leder and Krouse's direction, the Sun Funds placed 

SCAI employees in two of SBI's three director positions, allowing 

SCAI to control SBI. Sun Capital III, 172 F. Supp. 3d at 467. 

Moreover, this pooling of resources and expertise in SCAI, which 

the Funds used not only to identify, acquire, and manage portfolio 

companies, and structure those deals, but to provide management 

consulting and employees to portfolio companies, including SBI, is 

evidence tending to show a partnership. See Cahill v. Comm'r, 106 

T.C.M. (CCH) 324, 2013 WL 5272677, at *4 (2013) (concluding a 

party's desire "to pool his resources and to develop business 

jointly" evidenced a partnership); Luna, 42 T.C. at 1078 (holding 

that "mutual control over and . . . mutual responsibilities for 

[an] enterprise" indicate a partnership-in-fact). Indeed, the 

record does not show a single disagreement between the Sun Funds 

over how to operate SSB-LLC. The Funds' conduct in managing SSBLLC is further evidence of a partnership-in-fact sitting above. 

Cf. Luna, 42 T.C. at 1077 (paralleling Luna factor one: "[t]he 

agreement of the parties and their conduct in executing its terms" 

(emphasis added)). 

We next discuss the Luna factors that counsel against 

recognizing a partnership-in-fact. The record evidence is clear 

that the Funds did not "intend[] to join together in the present 

conduct of the enterprise" (at least beyond their coordination 

within SSB-LLC). Comm'r v. Culbertson, 337 U.S. 733, 742 (1949); 
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see also Luna, 42 T.C. at 1077 (counting against factor one). The 

fact that the Funds expressly disclaimed any sort of partnership 

between the Funds counts against a partnership finding as to 

several of the Luna factors. See Luna, 42 T.C. at 1077-78 

(counting against factor one, the "agreement of the parties"; 

factor five, "whether business was conducted in the joint names of 

the parties"; and factor six, "whether the parties . . . 

represented to . . . persons with whom they dealt that they were 

joint venturers"). Most of the 230 entities or persons who were 

limited partners in Sun Fund IV were not limited partners in Sun 

Fund III. The Funds also filed separate tax returns, kept separate 

books, and maintained separate bank accounts -- facts which tend 

to rebut partnership formation.15 Id. at 1078 (counting against 

factors six and seven). The Sun Funds did not operate in parallel, 

that is, invest in the same companies at a fixed or even variable 

ratio, which also shows some independence in activity and 

structure. 

The creation of an LLC by the Sun Funds through which to 

acquire SBI also shows an intent not to form a partnership 

(although not as categorically as the Funds contend). The 

formation of an LLC both prevented the Funds from conducting their 

 15 There was some disagreement at oral argument about 

whether the record shows the Sun Funds co-investing with entities 

that Leder and Krouse do not control. The answer to this question 

would not change our decision. 
- 24 - 

business in their "joint names" (Luna factor five) and limited the 

manner in which they could "exercise[] mutual control over and 

assume[] mutual responsibilities for" managing SBI (Luna factor 

eight). Id. 

The fact that the entities formally organized themselves 

as limited liability business organizations under state law at 

virtually all levels distinguishes this case from Connors and other 

cases in which courts have found parties to have formed 

partnerships-in-fact, been under common control, and held both 

parties responsible for withdrawal liability. E.g., Connors, 923 

F.2d at 1467–68. These cases often involved individuals (typically 

married couples), rather than limited liability business entities 

like limited partnerships, further distinguishing them from the 

instant case. E.g., id. at 1464. And many of the cases in which 

courts have recognized these types of partnerships involved 

fractionalizing already-existing businesses, rather than pursuing 

investments in different ones. E.g., id. at 1467–68; Johnson, 991 

F.2d at 392–94. Using the Luna factors, we conclude that most of 

them, on these facts, point away from common control. 

We credit the district court for its careful and reasoned 

analysis of the complex facts and law at hand. Nonetheless, the 

district court (and the Pension Fund and PBGC) too greatly 

discounted the Luna factors rebutting partnership-in-fact 

formation. Importantly, although the district court correctly 
- 25 - 

concluded that incorporating SSB-LLC did not in and of itself 

prevent recognizing a partnership-in-fact between the Funds, SSBLLC's incorporation implicates many Luna factors counting against 

that recognition (an analysis absent from the district court's 

opinion). 

Moreover, we are reluctant to impose withdrawal 

liability on these private investors because we lack a firm 

indication of congressional intent to do so and any further formal 

guidance from PBGC. Two of ERISA and the MPPAA's principal 

aims -- to ensure the viability of existing pension funds and to 

encourage the private sector to invest in, or assume control of, 

struggling companies with pension plans -- are in considerable 

tension here. 

We do not reach other legal issues in the case, including 

the trade or business issue. We decide the issue of common control 

only as it has been framed before us and do not reach other 

arguments that might have been available to the parties. 

IV. 

We reverse entry of summary judgment for the Pension 

Fund and remand with directions to enter summary judgment for the 

Sun Funds. No costs are awarded.