ERISA-Seventh Circuit Holds That Defendant May Not Be Responsible For Withdrawal Liability

In Hotel 71 Mezz Lender LLC v. The National Retirement Fund, No. 14-2034 (7th Cir. 2015), the National Retirement Fund (“NRF”) and its trustees sought to hold Hotel 71 Mezz Lender LLC (“Mezz Lender”) and Oaktree Capital Management, L.P. (“Oaktree”) responsible for multiemployer pension fund withdrawal liability pursuant to section 4201 of ERISA.

In this case, Oaktree, through Mezz Lender, provided financing for the acquisition of a hotel by Chicago H&S Hotel Property LLC (“H&S”). When H&S later defaulted on the loan, it was taken into bankruptcy and the hotel was sold. NRF is a multiemployer pension plan to which H &S had been making employer contributions for the hotel employees under a collective bargaining agreement. NRF contends that the sale of the hotel triggered withdrawal liability to NRF on the part of H&S and any other “trade or business” under common control with it–including both Oaktree and Mezz Lender (together, the “Oaktree parties”). One issue for the Seventh Circuit Court of Appeals (the “Court”)-do the Oaktree parties have any responsibility for the withdrawal liability? The Oaktree parties had come under common control with H &S, so the remaining question was whether they conducted a “trade or business”.

In analyzing the case, the Court concluded that there was uncertainty and an absence of evidence as to whether the Oaktree parties were engaged in a “trade or business”. As such, the Court could not determine whether the Oaktree parties could have responsibility for the withdrawal liability. Consequently, the Court remanded the case back to the district court to make this determination.

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