The Capital Commitment

Proskauer on Private Fund Litigation

Tag Archives: Liability

The Portfolio Company Playbook: Chapter 4 – Navigating Direct Liability Risks to the Fund

By Timothy W. Mungovan, Michael R. Hackett, Jonathan M. Weiss and Adam L. Deming on Posted in Asset Management, Compliance, Disputes, Enforcement, Private Equity, Private Equity Litigation, Regulation
As litigation claims against portfolio companies have increased, so have accompanying claims asserted directly against funds (and their sponsors). Plaintiffs’ reasoning for including funds as defendants is no mystery: funds often have greater financial resources than the defendant portfolio company, particularly where the portfolio company is in distress, and thus represent the proverbial “deep pockets.” … Continue Reading

The Portfolio Company Playbook – Chapter 3: Navigating Risk from Company Employee Claims

By Timothy W. Mungovan, Jonathan M. Weiss, Michael R. Hackett and Adam L. Deming on Posted in Asset Management, Compliance, Disputes, Enforcement, Private Equity, Private Equity Litigation, Regulation
Another source of litigation risk for fund sponsors are claims brought by portfolio company employees.  Sponsors should be aware of these risks, particularly when the portfolio company is in distress or is considering a sale or other transaction affecting the disposition of shares in the company.  We have set forth below just a few examples … Continue Reading

Portfolio Companies Continue to be a Source of Litigation Risk

By Margaret A. Dale, Michael R. Hackett, Kirsten E. Lapham, William Komaroff, Timothy W. Mungovan, Dorothy Murray, Joshua M. Newville, Todd J. Ohlms, Seetha Ramachandran, Ana Vermal, Samuel J. Waldon, Jonathan M. Weiss, Anthony M. Drenzek, James Anderson, Alexandra V. Bargoot, William D. Dalsen, Adam L. Deming, David W. Heck, Hena M. Vora and Lucy C. Wolf on Posted in Asset Management, Compliance, Disputes, Enforcement, Private Credit, Private Equity, Regulation
A significant ownership stake in a portfolio company has always raised the specter of claims against funds, sponsors, and sponsor-appointed board designees, if for no other reason than they are perceived by the plaintiffs’ bar to be deep pockets.  This risk has only increased in recent years, as it has become less taboo – indeed, … Continue Reading

The Portfolio Company Playbook – Chapter 2: Navigating Risk from Conflicts of Interest

By Timothy W. Mungovan, Jonathan M. Weiss, Michael R. Hackett, Alexandra V. Bargoot and Adam L. Deming on Posted in Asset Management, Compliance, Disputes, Enforcement, Private Equity, Private Equity Litigation, Regulation
Private funds frequently negotiate for special rights when making an investment in a portfolio company, such as the right to appoint one or more board directors, voting rights, and liquidation preferences. Fund sponsors often focus solely on the positive aspects of these special rights, such as increased control, without considering fully other implications. As the … Continue Reading

The Portfolio Company Playbook – Chapter 1: A Fund Sponsor’s Guide to Navigating Risks, Conflicts, and Regulatory Concerns Arising from Portfolio Companies

By Timothy W. Mungovan, Jonathan M. Weiss, Michael R. Hackett, Alexandra V. Bargoot and Adam L. Deming on Posted in Asset Management, Compliance, Disputes, Enforcement, Private Equity, Private Equity Litigation, Regulation
Over the last few years, we have seen an uptick in litigation claims against sponsors and funds arising out of their interests in portfolio companies.  A fund sponsor’s participation on a portfolio company board, in particular, is a risk factor for the entire investment structure (the GP, the Management Company, individual members of the GP … Continue Reading

Ten Tips for Navigating Risks and Liability at Portfolio Companies During COVID-19

By Timothy W. Mungovan, Michael R. Hackett, Jonathan M. Weiss, Alexandra V. Bargoot and Adam L. Deming on Posted in Asset Management, Compliance, Private Equity, Private Equity Litigation, Regulation
Many portfolio companies continue to confront business disruptions as a result of the COVID-19 pandemic. Even prior to the pandemic, we were seeing an uptick in litigation claims against sponsors and funds arising out of portfolio companies. The liquidity challenges since March have increased those risks at some companies. For sponsors, many of these risks … Continue Reading

First Circuit Reverses District Court’s “Partnership-in-Fact” Holding and Finds Private Equity Funds Not Part of Controlled Group and Not Liable for Portfolio Company’s Pension Liabilities

By William D. Dalsen, Jennifer Rigterink, Timothy W. Mungovan, Ira G. Bogner, Ira Golub, Justin Alex, Adam Scoll, Michael R. Hackett and Alexandra V. Bargoot on Posted in Disputes, Private Equity, Private Equity Litigation, Uncategorized
Last Friday, the U.S. Court of Appeals for the First Circuit ruled that two co-investing Sun Capital private equity funds had not created an implied “partnership-in-fact” for purposes of determining whether the Sun Funds were under “common control” with their portfolio company, Scott Brass, Inc. (SBI) – resulting in a ruling that the Sun Funds … Continue Reading
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