A corporate entity that buys the assets of another corporate entity may be liable for the seller's delinquent contributions to multiemployer pension and welfare plans governed by ERISA, the U.S. Court of Appeals for the Third Circuit has held.

In Einhorn v. M.L. Ruberton Construction Company, No. 09-4204 (3rd Circuit 2011), the Court held that the purchaser in Einhorn was liable for the delinquent contributions because it knew about them before the sale, and there was a sufficient continuity of operations before and after the sale. 

Although the Court had previously held successors liable for ERISA payments after a merger, this was the first time it expanded liability to include asset purchases. The Court reasoned that successors generally are in a better position to pay delinquent ERISA contributions, and to negotiate a lower purchase price or an indemnification right in order to account for such potential liability.

The Court also emphasized the importance of protecting victimized employees. In Einhorn, 53 union workers and, in some cases, their families had been left without health insurance after the sale. Thus, expansion of successor liability was necessary to vindicate ERISA statutory policy, which is to protect plan participants and their beneficiaries, which is one of the underlying policy goals of ERISA.

If you have any questions about this new development, please contact Brian M. Pinheiro at 215.864.8511 or pinheiro@ballardspahr.com; or Scott Towers at 215.864.8632 or towerss@ballardspahr.com.

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