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Holding the Defensive Line: Delaware Court Rejects Extension of Warn Act Liability to Private Equity Sponsor
16 May 2013
Private equity sponsors may be attractive targets for claimants seeking deep pockets to hold responsible for employee-related liabilities if a portfolio company fails.
A recent decision from the U.S. Bankruptcy Court for the District of Delaware is good news for investors: the court rejected an attempt to hold a private equity sponsor liable for the federal WARN Act violations of its portfolio company.
Sponsors can dramatically improve their ability to defend against spillover liabilities of their portfolio companies by following best practices relative to corporate governance, corporate separateness and documentation of management agreements.
M. Natasha Labovitz
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