This week’s New York Business Divorce takes us to the Garden State for a delightfully-written, post-trial decision by retired, recalled Appellate Division Judge Clarkson S. Fisher, Jr.
Cheshun v Sikand, Opinion [NJ Super Ct, Monmouth County May 7, 2025]), was a dissolution proceeding under New Jersey’s version of the Revised Uniform Limited Liability Company Law (“RULLCA”) between two 50/50 LLC member-managers who founded and operated an entity they hoped would perform clinical drug trials, but which never really got off the ground.
A couple of lessons emerge from Cheshun.
First, it seems obligatory for close entity owners and their litigation counsel to throw stones, cast aspersions, and lay blame for the business’s demise. But like marriages, sometimes business relationships fail because of good faith disagreements and reasonable, dashed expectations. Sometimes nobody is to blame. And that is ok.
Second, business owners may agree to part ways, but the decision to do so does not sever the existence of one’s ongoing fiduciary duties. Fiduciary duties continue through the conclusion of the wind up process. In the words of Judge Fisher, where a business entity is in a “state of un-woundedness,” failure to heed one’s fiduciary duties – even after an agreement to separate – can prove costly.
The following facts are derived from Judge Fisher’s opinion.
In October 2021, Plaintiff Zhannetta Cheshun (“Cheshun”) and Defendant Sanjay Sikand (“Sikand”) formed Mid Atlantic Pulmonary Research Associates, LLC (“MAPRA”) to perform clinical drug trials for major pharmaceutical manufacturers like AstraZeneca. MAPRA had no operating agreement, only an alleged “oral understanding that they would jointly manage the LLC and that they would equally split expenses and profits.”
According to Judge Fisher, “an entity like this one requires a few essentials, namely: contacts with pharmaceutical entities, administrative savvy in this particular context, and willing patients.” Cheshun was to supply the first and second. Sikand, who ran a medical practice in New Jersey, was to supply the third.
But in the “process of preparing for and pursuing drug trials, disagreements arose and, before long, they ceased working together and the business became inactive.” According to the opinion, “the teaming of plaintiff and defendant would have appeared to be a nice fit” because Cheshun had a “long and successful track record” in the clinical trials business, and Sikand would have seemed an ideal partner to supply medical expertise and the required number of patients for clinical trials. “Much of the elicited testimony,” wrote the Court, “focused on who was to blame for this falling out.”
A flashpoint for disagreement involved “the types of expenses that the LLC might be expected to incur.” In Judge Fisher’s view, Sikand “hadn’t focused on the details about the expenses a drug trial generates,” which “led to differences that seemed to reach a boiling point” when Sikand “expressed concerns about financial information that he thought wasn’t being made available, that he might be expected to bear more than his fair share of the expenses, and that he felt [Cheshun] was being clandestine.”
This led to a text exchange where Sikand’s office manager texted Cheshun that “SANJAY IS OUT” and to “[l]eave Sanjay alone.” Cheshun later sent an email confirming: “I . . . understand that you want to close. I see. No problem.” Based upon these exchanges, the Court found a mutual intent to dissolve the business under RULLCA’s second of several enumerated grounds for dissolution upon “the consent of all the members.”
In a lovely passage, the Court saw no reason to blame anyone for their falling out:
As noted above, the parties would have this court say who was right and who was wrong about their disagreements. The court finds no villain here. It’s just one of those situations best explained by songwriter Dave Mason’s ‘We Just Disagree’: ‘there ain’t no good guys, there ain’t no bad guys, there’s only you and me and we just disagree.’
The Court granted dissolution, then turned to the parties’ conduct during the wind up. Here, the Court was comfortable laying blame squarely upon Sikand. The Court wrote that after agreeing to part ways, Cheshun repeatedly “proposed sitting down and winding down the LLC – what she called a ‘friendly conclusion.’” Sikand, on the other hand, “just simply refused to speak with plaintiff or even recognize her existence. In shutting plaintiff out, however, defendant ignored the fact that, among other things: the LLC had a bank account with cash on hand; it had a contract . . . to run a trial on a drug manufactured by AstraZeneca,” and other assets and liabilities requiring division.
Drawing upon Justice Cardozo’s famous phrase from Meinhard v Salmon that “‘[n]ot honesty alone, but the punctilio of an honor the most sensitive’” is the standard co-partners owe one another, the Court wrote:
There is no doubt, and the court so finds, that these parties were tethered by fiduciary bands that by law remain intact – even now – and until such time as the LLC is properly wound down and dissolved.
The Court ruled that Sikand breached his fiduciary duties by draining MAPRA’s bank account of its cash on hand after he and Cheshun agreed to part ways, and by misappropriating a corporate opportunity when he “created his own LLC . . . and contracted behind plaintiff’s and the LLC’s backs” for the AstraZeneca clinical trial.
The Court concluded that “[w]hen defendant took that step, he acted as a constructive trustee for the LLC and whatever he earned on [the] contract should be viewed as having been done on the LLC’s behalf.” Unfortunately for Cheshun, her monetary recovery of Sikand’s profits from the drug trial was a disappointingly modest $7,425.
The biggest financial win for Cheshun was not on the merits, but on an application she made for attorneys’ fees. RULLCA has a discretionary fee-shifting provision – subsection (c) – built into the LLC dissolution statute itself, for which New York has no equivalent, permitting courts to award fees where an opponent “acted vexatiously, or otherwise not in good faith.” “It seems to this court,” wrote Judge Fisher, “that the refusal of an LLC member to cooperate in the dissolution of the LLC once the parties have agreed to dissolve, constitutes the type of vexatiousness or the lack of good faith that the Legislature intended to sanction through fee shifting.”
With all the misbehavior we love to write about here on New York Business Divorce, if New York were to adopt a fee-shifting statute like New Jersey’s, one suspects it would quickly become a feature of almost every LLC dissolution case.
A special thank you to Alexander Sakin, counsel for Cheshun, who sent me a copy of this article’s opinion. Here at New York Business Divorce, we like submissions from our readers. If it’s interesting, we may write about it.
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