Locked Out of the Data: A Modern Freeze-Out with AI

 Technology is changing everything around us rapidly, including disputes between business partners. Common themes triggering business divorce litigation include removing a shareholder from management, cutting off access to information, and excluding them from decisions. All of these things are being made easier to do with AI.

AI can be a critical tool to help operate certain businesses. CRM data, financial dashboards, sales tracking, forecasting, predictive analytics and other AI tools are becoming more commonplace – and necessary - every day. But when one partner starts implementing AI tools to run operations, the other partner can be left behind – or at least feel that way. In this scenario, only one partner controls the system and has access to key information. Decisions are made without transparency, putting the less tech-savvy owner effectively “in the dark.” The person in charge of technology can use this control to effectively strip his partner of meaningful participation.

Exclusion from business records and control can now take new, more subtle forms. “It’s not my fault I’m the only one who can interpret the AI generated reports. You should have learned how to use it, too.” Or, data can now be stored in platforms that one partner has no idea how to access – and may not even know exists. If your access is restricted in this way, it is vastly more difficult to evaluate performance, challenge decisions, or even protect your investment.

Not every technology imbalance is wrongful, of course. And much of it is inevitable, as partners almost always have different skill sets. But red flags include:

• • Refusal to share financial or operational data
  • Selective reporting (only showing certain metrics)
  • Sudden migration to systems controlled by one owner
  • Use of “technical complexity” to avoid questions

Don’t be afraid of technology – even AI. Some businesses will not survive without it.  But if the technology imbalance is turning into an uncomfortable information imbalance, do something about it. An attorney with expertise in this field can help you negotiate into your business relationship an agreement that access to complete data and information is non-negotiable, and avoid “single gatekeeper” systems. If your business partner will not compromise on these issues, it may portend a larger issue.

About the Author – Business Divorce in NJ

David C. Roberts, Chair of the firm, concentrates on complex commercial litigation, including fraud, trade secrets, and restrictive covenants, with a focus on business partnership and shareholder disputes in New Jersey. Known as business divorce litigation, these disputes often involve shareholder and LLC member oppression, embezzlement, owner freeze-outs, dissenter’s rights, and efforts to dissociate or expel an owner. Dave strives to resolve matters through mediation but is a seasoned trial attorney when needed. He frequently writes and lectures on minority shareholder disputes. With extensive experience representing both minority shareholders seeking buyouts and majority owners defending against such claims, Dave offers unique insight into the strategies and challenges of business disputes, particularly in family-owned companies.