Court says Interactive Brokers to produce missing source code info sought by former customer

Maria Nikolova

A telephonic status conference regarding a discovery dispute was held on September 2, 2020.

The lawsuit brought by Robert Scott Batchelar, a former customer of Interactive Brokers, continues at the Connecticut District Court. He accuses the brokerage of negligently designing its software resulting in automatic liquidation of the positions in his account that cost him thousands of dollars more than it should have.

The latest developments in this case, which has been closely monitored by FinanceFeeds, concern a discovery dispute. The plaintiff says that the Court previously ordered Interactive Brokers to produce its Auto-Liquidation Software Source Code. In response, IB produced apparently complete Source Code from only three of the six Source Code modules. According to the plaintiff, IB is withholding Source Code from three of the six modules.

IB has not denied that the Source Code identified by the plaintiff is missing from the production, has not produced the missing Source Code, and has made no excuse for not having produced the Source Code.

Batchelar’s experts advise that examination of the missing Source Code is needed to confirm their initial opinions and identify for the Court the specific instructions in the code that are both (1) common to all class members’ liquidations and (2) the basis of Plaintiff’s claims in this litigation—both determinations being integral to the issue of class certification.

On September 2, 2020, proceedings were held before Judge Alvin W. Thompson. There was a conference to discuss the discovery dispute. According to a Court report, the defendants will produce the missing source code. Counsel will confer to work out a methodology for plaintiff’s counsel to access the source code materials. If the parties cannot agree, the court will convene an additional conference.

This marks another dispute between the parties in this case regarding access to the source code. Let’s recall that, on May 1, 2019, Albert Lukazik, a Software Engineering Department Head, Senior Technology Manager, and Information Security Officer for Interactive Brokers LLC and Interactive Brokers Group, Inc., filed a Declaration in support of defendants’ objection to produce source code materials.

In his Declaration, Lukazik stresses that the source code is one of Interactive’s foundational assets and incorporates its trade secrets and know-how accumulated over a period of more than 20 years. The source code is comprised of approximately 600,000 lines of code and it refers to various subsystems within Interactive’s trading system. If access to Interactive’s source code were made public, the brokerage’s competitors would potentially be able to replicate aspects of Interactive’s margin liquidation system, Mr Lukazik noted.

Such access could potentially also allow customers to improperly utilize Interactive’s trading platform in a manner that may result in heightened trading and liquidity risks to IB LLC and IBG, based on their improperly-gained knowledge of the source code, Mr Lukazik said.

In December 2019, Batchelar wrote to the Court stating that the brokerage had not completed document discovery and had not supplemented its written responses. Back then, Batchelar identified several categories of documents that in May 2019 Interactive Brokers agreed to produce, which it failed to produce. Generally, this sub-set of production covers exemplars of standard forms, computer logs and order tickets generated when Batchelar’s account was liquidated, non-privileged reports regarding liquidation of Plaintiff’s account, and documents supporting the defendants’ position on the certification factors (e.g. commonality, etc.).

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