GAIN Capital responds to TIBCO Software’s $22m claim for alleged software over-deployment

Maria Nikolova

GAIN rejects allegations by TIBCO about unauthorized use of its software and files counterclaims about fraud in the inducement and negligent misrepresentation.

Less than a month after TIBCO Software reiterated its allegations about software over-deployment against GAIN Capital, the online trading major has sought to reply to the accusations and has filed a set of counterclaims against the software firm.

On Thursday, June 14, 2018, GAIN Capital filed an answer to TIBCO’s complaint with the California Northern District Court. The document (a heavily redacted version of it was seen by FinanceFeeds) states that GAIN rejects the accusations against it. In addition, GAIN asserts a number of counterclaims against TIBCO.

GAIN states that TIBCO was simply not content with its legitimate license fee revenue stream. In 2016 (if not earlier), GAIN says, TIBCO began setting up its customers for expensive and extortionate games of “gotcha.” GAIN was allegedly one of TIBCO’s victims. TIBCO tricked GAIN into signing an “Order Form” (“2016 Order Form”) for TIBCO products and services that GAIN had not used and did not need.

The broker insists that the KMPG audit that purportedly indicated the software over-deployment by GAIN was flawed. After receiving the End of Deployment Report from GAIN in April 2016, TIBCO demanded an audit by KPMG regarding the deployment of TIBCO’s software. That audit purported to find “over-deployment” of TIBCO’s software by GAIN beyond what TIBCO claims GAIN had paid for. The over-deployment numbers are dubbed absurd by GAIN.

According to the broker, TIBCO deliberately rigged the audit to achieve the result it wanted by instructing KPMG to include in its count of the number of units deployed by GAIN, processors that were no longer in use by GAIN, and versions of TIBCO software that TIBCO had updated from time to time. Including non-operative processors and outdated versions of its software is said to have drastically inflated the purported deployment of TIBCO software. This intentional ruse resulted in TIBCO’s whopping so-called “Bill of Materials,” sent by email on or about October 20, 2016.

This step had a very important effect – GAIN explains – it moved the goal posts so far out, that even a wildly inaccurate and over-inflated “settlement” might seem palatable—especially to GAIN IT personnel who TIBCO made to feel were responsible for the purported over-deployment. This was deliberate. But GAIN’s accounts payable personnel did not respond to TIBCO’s payment requests. Negotiations between TIBCO and GAIN broke down, and TIBCO initiated its lawsuit in June 2017.

TIBCO says it is owed more than $22 million for unauthorized use of its software by the online trading major. TIBCO’s complaint asserts a number of claims against GAIN, including breach of contract; breach of the implied covenant of good faith and fair dealing; and copyright infringement.

GAIN’s counterclaims include: Fraud in the inducement; Negligent misrepresentation; Unfair competition; and Rescission based on unilateral mistake.

GAIN asks the Court to award GAIN damages, including but not limited to compensatory and punitive damages, together with pre-judgment and post-judgment interest, in an amount to be determined at trial. The broker also asks the Court to enter an order enjoining TIBCO from seeking any payments from GAIN for license fees, or claiming that it is owed any payments for license fees by GAIN, under the 2016 Bill of Materials.

The case is captioned TIBCO Software Inc., v. Gain Capital Group, LLC (5:17-cv-03313).

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