KPMG, TIBCO Software oppose Court orders about producing info to GAIN Capital

Maria Nikolova

KPMG insists that the workload it faces due to the Court order is too heavy and that GAIN should cover associated costs.

About a fortnight after GAIN Capital secured a Court order directing KPMG to produce certain information related to audits of TIBCO Software products, the online trading company faces objections.

Let’s recall that Magistrate Judge Viginia K. Demarchi of the California Northern District Court had stepped in to resolve an evidence dispute between GAIN and TIBCO Software over what information must be provided by KPMG in relation to a lawsuit involving GAIN and TIBCO.

In this lawsuit, TIBCO alleges that it licensed certain software to GAIN during a limited term, but that GAIN deployed the TIBCO software outside that term in violation of its license agreements with TIBCO. TIBCO sues GAIN for breach of contract, breach of the covenant of good faith and fair dealing, and copyright infringement. TIBCO’s allegations of over-deployment and unauthorized use of the software by GAIN are based in large part on an audit conducted in 2016 at TIBCO’s request by KPMG.

GAIN denies TIBCO’s allegations, and counterclaims against TIBCO for fraud in the inducement, negligent misrepresentation, unfair competition, rescission based on unilateral mistake, and rescission based on mutual mistake. According to GAIN, KPMG did not perform the audit correctly, and TIBCO intentionally gave KPMG incorrect instructions on how to conduct the audit so that KPMG was certain to conclude that GAIN had exceeded the permissible scope of its licenses for TIBCO software.

In her Order, Judge Demarchi found that GAIN is correct in its request for some discovery from KPMG as the information would be relevant to its defenses and counterclaims in this case, particularly as it relates to the methodology used by KPMG to conduct the audit and the instructions provided by TIBCO to KPMG. For instance, whether KPMG used a different methodology to audit GAIN’s deployment of TIBCO software than it used to audit other customers’ use of the same software is relevant to GAIN’s claim that TIBCO deliberately instructed KPMG to use a methodology that would incorrectly yield findings of unauthorized use by GAIN.

Now, TIBCO and KPMG oppose the Judge’s Order. In a set of documents filed with the Court on Friday, September 14, 2018, TIBCO wants reconsideration of the Judge Demarchi’s Order, whereas KPMG complains of the heavy workload and expenses it faces.

TIBCO insists that Judge Demarchi’s ruling was “clear error and directly contrary to the law, and asks this court to revisit the issue”. In addition, TIBCO argues that the Magistrate committed clear error by ordering discovery into the confidential business dealings of TIBCO’s third party customers. TIBCO estimates that dozens of its customers would be impacted by such discovery and calls GAIN’s access to such data “an invasion of their confidential information”.

According to TIBCO, GAIN seeks discovery encompassing hundreds of thousands of pages of documents that have nothing to do with GAIN, or the substance of TIBCO’s claims in this case.

KPMG, although not a party in this case, is objecting to the Magistrate Judge order too.

According to KPMG, the Order permits discovery that will be inordinately burdensome for the firm. The Order first authorizes “discovery of documents sufficient to show the methodology used by KPMG to conduct audits of one or more of the TIBCO software products at issue in this case, including documents showing the results of the audits using that methodology.” To comply with that portion of the Order, KPMG will first need to review the electronic files maintained for all the software compliance reviews performed for TIBCO from January 1, 2014 to the present. KPMG estimates that there were over 70 software compliance reviews during this period.

KPMG is displeased because this will be a manual process and it anticipates retaining a number of contract attorneys to assist in this review. The review of the electronic files will be extraordinarily time consuming, detailed and expensive.

The second provision in the Order permits GAIN to “obtain discovery of all communications between TIBCO and KPMG regarding instructions for conducting the audit, the actual conduct of the audit, the methodology to be used to conduct the audit and the methodology actually used to conduct the audit for all audits of one or more of the TIBCO software products at issue in this case.”

Based on KPMG’s review of documents relating to the GAIN software compliance review, KPMG anticipates that some of these “communications” will be in the electronic files but many of them will be found in the ESI of the KPMG professionals who worked on the software compliance reviews. If KPMG is forced to move beyond the electronic files and begin searching ESI, the time and expense associated with the search, review and production of documents will increase significantly.

KPMG argues it should not be required to undertake this discovery unless GAIN can demonstrate that it cannot obtain the information that it needs from TIBCO. Moreover, KPMG says it should not be required to comply with the Order unless GAIN agrees to pay KPMG’s costs associated with the information requests.

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

Read this next

Digital Assets

Binance buys Japanese crypto exchange Sakura BitCoin

Binance, the world’s largest crypto exchange by traded volume, has made a fresh bid to enter Japan with the acquisition of Japanese-registered crypto exchange service provider Sakura Exchange BitCoin (SEBC). The financial terms of the transaction were not disclosed.

Industry News, Inside View

Viacheslav Taran: FX and Crypto industry mourns death of Libertex Group co-founder

FinanceFeeds reports with great sadness that Viacheslav Taran, Co-Founder of Libertex Group, passed away last Friday. 

Digital Assets

FTX founder SBF called to testify by Texas regulator

The Texas State Securities Board (TSSB) has called on Sam Bankman-Fried to testify during an administrative hearing scheduled for Feb. 2, 2023. The move marks yet another expansion of enforcement agencies’ probes into FTX’s activities following its insolvency.

Digital Assets

Despite FTX chaos, Italy welcomes crypto lender Nexo

Crypto lender Nexo has won regulatory approval from Italy’s financial regulators, allowing the exchange to continue serving Italian customers.

Institutional FX, Interviews

ION Markets for execution and clearing: Francesco Margini at FIA EXPO 2022

The CPO of Cleared Derivatives at ION Markets spoke about the need for automated execution and clearing in times of surging volumes and increased volatility.

Institutional FX

FIA EXPO 2022: Baton Systems President on building post trade rails for capital markets

As the world’s largest trade show for the listed derivatives dealers, the FIA Futures and Options Expo is a high point for the global cleared swaps community, with dozens of panels, educational sessions, networking opportunities and more.

Inside View

Olga Taran releases public statement in Monaco regarding “false accusations” against her late husband Viacheslav

Vyacheslav Taran, 53, founder of Forex Club and CEO of Libertex Group, was the sole passenger of a helicopter that crashed in Villefranche-sur-Mer this weekend. The helicopter crash is still under investigation, and authorities have not indicated any possibility of foul play.

Industry News

Brokeree Solutions Wins the “Best Emerging Fintech” Award

2022 has become, for Brokeree Solutions, a time of new inventions and developments. We are pleased that the industry has appreciated this emergence of new technologies

Metaverse Gaming NFT

Glip raises $2.5 million to develop class-A Web3 games ecosystem

Web3 game discovery & wallet app, Glip has raised an additional $2.5 million in new funding from a range of investors, bringing the total investments it received to $6 million thus far. 

<