Judge Edward J. Davila denies TIBCO Software’s motion not to give information about KMPG audits to GAIN Capital.
There have been more twists and turns in the software overdeployment lawsuit brought by TIBCO Software against online trading major GAIN Capital. The latest developments concern an order issued by Magistrate Judge Viginia K. Demarchi of the California Northern District Court who had stepped in to resolve an evidence dispute between GAIN and TIBCO Software over what information must be provided by KPMG in relation to the 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, Magistrate 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.
In September, TIBCO and KPMG opposed the Magistrate Judge’s Order. TIBCO requested reconsideration of the Judge Demarchi’s Order, whereas KPMG complained of the heavy workload and expenses it faces.
TIBCO argued 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 said 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.
Apparently, TIBCO’s arguments were unconvincing to the Court. As per the latest Court filings, seen by FinanceFeeds, TIBCO’s motion is denied. Judge Edward J. Davila explained that a district judge may only reconsider the pretrial order of a magistrate judge “where it has been shown that . . . order is clearly erroneous or contrary to law”.
The case, captioned TIBCO Software Inc., v. Gain Capital Group, LLC (5:17-cv-03313), continues at the California Northern District Court.