HT-2021-000363 - [2025] EWHC 532 (TCC)

In June 2011, within a few weeks after the conclusion of the Neon litigation, Mr Rockmann visited Mr Moores at his home in Pebble Beach, California, during which a new project, to develop what subsequently became the SDM, was conceived.

In August 2011 Mr Rockmann returned to the US and attended a meeting with software developers Eric Spencer, Andrew Galewsky and Mr Bowler, who discussed ideas for a proposal to enable mainframe customers to migrate workloads to a non-mainframe platform. Following that meeting, Mr Moores and Mr Rockmann agreed that Mr Rockmann would set up a company and assemble a team to develop the concept. It was agreed that Mr Moores would be the ultimate beneficial owner and provide the funding for the venture.

In furtherance of the proposed venture, in August 2011, Mr Moores incorporated Texas Wormhole LLC (“Texas Wormhole”) for the purpose of developing what was then referred to as the “Rent Control” project.

On 3 November 2011 LzLabs was incorporated in Zürich, Switzerland. Mr Rockmann was appointed as Chairman and CEO of LzLabs in December 2011. In May 2015, he became the Chairman and Chief Operating Officer, and Mr Cresswell took over as CEO. In November 2020, he resumed his role as CEO.

A number of software developers or other employees who had worked at Neon and/or Peregrine Bridge were recruited to work on the Rent Control project at Texas Wormhole, LzLabs and, subsequently, Winsopia. They included Tom Harper (LzLabs), Mr Galewsky (LzLabs), Mr Spencer (Texas Wormhole and LzLabs), Bryan Young (Texas Wormhole and LzLabs), Paul Viebrock (Winsopia and LzLabs UK), Brad Taylor (Texas Wormhole and LzLabs) and Chris Palmer (Winsopia and Texas Wormhole).

In evidence Mr Jaeger stated that Mr Spencer was the main developer working on the prototype SDM, with the initial focus on developing a proof of concept. The early work involved testing using the NIST COBOL test suite, which is a set of COBOL testing programs that are available to download from the US National Institute of Standards and Technology website. This testing was carried out using a modified form of Hercules to emulate the mainframe hardware. Mr Jaeger’s evidence was that not many of the NIST test programs executed successfully on the COBOL runtime environment in Linux; it was a process of trial and error.

In 2012, LzLabs engaged Texas Wormhole and OnTarget, an outsourcing company based in St Petersburg, Russia, which had previously worked with Neon, to provide software development services.

Once the LzLabs office opened in 2013, a number of the Texas Wormhole and OnTarget contractors moved to Switzerland and became employed by LzLabs.

Following consultation with the developers, Mr Rockmann formed the view that LzLabs would benefit from having a test facility available on an IBM mainframe, so as to allow the output and behaviour of applications on a mainframe to be compared to their output and behaviour on the LzLabs product. To achieve compatibility, LzLabs needed the output and behaviour to be the same in both environments.

Mr Rockmann decided to set up a mainframe testing environment using a separate company, ultimately named Winsopia. The intention was that LzLabs would acquire Winsopia; and Winsopia would acquire an IBM mainframe and license the z/OS operating system and subsystems, including Db2, IMS and CICS.

In early 2013, Keith Rastall was contacted by Ira Broussard, who was then working at Texas Wormhole, with a view to potential involvement in the project. Mr Rastall travelled to Kentucky to meet Mr Moores and his team to discuss setting up a company with a licensed mainframe to provide freelance testing services. He understood that Mr Moores and his team wanted to develop software which would allow applications that had been developed for a mainframe to be executed on non-mainframe platforms.

Mr Rastall was aware of the Neon litigation in the US. Although he did not know the details, he was aware that there had been an unfavourable outcome to the Neon litigation and that there was a strong possibility that IBM would start proceedings against Winsopia, sooner or later. Indeed, in an email to Mr Rockmann dated 19 February 2013, Mr Rastall stated:

“I have one significant reservation and that is my liability and or my companies liability in the event that I be pursued in the courts for my involvement in the project. I would like some advice on this from Lzlabs lawyers? And if Liability insurance is required what insurance cover would be required and who would pay for it.”

Notwithstanding that concern, Mr Rastall agreed to Mr Moores’ proposal. On 15 March 2013, he incorporated Winsopia in the UK.

A few months later, Mr Rockmann approached Mr Rastall and told him that LzLabs wanted to acquire Winsopia because LzLabs required its services on an exclusive basis. Mr Rastall considered that he had no real option but to sell, as LzLabs was Winsopia’s principal, indeed its only, customer.

On 5 July 2013 LzLabs acquired Winsopia and Winsopia became a wholly owned subsidiary of LzLabs. Mr Rockmann became sole director of Winsopia. Mr Rastall became the general manager of Winsopia and is now Vice President of Customer Success at Winsopia.

In August 2013 Winsopia purchased a second-hand IBM z10 mainframe from GMT360 Limited, through Mr Wilson at RSM Partners Ltd (“RSM”). By a contract dated 16 July 2013 between Winsopia and RSM, RSM agreed to provide mainframe hosting and support services in respect of Winsopia’s mainframe.