Syntel Sterling Best Shores Mauritius Limited v. The Trizetto Group, Inc.

Background

The opinion followed a six-day jury trial held in October 2020. TriZetto develops the Facets healthcare administrative platform and related software tools, guides, manuals, and implementation services. Syntel provided information-technology and consulting services to TriZetto’s Facets customers under a Master Services Agreement (MSA). The parties amended the MSA in 2012 to remove a noncompetition provision, and ended their relationship after Cognizant acquired TriZetto in 2014.

Syntel began the lawsuit in 2015, asserting breach of contract and other claims. TriZetto filed counterclaims. During discovery, the court ordered a forensic examination of Syntel’s electronic devices and files and later entered a preclusion order sanctioning Syntel for continued discovery misconduct. That order barred Syntel from presenting evidence that it had not misappropriated or unlawfully copied TriZetto’s Facets test cases and automation scripts, or that it had independently developed the Platform Management Tools at issue.

The jury found for TriZetto and Cognizant on all claims and counterclaims that were tried. Those claims included TriZetto’s claims for trade-secret misappropriation under the Defend Trade Secrets Act (DTSA) and New York law, and copyright infringement against Syntel Sterling Best Shores Mauritius Limited and Syntel Inc. The jury also considered claims brought by Syntel against TriZetto. It awarded TriZetto $284,855,192 in compensatory damages and $569,710,384 in punitive damages.

Syntel’s post-trial motions

Syntel renewed its request for judgment as a matter of law under Federal Rule of Civil Procedure 50(b), or alternatively sought a new trial or reduction of the award under Rule 59. The court denied Syntel’s liability challenges.

The court rejected Syntel’s argument that the 2012 MSA amendment authorized it to use TriZetto’s confidential information while competing with TriZetto. The amendment removed the noncompetition provision but left the MSA’s confidentiality provisions in place. The court held that the amended MSA allowed Syntel to compete but continued to require Syntel to protect and limit its use of TriZetto’s confidential information.

The court also upheld the jury’s rejection of Syntel’s waiver and estoppel defenses. It concluded that the evidence supported the jury’s finding that TriZetto had not concealed an unauthorized plan by Syntel to use TriZetto’s trade secrets for other customers.

The court rejected Syntel’s argument that TriZetto had not identified its 104 asserted trade secrets specifically enough. TriZetto grouped the alleged secrets into software, guides and manuals, and tools; connected them to particular documents or source code; presented testimony describing them; and submitted a list to the jury. The court concluded that the evidence allowed a reasonable jury to determine what the asserted trade secrets were and whether they had been misappropriated.

The court also rejected Syntel’s argument that the DTSA claim failed because TriZetto had not shown misappropriation after May 11, 2016, the DTSA’s effective date. Evidence showed continued use of TriZetto’s trade secrets in Facets consulting work through at least June 2018, including a UnitedHealth Group upgrade in November 2016. The jury therefore had sufficient evidence to find DTSA misappropriation during the period from May 11, 2016, through October 18, 2020.

Damages

The jury awarded $284,855,192 in total compensatory damages, using the DTSA award based on Syntel’s alleged avoided development costs. The court held that avoided costs may qualify as unjust-enrichment damages under the DTSA. It also concluded that sufficient evidence connected those costs to Syntel’s misappropriation, including evidence that Syntel used TriZetto trade secrets during the November 2016 UnitedHealth Group upgrade and gained an advantage by entering the Facets consulting market without developing the necessary materials itself.

The court found the $569,710,384 punitive-damages award excessive under federal common law. It considered the repeated nature of the conduct, evidence of intentional and deceptive conduct, the two-to-one punitive-to-compensatory ratio, and awards in similar trade-secret cases. The court determined that a one-to-one ratio was the highest permissible award in these circumstances. It therefore ordered that the punitive award be reduced to $284,855,192 if TriZetto accepted remittitur, meaning the reduction offered instead of a new trial. If TriZetto did not accept, Syntel’s motion for a new trial on punitive damages was granted. The court did not decide whether the original award violated constitutional due process because its remittitur ruling resolved the issue without reaching that question.

Permanent injunction

TriZetto sought a permanent injunction under the DTSA and Copyright Act. Judge Schofield found that TriZetto faced irreparable harm that money damages could not adequately address because Syntel might continue using the trade secrets or disclose them to unauthorized third parties. The court also found that the balance of hardships and public interest favored an injunction.

The court granted TriZetto’s application for a permanent injunction barring Syntel from unauthorized use of the trade secrets at issue. The court required the injunction to identify the 104 trade secrets, removed the vague phrase “otherwise misappropriating,” and required an exception for previously authorized use. The parties were ordered to submit a proposed injunction consistent with the opinion and Rule 65(d), which requires an injunction to describe the prohibited conduct specifically.

The court rejected Syntel’s argument that the injunction could not reach conduct outside the United States. It relied on the DTSA’s provisions concerning conduct outside the United States and found that the statutory conditions were satisfied because Syntel Inc. is a U.S. corporation and evidence showed acts furthering the alleged misappropriation occurred in the United States.

Interest and disposition

The court denied TriZetto’s request for prejudgment interest. It reasoned that the approximately $285 million judgment, calculated from Syntel’s gain rather than TriZetto’s losses, together with punitive damages, provided sufficient compensation and that additional prejudgment interest could overcompensate TriZetto. The court granted post-judgment interest, which it described as mandatory for a money judgment in a civil case.

In the conclusion, Judge Schofield denied Syntel’s motions for judgment as a matter of law, a new trial, or remittitur except that Syntel’s request for a new trial or remittitur on punitive damages was granted. TriZetto’s applications for a permanent injunction and post-judgment interest were granted, its request for prejudgment interest was denied, and TriZetto’s Rule 50(a) motion and the parties’ requests for oral argument were denied as moot.