The Southern District of New York vacates practically $200 million in damages after remand from Second Circuit
On March 13, 2024, in Syntel Sterling Best Shores Mauritius Ltd. v. The TriZetto Group Inc., the Federal District Court in the Southern District of New York vacated a 9-figure damages award for TriZetto on its commerce secret and copyright claims. This choice leaves TriZetto with no damages award for the violation of its commerce secrets and techniques, regardless of a jury verdict that Syntel misappropriated TriZetto’s commerce secrets and techniques and infringed its copyright. The District Court did, nevertheless, award TriZetto $14 million in attorneys’ charges. Curiously, a $275 million punitive damages award appears to stays intact as a result of Syntel didn’t problem the punitive damages award on attraction and that award is just not inside the scope of the Second Circuit’s remand.
The District Court initially upheld the jury verdict of $285 million in unjust enrichment damages as a result of it believed that Syntel was unjustly enriched by that quantity due to a perceived head begin arising from Syntel’s commerce secret misappropriation. On attraction, the Second Circuit disagreed, discovering that TriZetto was not entitled to an unjust enrichment award as a result of TriZetto suffered an precise loss, a loss that was enough to compensate TriZetto for the hurt triggered by Syntel’s misappropriation. The Second Circuit remanded the case to the District Court in order that it may deal with the propriety of the two remaining jury awards totaling over $200 million based mostly on an inexpensive royalty principle of restoration. One award was based mostly upon violation of a New York commerce secrets and techniques regulation, and the different was based mostly upon copyright infringement.
On remand, the District Court vacated the jury’s extra damages awards. In its view, an inexpensive royalty for commerce secret misappropriation or copyright infringement “is not an appropriate measure of damages because it does not restore the plaintiff to the position it would have been in but for the infringement.” (inner citation omitted).
The District Court additionally vacated the Copyright damages award as a result of there was a scarcity of proof that $59 million was an inexpensive licensing payment for a use that earned $27 million in income and fewer than $1 million in revenue.
Despite its lack of the awarded damages, TriZetto did prevail on its declare for a big award of attorneys’ charges. The District Court awarded over $14.5 million in charges pursuant to the Federal Defense of Trade Secrets Act. The District Court didn’t attempt to disentangle the charges incurred prosecuting the commerce secret declare from the copyright declare as a result of the District Court concluded that they had been based mostly on a typical core of information.
Curiously, a $275 million punitive damages award appears to stays intact as a result of Syntel didn’t problem the punitive damages award on attraction and the punitive damages award is just not inside the scope of the Second Circuit’s remand. Further briefing is predicted on this difficulty from the events.
The District Court appeared sympathetic to the undeniable fact that, regardless of the “malicious and wanton” misappropriation, TriZetto couldn’t recuperate any compensatory damages. In truth, the District Court successfully acknowledged that its choice seemingly punishes TriZetto by depriving it of any damages regardless of “the jury’s clear view about the harm to TriZetto and the maliciousness of Syntel’s conduct.” The District Court additionally famous that its ruling on damages, which was knowledgeable by the Second Circuit’s opinion in the identical case, was at odds with a 2020 decision from the seventh Circuit, which can have (mis)guided TriZetto in formulating its damages case. The distinction in strategy relies upon the query of whether or not and to what extent averted growth prices might be included as a part of a damages award, with New York regulation apparently much less permissive on this space than the regulation of Wisconsin.
This choice amplifies how cautious commerce secret plaintiffs should be in presenting damages and structuring proposed verdict types. In gentle of this choice, litigants can be extra cautious about asking the jury to attain a choice on each damages principle individually, and that each damages principle be adequately supported by the proof.
There is little doubt that the Syntel case can be making a second journey to the Second Circuit. It is probably going that the Second Circuit may have to take into account the proprietary of the choice to vacate the affordable royalty damages awards, in addition to whether or not the punitive damages award can stay intact in the occasion that there are completely no compensatory damages. We will proceed to comply with this case, and the case regulation the develops in its wake given its significance to understanding how commerce secret plaintiffs pursue their damages instances.