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

Filing 613

***SELECTED PARTIES*** OPINON AND ORDER: For the reasons above, the Report is adopted in full. Defendants' motion for summary judgment is granted in part and denied in part. Specifically, summary judgment is granted to Defendants on: (1) the br each of contract claim based on the Non-Solicitation Provision and on (2) the tortious interference claims, except as to the five employment agreements. Summary judgment is denied to Defendant on (1) the confidential information claims and (2) Def endants trade secrets counterclaim. Plaintiffs' motion for summary judgment is denied, specifically as to: (1) the breach of contract claim based on Transition Rebates and (2) Defendants copyright infringement counterclaim. For clarity, the su rviving claims and counterclaims are: Count I: Breach of Contract, based on Sections 19.01 (Confidentiality) and 23.02 (Transition Rebates), as to Defendant TriZetto; Counts II and III: Tortious Interference, based on the five employment agreement s only, as to both Defendants; Count IV: Misappropriation of Confidential Information, as to both Defendants; Counterclaim Counts I and II: Breach of Contract and Breach of the ImpliedCovenant of Good Faith and Fair Dealing, as to Plaintiff Syntel M auritius; Counterclaim Counts III and IV: Misappropriation of Trade Secrets, as to bothPlaintiffs; Counterclaim Count V: Unfair Competition, as to both Plaintiffs; Counterclaim Count VI: Tortious Interference, as to both Plaintiffs; Counterclaim VI II: Copyright Infringement, as to both Plaintiffs. The Clerk of Court is respectfully directed to (1) close Dkt. Nos. 520 and 528 and to (2) docket this Order (As further set forth in this Order.) (Signed by Judge Lorna G. Schofield on 3/24/2020) (cf) (Main Document 613 replaced on 3/31/2020) (cf). Modified on 3/31/2020 (cf).

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
SYNTEL STERLING BEST SHORES
:
MAURITIUS LIMITED, ET AL.,
:
Plaintiffs,
:
:
-against:
:
THE TRIZETTO GROUP, ET AL.,
:
Defendants.
:
:
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15 Civ. 211 (LGS)
OPINION & ORDER

LORNA G. SCHOFIELD, District Judge:
The parties filed cross-motions for partial summary judgment in this dispute over their
past business dealings. Plaintiffs Syntel Sterling Best Shores Mauritius Limited’s (“Syntel
Mauritius”) and Syntel, Inc. (together, “Syntel”) bring claims of breach of contract (Count I),
intentional interference with contractual relations (Counts II and III), and misappropriation of
confidential information (Count IV). Defendants The TriZetto Group (“TriZetto”) and
Cognizant Technology Solutions Corp. (“Cognizant”) counterclaim for breach of contract and
breach of the implied covenant of good faith and fair dealing (Counterclaim Counts I and II),
misappropriation of trade secrets (Counterclaim Counts III and IV), unfair competition
(Counterclaim Count V), tortious interference with prospective business relations (Counterclaim
Count VI), and copyright infringement (Counterclaim Count VIII). Plaintiffs move for partial
summary judgment on Defendants’ copyright infringement counterclaim and on Plaintiffs’
breach of contract claim based on a rebates provision (the “Transition Rebates Claim”).
Defendants move for summary judgment on their trade secrets counterclaim and on all of
Plaintiffs’ claims, except the Transition Rebates Claim. The parties do not seek summary
judgment on the remainder of Defendants’ counterclaims.

On January 27, 2020, the Honorable Stewart D. Aaron issued a Report and
Recommendation (the “Report”), which recommended denying Plaintiffs’ partial motion for
summary judgment and granting in part and denying in part Defendants’ partial motion for
summary judgment. The Report also denied Defendants’ motion to strike portions of Plaintiffs’
summary judgment filings. The parties timely filed objections. For the reasons below, the
objections are overruled or deemed waived, and the Report is adopted in full.
I.

BACKGROUND
Familiarity with the Report is assumed, and a brief summary of the facts relevant to the

objections is summarized below.
Defendant TriZetto is a technology company that owns a software product called
“Facets,” a platform used by healthcare companies to manage and process healthcare claims.
Because Facets must be customized for each user, Plaintiff Syntel and Defendant Cognizant
provided customization and implementation services to Facets users. Syntel and Cognizant are
competitors. On September 15, 2014, Defendant Cognizant announced that it was acquiring
Defendant TriZetto.
Before the acquisition, Syntel had provided customization services to TriZetto’s
customers, under a Master Services Agreement (“MSA”), dated June 30, 2010, as amended
August 17, 2012, to which Syntel Mauritius and TriZetto were parties. On February 18, 2015,
the MSA was terminated, after Syntel exercised its right to terminate, in the event a competitor
acquired TriZetto. The parties’ dispute revolves around the alleged malfeasance following
termination. As relevant to the objections here, Syntel alleges that (i) Defendants’ breached
Section 25.03 of the MSA (the “Non-Solicitation Provision”) by poaching Syntel’s employees,
and (ii) Defendants misappropriated confidential information about Syntel’s employees to

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facilitate the poaching. Defendants, in turn, allege that Syntel is infringing Defendants’
copyright of their so-called “Data Dictionary” product.
In the portion of the Report to which the parties do not object, the Report recommends
denying Defendants’ affirmative motion on the trade secrets counterclaim, due to genuine
disputes of fact over whether the Facets test cases and automation scripts at issue are trade
secrets and whether Plaintiffs misappropriated them. The Report recommends granting
Defendants’ motion on all of Plaintiffs’ tortious interference claims, except for a claim based on
Defendants’ inducement of five Syntel employees to breach their employment agreements and to
work for Defendants. The Report further recommends denying Plaintiffs’ affirmative motion as
to the breach of contract claim due to genuine disputes of fact over whether Plaintiff adequately
performed under the contract. Finally, the Report denies Defendants’ request to strike Plaintiffs’
summary judgment filings.
Regarding the portions of the report to which the parties object, the Report recommends
granting Defendants’ motion as to Plaintiffs’ Non-Solicitation Provision claim. Although
Section 25.03 of the MSA forbids TriZetto from “directly or indirectly hir[ing] any person who
is then or who was during the previous six months an employee of Service Provider,” the alleged
poached employees do not qualify as “employee[s] of Service Provider.” The Report further
recommends denying Defendants’ motion for summary judgment as to Syntel’s confidential
information claims, given factual disputes over the confidential information at issue and resulting
damages. Finally, the Report recommends denying Syntel’s summary judgment motion on the
Data Dictionary counterclaim, due to factual disputes over the registration and protectability of
the allegedly infringed work.

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II.

LEGAL STANDARDS
A reviewing court “may accept, reject, or modify, in whole or in part, the findings or

recommendations made by the magistrate judge.” 28 U.S.C. § 636(b)(1). The district court
“may adopt those portions of the report to which no ‘specific, written objection,’ is made, as long
as the factual and legal bases supporting the findings and conclusions set forth in those sections
are not clearly erroneous or contrary to law.” Adams v. N.Y. State Dep’t of Educ., 855 F. Supp.
2d 205, 206 (S.D.N.Y. 2012) (quoting Fed. R. Civ. P. 72(b) (citing Thomas v. Arn, 474 U.S. 140,
149 (1985)). A district court need only satisfy itself that “no clear error is apparent from the face
of the record.” See, e.g., Candelaria v. Saul, No. 18 Civ. 11261, 2020 WL 996441, at *1
(S.D.N.Y. Mar. 2, 2020).
A district court must conduct a de novo review of any portion of the report to which a
specific objection is made on issues raised before the magistrate judge. 28 U.S.C. § 636(b)(1);
accord United States v. Romano, 794 F.3d 317, 340 (2d Cir. 2015). “When a party makes only
conclusory or general objections, or simply reiterates the original arguments made below, a court
will review the report strictly for clear error.” Espada v. Lee, No. 13 Civ. 8408, 2016 WL
6810858, at *2 (S.D.N.Y. Nov. 16, 2016). A district court should not, however, entertain new
grounds for relief or additional legal arguments that were not before the magistrate judge. See
Walker v. Stinson, 205 F.3d 1327, 2000 WL 232295, at *2 (2d Cir. 2000) (holding that a district
court did not abuse its discretion in refusing to consider an argument that a petitioner failed to
raise before a magistrate judge); accord Kriss v. Bayrock Grp., No. 10 Civ. 3959, 2015 WL
1305772, at *1 (S.D.N.Y. Mar. 23, 2015).

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III.

DISCUSSION
The portions of the Report to which there are objections are reviewed de novo, and the

remainder is reviewed for clear error. Under this standard, the Report is adopted in full.
A. Non-Solicitation Provision Claim
Syntel objects to the Report’s recommendation that the phrase “employee of Service
Provider” in Section 25.03 of the MSA unambiguously means an employee of the defined
“Service Provider,” i.e. Syntel Mauritius. This recommendation is fatal to Syntel’s claim,
because Syntel’s theory is that Defendants breached Section 25.03 by poaching employees not of
Syntel Mauritius, but of Syntel, Inc. and affiliates of Syntel. Syntel makes two alternative
arguments in its objections: (i) that the phrase “employee of Service Provider” unambiguously
refers to the entire “pool of service professionals sent to work for TriZetto” under the MSA, i.e.
the “agents, subcontractors and representatives” of Syntel Mauritius and the “Service Provider
Party [a defined term referring to both Syntel Mauritius and Syntel, Inc.] employees,” or (ii) that
the phrase is ambiguous, and extrinsic evidence establishes that the parties both understood at
contracting, and subsequently demonstrated in their course of conduct, that “employee of Service
Provider” is not limited to Syntel Mauritius’ employees. Syntel further argues that the Report’s
construction of the phrase renders Section 25.03 and related phrases inoperable, because Syntel
Mauritius has no employees.
The Report’s conclusion is correct. The phrase “employee of Service Provider”
unambiguously means individuals employed by Syntel Mauritius, the entity defined as “Service
Provider.” The Report correctly rejects Syntel’s arguments of ambiguity: simply because the
MSA overall contemplates that employees from various Syntel entities and affiliates will
perform services does not render the term “employee of Service Provider” ambiguous. Indeed,
the MSA uses a defined phrase “Service Provider Party” to refer to both Syntel Mauritius and
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Syntel, Inc. when necessary. As the Report explains, the heart of Plaintiff’s argument is an issue
outside the contract: “any ambiguity comes not from the language of the MSA itself, but from
the fact that Syntel Mauritius does not have any employees.” Citing Galli v. Metz, 973 F.2d 145,
149 (2d Cir. 1992), the Report concludes that this external fact does not render Section 25.03
“superfluous or meaningless,” because Syntel Mauritius “at any time could have hired
employees.” The Report correctly adopts the plain meaning of Section 25.03 and does not
consider any extrinsic evidence.
B. Confidential Information Claims
Defendants object to the Report’s recommendation to deny summary judgment on
Plaintiffs’ two confidential information claims, which allege that (i) Defendants breached
Section 19.01 of the MSA,1 and (ii) that Defendants misappropriated Syntel’s confidential
information and used the information to hire away Syntel Employees. The Report concludes that
Defendants are not entitled to summary judgment due to material disputes of fact. Contrary to
Defendants’ argument, Plaintiffs have sufficiently identified confidential information on which
their claims are based. Plaintiffs have also presented sufficient evidence of damages at this
stage. Defendants’ objections to these findings are deemed waived or are overruled.
As to waiver, at summary judgment, Defendants only argued that Plaintiffs failed to
identify any confidential information underlying their claims. They did not argue, but raise for
the first time now, that the evidence fails to show as a matter of law that Defendants used the
purported confidential information to hire away Syntel employees. As the Report expressly

Section 19.01 of the MSA proscribes the contracting parties from using “Confidential
Information” without the other party’s written consent. Section 1.01(13) in turn defines
“Confidential Information” broadly to include “all information (including information
communicated orally) . . . whether disclosed to or accessed by [the parties] in connection with
this Agreement . . . that a reasonable person would recognize as confidential.”
1

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states, however, “the only arguments Defendants make in support of their motion are that
Plaintiffs have not adequately identified confidential information (that is not otherwise publicly
available), and have not provided adequate evidence of damages.” Defendants themselves
furthermore state that their objections respond to Judge Aaron’s findings and are not limited to
their arguments raised below: “Judge Aaron set the stage for this Court to extend his rulings to
their logical conclusions, by evaluating whether any of the Alleged Confidential Information is
in fact confidential or relates to what Syntel sets forth as its misappropriation theory.” This
objection is waived. Defendants may, of course, raise the failure-to-use argument at trial.
To the extent Defendants object to the Report’s finding that Plaintiffs’ identified
information is confidential, the Report is correct. The Report concludes only that: “Syntel
specifically has identified at least some information, such as the salaries, particularized
assignments, historical project data, evaluations, grade levels, billing rates and strategic
placements for each employee, which does not appear to be included on the individuals’
LinkedIn Profiles” (emphasis added). That is, information in the
testimony about information in

screenshots,

and internal records of employee evaluations are

not publicly available and do not appear in the employees’ LinkedIn Profiles. Therefore, this
information may form the basis of Plaintiffs’ misappropriation claims. Defendants object that all
the evidence on which the Report relies is flawed because the exhibits are Syntel-created, the
testimony is self-serving, and many of the exhibits are hard to decipher, but these are credibility
issues for the factfinder. Defendants also argue that Plaintiffs did not offer confidential
information as to every alleged poached employee, but Syntel may, in theory, prove its claims,
even without proving that Defendants poached every employee at issue using the confidential
information. This argument bears on damages.

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The Report also properly concludes that a reasonable jury could credit the damages
analysis, thus creating an issue of fact. Plaintiff’s expert estimates Syntel’s lost profits as a result
of losing the employees at issue. The Report concludes that this analysis provides a colorable
“basis for damages tied to employees [Syntel] contends [were] hired away by Defendants” and in
turn to the misappropriation of the confidential information about the employees. Although
Defendants argue that the analysis makes unreasonable assumptions about Syntel’s revenue and
performance, the factfinder may weigh the reliability of the expert opinion and the methodology.
Defendants also may raise challenges to expert opinions in their anticipated Daubert motions.
C. Data Dictionary Counterclaim
Syntel objects to the Report’s recommendation to deny summary judgment on
Defendants’ copyright counterclaim. The Report concludes that there are material disputes of
fact regarding (i) whether Data Dictionary is part of the Facets product, and therefore whether
Syntel infringed the registered Facets copyright itself and (ii) in the alternative, whether Data
Dictionary incorporates protected elements of Facets, and therefore whether Syntel infringed the
copyright of an unregistered derivative work. Syntel raises objections only to the latter theory.
Syntel argues that the Report relies improperly on inadmissible documents and testimony of a
TriZetto executive and Rule 30(b)(6) witness, Chuck Sanders, in finding material disputes of
fact. Syntel also objects that Defendants have failed to produce evidence of the particular shared
elements of Facets and Data Dictionary. These objections are overruled.
The Report correctly concludes that a reasonable jury could decide that Data Dictionary
and Facets have shared protected elements, based on Mr. Sanders’ testimony and standard
customer documents describing Data Dictionary -- i.e. the “Facets® Release 5.01 Physical
Package Document” and “Facets® Data Dictionary Guide.” Customers receive Data Dictionary
as part of the delivery of the Facets software. Data Dictionary helps customers implement and
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build out the Facets system to suit their needs. The Sanders Declaration explains, citing the
customer documents, that Data Dictionary is
provides
available in Facets,
and
This evidence raises at least an issue of fact regarding whether Data Dictionary incorporates
protected elements of Facets itself.
Syntel incorrectly argues that the customer documents are inadmissible hearsay. They
are admissible as business records under Federal Rule of Evidence 803(6). Defendants regularly
created these standard documents at the time of a Facets release, and maintained copies to deliver
to Facets customers. The documents seem to provide reliable descriptions of Data Dictionary
because customers actually used them as how-to guides. Even if these documents were not
admissible, Plaintiffs’ expert may rely on them in forming an opinion, if experts in the same field
would reasonably rely on such documents. See Fed. R. Evid. 703.
Syntel also objects that Mr. Sanders has no personal knowledge to testify about the
relationship between Data Dictionary and Facets because he is not an engineer and did not
compare the programming code in the two products. As a 30(b)(6) witness, Mr. Sanders
testified, however, that his statements were based on his personal review of relevant TriZetto
documents. He is informed about the types of products TriZetto offers, even if he did not
engineer them himself, as the Vice President of Corporate Development and Strategic Alliances.
Therefore, the Report’s recommendation to deny summary judgment on the claim of copyright
infringement of a derivative work is justified.

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D. Remaining Report
As to the remainder of the Report to which the parties did not object, the Court finds no clear
error on the face of the record. Accordingly, these portions are adopted in full. See 28 U.S.C. §
636(b)(1) (In reviewing a magistrate judge’s recommendations, a District Judge “may accept,
reject, or modify, in whole or in part, the findings or recommendations made by the magistrate
judge.”); Fed. R. Civ. P. 72(b), Advisory Committee Notes (“When no timely objection is filed,
the court need only satisfy itself that there is no clear error on the face of the record in order to
accept the recommendation.”); accord Niles v. O'Donnell, No. 17 Civ. 1437, 2019 WL 1409443,
at *1 (S.D.N.Y. Mar. 28, 2019).
IV.

Conclusion
For the reasons above, the Report is adopted in full.
Defendants’ motion for summary judgment is granted in part and denied in part.

Specifically, summary judgment is granted to Defendants on: (1) the breach of contract claim
based on the Non-Solicitation Provision and on (2) the tortious interference claims, except as to
the five employment agreements. Summary judgment is denied to Defendant on (1) the
confidential information claims and (2) Defendants’ trade secrets counterclaim.
Plaintiffs’ motion for summary judgment is denied, specifically as to: (1) the breach of
contract claim based on Transition Rebates and (2) Defendants’ copyright infringement
counterclaim.
For clarity, the surviving claims and counterclaims are:
•

Count I: Breach of Contract, based on Sections 19.01 (Confidentiality) and 23.02
(Transition Rebates), as to Defendant TriZetto;

•

Counts II and III: Tortious Interference, based on the five employment
agreements only, as to both Defendants;
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•

Count IV: Misappropriation of Confidential Information, as to both Defendants;

•

Counterclaim Counts I and II: Breach of Contract and Breach of the Implied
Covenant of Good Faith and Fair Dealing, as to Plaintiff Syntel Mauritius;

•

Counterclaim Counts III and IV: Misappropriation of Trade Secrets, as to both
Plaintiffs;

•

Counterclaim Count V: Unfair Competition, as to both Plaintiffs;

•

Counterclaim Count VI: Tortious Interference, as to both Plaintiffs;

•

Counterclaim VIII: Copyright Infringement, as to both Plaintiffs.

The Clerk of Court is respectfully directed to (1) close Dkt. Nos. 520 and 528 and to
(2) docket this Order

.
Dated: March 24, 2020
New York, New York

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