Trade Secrets

Syntel v. TriZetto: The Limits of 'Avoided Costs' as DTSA Damages

The Second Circuit erased a roughly $285 million unjust-enrichment award, holding that avoided development costs cannot be stacked on top of lost profits without proof of harm beyond actual loss.

October 13, 2025
Software developers reviewing code on monitors in an office
A dispute over healthcare-IT software produced a leading appellate ruling on how to measure DTSA damages. Shutterstock
Educational content, not legal advice. This article explains general legal concepts. It does not create an attorney–client relationship. For your specific situation, consult a licensed attorney.

In Syntel Sterling Best Shores Mauritius Ltd. v. The TriZetto Group, Inc., 68 F.4th 792, No. 21-1370 (2d Cir. May 25, 2023), the Second Circuit confronted one of the most consequential remedies questions under the Defend Trade Secrets Act: when may a trade-secret owner recover the costs the misappropriator avoided by stealing, rather than developing, the information? On appeal from the Southern District of New York (Schofield, J.), the court vacated an unjust-enrichment award of roughly $285 million in avoided development costs, holding that this measure was unavailable on the facts because the defendant’s gain was already captured by the plaintiff’s actual-loss recovery and the plaintiff suffered no compensable harm beyond it. The decision is now the leading appellate authority cabining “avoided costs” as a DTSA damages theory.

The case grew out of a soured commercial relationship in healthcare information technology. TriZetto licenses software used by health insurers to process claims; Syntel was, for a time, its partner in providing implementation and support services, with contractual access to TriZetto’s platform and confidential materials. After the relationship deteriorated, TriZetto counterclaimed that Syntel had misappropriated its trade secrets to build a competing services capability. A jury agreed, finding that Syntel had misappropriated 104 of TriZetto’s trade secrets in violation of the DTSA and New York law, and also found copyright infringement. The jury’s DTSA award was measured by the development costs Syntel avoided — what it would have cost to create the information itself — and came to $284,855,192.

At a glance

  • Case: Syntel Sterling Best Shores Mauritius Ltd. v. The TriZetto Group, Inc., 68 F.4th 792, No. 21-1370 (2d Cir. May 25, 2023), on appeal from the Southern District of New York.
  • Liability: Jury found misappropriation of 104 trade secrets under the DTSA and New York law, plus copyright infringement; liability was not the focus of the reversal.
  • The vacated award: approximately $284.9 million in “avoided” development costs, awarded as unjust enrichment under the DTSA.
  • Statute: DTSA damages provision, 18 U.S.C. § 1836(b)(3)(B), permitting actual loss plus unjust enrichment “not addressed in computing damages for actual loss.”
  • Core holding: Avoided development costs were unavailable here because Syntel’s gain was already reflected in TriZetto’s actual loss and TriZetto showed no compensable harm beyond that loss.

The structure of DTSA damages

The court’s analysis starts from the text of § 1836(b)(3)(B), which authorizes two compensatory measures. A plaintiff may recover “damages for actual loss caused by the misappropriation,” and separately “damages for any unjust enrichment caused by the misappropriation … that is not addressed in computing damages for actual loss.” The statute thus permits stacking actual loss and unjust enrichment, but only to the extent the unjust-enrichment component reaches gains not already counted in the actual-loss figure. That “not addressed in computing” clause does the decisive work.

Avoided development costs are a recognized form of unjust enrichment: the idea is that a thief who skips the research-and-development expense is enriched by the savings, and the law can strip that benefit. The problem in Syntel was one of double counting. TriZetto’s damages theory and the trial record, as the Second Circuit read them, established that Syntel’s gain from the misappropriation was already captured by TriZetto’s compensable losses. Layering an avoided-cost award on top would compensate TriZetto twice for the same wrong and confer a windfall untethered to any incremental harm.

Why “avoided costs” failed on these facts

The court was careful to frame its holding as fact-dependent rather than as a categorical ban on avoided-cost recovery. The decisive points were that Syntel never actually brought a competing product to market in a way that diminished the value of TriZetto’s trade secrets, and that TriZetto continued to exploit its own software. In the court’s analysis, beyond its recoverable losses TriZetto “suffered no compensable harm” that an avoided-cost award could legitimately redress. Where the trade secret retains its value to the owner and the misappropriator’s enrichment is already reflected in the owner’s actual loss, an avoided-cost figure measures nothing the statute leaves unaddressed.

That reasoning ties unjust enrichment back to the misappropriation’s real economic consequences. Avoided development cost is sometimes pitched as a free-standing, easy-to-quantify number — take the plaintiff’s R&D budget and hand it to the plaintiff — but the Second Circuit insisted that the measure must correspond to an enrichment that is both caused by the misappropriation and not already counted elsewhere. The court effectively rejected using avoided costs as a punitive proxy or as a default windfall when actual harm is modest or already compensated.

What survived and what was sent back

The reversal did not wipe out TriZetto’s recovery. The Second Circuit remanded for the district court to address other components of the judgment, including awards measured by a reasonable royalty under New York trade-secret law and the copyright award. The remand underscores a practical lesson: a plaintiff who anchors its entire trade-secret case to a single, aggressive damages theory risks losing the lot on appeal, whereas alternative measures — reasonable royalty, profits causally tied to the misappropriation, or actual lost profits — may prove more durable. The opinion is best read not as hostility to large trade-secret recoveries but as a demand that each dollar map onto a recognized, non-duplicative measure of harm or gain.

Open questions

Syntel leaves the boundaries of avoided-cost recovery for future cases. When is an avoided-cost award proper — must the trade secret’s value to the owner be demonstrably diminished, or is it enough that the misappropriator obtained a head start the owner cannot otherwise capture? How should courts treat cases where the defendant has not yet marketed a competing product but has banked the development savings for later use? And how does the “not addressed in computing damages for actual loss” clause interact with reasonable-royalty awards, which are themselves a hybrid measure? The court’s fact-bound framing means practitioners must reason by analogy, and district courts will continue to test how much daylight the opinion leaves for avoided-cost theories in cases where actual loss is hard to prove.

Implications

  • Map every dollar to the statute. Under § 1836(b)(3)(B), unjust enrichment is recoverable only to the extent it is “not addressed in computing damages for actual loss.”
  • Avoided costs are not a default windfall. A plaintiff cannot stack avoided development costs on top of a full actual-loss recovery absent harm beyond that loss.
  • Plead alternative damages measures. Reasonable royalty, causally connected profits, and actual lost profits may survive where an aggressive avoided-cost theory will not.
  • Tie enrichment to consequences. Avoided-cost recovery should track a real, non-duplicative benefit caused by the misappropriation, not the plaintiff’s historical R&D budget.
  • Big verdicts face hard appellate scrutiny. A nine-figure award resting on a single theory is vulnerable if the theory double counts.

Frequently asked questions

What are “avoided costs” in a trade-secret case? They are the development or research-and-development expenses a misappropriator did not have to incur because it took the information instead of creating it. They are treated as a form of unjust enrichment under the DTSA.

Why did the Second Circuit vacate the avoided-cost award? Because Syntel’s enrichment was already reflected in TriZetto’s actual loss, and TriZetto showed no compensable harm beyond that loss. The DTSA allows unjust-enrichment damages only for gains “not addressed in computing damages for actual loss,” so the award would have double counted.

Does Syntel eliminate avoided-cost damages under the DTSA? No. The court’s holding is fact-specific. Avoided costs remain a recognized unjust-enrichment measure; they simply cannot be stacked on a full actual-loss recovery without proof of additional, non-duplicative harm.

Authorities and sources