In a False Claims Act (FCA) case with implications for the use of business and work visas, the US District Court for the District of New Jersey refused on Tuesday to reconsider or allow an immediate appeal of its prior ruling that the knowingly improper use of less expensive visas when more expensive visas are appropriate may give rise to FCA liability.
The case, Jean-Claude Franchitti v. Cognizant Technology Solutions Corporation et al., involves allegations that foreign employees of Cognizant, a technology services provider, traveled to the United States on B-1 and L-1 visas when the work they were performing required the company to obtain more expensive H-1B visas. The plaintiff, a former assistant vice president for Cognizant, claims the company perpetrated this alleged fraud by submitting visa petitions with false invitation letters attesting to the managerial responsibilities or special skills required for L-1 visa holders and used employees with L-1 visas or B-1 visas, which are for short-term business trips, to perform work that should legally have been performed by H-1B visa holders. The plaintiff argues this amounts to a reverse false claim, which is codified in 31 USC § 3729(a)(1)(G) and occurs when a defendant knowingly makes a false statement to avoid paying an obligation to the government (e.g., misstatements regarding the nature of B-1 and/or L-1 visa holders’ activities to avoid paying the higher fees associated with H-1B visas).
In August, the court declined to dismiss these claims, finding that Cognizant arguably had an obligation to pay for higher fees associated with H-1B visas based on the type of work Cognizant’s employees had undertaken. The court said the arrangement between Cognizant and the government could be characterized as an “implied contractual” or a “fee-based” relationship, both of which are part of the definition of “obligation” under the FCA, and that “[b]y paying for L-1 and B-1 visas but directing its employees to perform work that required the more expensive H-1B visa, Cognizant decreased—and made false statements material to—its obligation to pay money to the government under [the FCA].”
Cognizant argued the court should reconsider its ruling on the motion to dismiss or certify the issue for interlocutory appeal because the court misinterpreted or ignored the opinions in other cases, including an earlier ruling from the US District Court for the Northern District of California in a substantively similar case in which the court reached the opposite conclusion regarding the viability of a reverse False Claims Act theory. The court in Lesnik v. Eisenmann SE found that the obligation to pay the government for more expensive H-1B visas would not have occurred unless and until the defendant actually applied for H-1B visas and, because the defendant did not actually apply for H-1B visas, a reverse FCA claim could not be sustained, regardless of whether B-1 visas were used for work that should have been performed by H-1B visa holders. See 374 F. Supp. 3d 923, 940 (N.D. Cal. 2019) (“[T]he obligation to pay the government only arises upon applying for a visa.”). The Cognizant court dismissed Cognizant’s arguments, noting that it had already considered the cases raised by Cognizant and that Lesnik “was not controlling precedent because it was decided in another circuit.”
The Cognizant court did not consider another case from the same court in the Northern District of California that ruled a reverse FCA claim related to the use of B-1 visas instead of H-1B visas could not be sustained because the law and regulations are not clear what activities are and are not permitted on a B-1 visa, meaning the defendant could not have intentionally made a false statement related to their use, as is required by the FCA. See United States ex rel. Krawitt v. Infosys Techs. Ltd., 372 F. Supp. 3d 1078, 1090 (N.D. Cal. 2019).
The Cognizant court also dismissed claims from the US Chamber of Commerce, which filed an amicus brief, that the court’s endorsement of the plaintiff’s false claims theory “would constitute a startling expansion” of the FCA. The court stated that its denial of Cognizant’s motion to dismiss should “not engender a ‘the sky is falling’ reaction,” as its decision is supported by prior cases and the ultimate outcome in the case is far from determined at this point. Finally, the court rejected Cognizant’s request that it reconsider its ruling that the “tax bar,” which states that the FCA does not apply to false statements made to the IRS, did not prohibit the plaintiff’s allegations that Cognizant deprived the government of payroll taxes by paying less than what was legally required had its employees properly obtained H-1B visas, which require certain wage amounts. The court found that the first of the tax bar’s two prongs—that the case depends entirely on a purported violation of the Tax Code—was not satisfied because immigration laws regulate the pay of foreign workers, and the Secretary of Labor—and not the IRS—enforces those regulations.
In its earlier ruling on the motion to dismiss, the court rejected the plaintiff’s direct FCA theory (i.e., involving the knowing submission of “a false or fraudulent claim for payment or approval” as codified in 31 USC §§ 3729(a)(1)(A) and (B)), concluding that visas do not qualify as “property,” which is required to establish an FCA violation. In analogies with cases in which courts found that video poker and fishing licenses do not qualify as property, the court concluded that visas are more akin to those types of licenses than a traditional property right that would satisfy the definition of a “claim” under the FCA. The court concluded that licenses have “no economic or commercial value in the hands of the government but, rather, allow it to collect processing fees from license applications,” and that “such a ‘purely regulatory’ scheme does not invoke traditional property rights.” This is the first reported decision in which a court has concluded that false statements in B-1, H-1B, and L-1 visa applications may not—as a matter of law—support a direct false claims theory.
The federal government previously elected not to intervene in the case.
