555 F.Supp.3d 63
D.N.J.2021Background:
- Relator Jean-Claude Franchitti, a former Cognizant director/assistant vice president, alleges Cognizant falsified visa paperwork (invitation letters/job descriptions) to create "travel-ready" foreign workers and to evade the competitive H-1B process.
- Alleged practices: applying prospectively for H-1Bs with fabricated project descriptions; using L-1 and B-1 visas (and corresponding invitation letters) for work that required H-1B authorization; and underpaying H-1B employees compared to non-visa colleagues.
- Franchitti filed a qui tam complaint under the False Claims Act; the United States declined to intervene; Cognizant moved to dismiss the amended complaint.
- The court ruled a visa is not "property" for purposes of the FCA, and dismissed claims under 31 U.S.C. §§ 3729(a)(1)(A) and (B) (false or fraudulent claims/records).
- The court held Franchitti plausibly pleaded a reverse-false-claims violation under 31 U.S.C. § 3729(a)(1)(G): Cognizant allegedly decreased its obligation to pay correct visa fees via material false statements, and the pleading met Rule 9(b) particularity.
- The court declined to resolve the public-disclosure bar on the current record (ordered discovery), and concluded the FCA tax-bar did not apply because the claim rests on immigration-law wage/fee obligations enforced by the Secretary of Labor, not the Internal Revenue Code.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether visas/count of visas constitute "property" or a "claim" under FCA §§3729(a)(1)(A)/(B) | Visas and the right to obtain them (and associated fees) are governmental assets; falsified applications thus present a false claim for approval/payment. | Visas are regulatory licenses, not government "property"; visas only generate fee revenue and do not constitute a claim for money or property. | Visa is not "property" under the FCA; claims under §§3729(a)(1)(A) and (B) dismissed. |
| Whether Franchitti pleaded a reverse false claim under §3729(a)(1)(G) (an "obligation" to pay government) | Cognizant avoided higher H-1B fees and wage obligations by obtaining cheaper L-1/B-1 visas or mischaracterizing work, thereby decreasing its obligation to pay the government. | No pre-existing obligation existed to pay H-1B fees for visas that were never petitioned for; fees paid for obtained visas fulfilled obligations. | Relator plausibly alleged an "obligation" (fee-based/regulated relationship) that was decreased by material false statements; §(G) claim survives and meets Rule 9(b). |
| Whether the FCA public disclosure bar blocks the suit | Franchitti asserts original-source status and that public disclosures (if any) do not show substantially the same allegations directed at Cognizant. | Cognizant argues news articles and other public materials already disclosed the fraud and thus bar the relator's claims. | Court declined to decide on current record; ordered discovery to resolve public-disclosure and original-source issues. |
| Whether the FCA tax bar (31 U.S.C. § 3729(d)) bars claims about lost tax revenue from underpaid H-1B workers | Franchitti seeks recovery based on immigration-law wage violations that allegedly reduced payroll tax payments to the government. | Cognizant contends relator's claim is effectively a tax claim and thus barred because IRS has exclusive jurisdiction. | Tax bar does not apply: claims arise under immigration and labor statutes (enforced by Secretary of Labor), not the Internal Revenue Code; IRS is not positioned to police the alleged violations. |
Key Cases Cited
- Cleveland v. United States, 531 U.S. 12 (2000) (licenses as regulatory instruments lacking traditional property rights under fraud statutes)
- United States v. Victaulic Co., 839 F.3d 242 (3d Cir. 2016) (reverse-FCA liability where a statutory duty to pay marking duties accrued and was knowingly avoided)
- United States v. Pemco Aeroplex, Inc., 195 F.3d 1234 (11th Cir. 1999) (false records used to reduce obligation to pay true value of government property)
- United States ex rel. Petras v. Simparel, Inc., 857 F.3d 497 (3d Cir. 2017) (reverse-FCA "obligation" must exist at time of the improper conduct)
- United States v. Majestic Blue Fisheries, LLC, 196 F. Supp. 3d 436 (D. Del. 2016) (regulatory licenses are not "property" independent of the regulatory regime)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (facial plausibility pleading standard under Rule 12(b)(6))
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (application of Twombly plausibility standard)
- Foglia v. Renal Ventures Mgmt., LLC, 754 F.3d 153 (3d Cir. 2014) (Rule 9(b) heightened pleading for fraud; details needed for FCA claims)
- United States v. Omnicare, Inc., 903 F.3d 78 (3d Cir. 2018) (interpretation of FCA public-disclosure bar)
- Rockwell Int'l Corp. v. United States, 549 U.S. 457 (2007) (definition of "original source" under the FCA)
- Lesnik v. Eisenmann SE, 374 F. Supp. 3d 923 (N.D. Cal. 2019) (rejecting reverse-FCA theory where no petition-based visa for the higher-fee category was submitted)