In an opinion issued April 29th in the case United States ex rel. Palmer v. Tata Consulting Servs., Ltd., the Fifth Circuit delivered a clear reminder that the False Claims Act is not an all-purpose enforcement mechanism for regulatory violations or fraud generally.
The case arose from allegations that Tata Consulting Services applied for lower-cost visas instead of H-1B visas and underpaid certain visa-dependent employees, allegedly reducing its tax withholding obligation. The relator framed both theories as “reverse” false claims, based on assertions that Tata Consulting Services avoided obligations to pay money to the government.
The court rejected both theories, emphasizing that False Claims Act liability for alleged reverse false claims requires an existing, established, and immediately due obligation to pay the government. On visa fees, the court held that immigration regulations require payment only for the visas actually sought. There is no freestanding obligation to pay for visas a company did not apply for, even if another visa category might have been more appropriate. Any duty to pay higher fees was contingent on applying for—and receiving—those visas.
The relator’s payroll theory fared no better. The court reasoned that wage regulations require payment to employees, not payment to the government. Tax withholding obligations arise from wages actually paid, not hypothetical wages that should have been paid. Without an actual present duty to transmit money to the government, the False Claims Act was not implicated.
The Tata decision aligns the Fifth Circuit with other circuits, such as the D.C., Second, and Ninth Circuits, and reinforces a consistent message: alleged visa or wage violations may be addressed elsewhere, but without a concrete payment obligation, they do not give rise to reverse False Claims Act liability. The Court of Appeals for the Third Circuit will be weighing in soon. In March, that court granted the parties’ joint petition for interlocutory review of the District Court’s denial of a motion to dismiss claims alleging similar theories of liability in the case Franchitti v. Cognizant Technology Solutions Corp.