# Palmer v. Tata Consulting Services

> Court of Appeals for the Fifth Circuit · April 29, 2026

URL: https://www.frixlaw.com/law-library/cases/11317949

## Case

- **Court:** Court of Appeals for the Fifth Circuit
- **Decided:** April 29, 2026
- **Precedential status:** Published
- **Opinion:** Opinion
- **Nature of suit:** Private Civil Federal
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/11317949

## How later opinions describe it (automated extraction)

- rejecting “potential or contingent obligations to pay . . . fines or penalties” under environmental laws as “legally insufficient to make a reverse false claim” (quoting Bain, 386 F.3d at 657)

## Opinion text

Case: 25-40368 Document: 63-1 Page: 1 Date Filed: 04/29/2026

United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit

____________ FILED
April 29, 2026
No. 25-40368 Lyle W. Cayce
____________ Clerk

United States of America ex rel. Jack Palmer, Jr., on behalf of
the United States of America,

Plaintiff—Appellant,

versus

Tata Consulting Services, Ltd.,

Defendant—Appellee.
______________________________

Appeal from the United States District Court
for the Eastern District of Texas
Civil Action No. 4:17-CV-72
______________________________

Before Willett, Wilson, and Douglas, Circuit Judges.
Cory T. Wilson, Circuit Judge:
After auditing Tata Consulting Services, Ltd. and its immigration
practices, Jack Palmer initiated this qui tam action under the False Claims Act
(FCA). Palmer alleged that Tata fraudulently acquired thousands of visas
for foreign workers and underpaid visa-dependent employees in violation of
federal law. Given the FCA’s requirements for recovery, Palmer framed his
allegations as “reverse false claims,” i.e., a failure by Tata to transmit money
owed to the federal government, by paying for cheaper visas under false
pretenses and by failing to withhold taxes on the required higher wages for
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No. 25-40368

certain visa recipients. The district court rejected both theories of liability
and dismissed Palmer’s complaint for failure to state a claim. Because
Palmer has not alleged any obligation of Tata to transmit money to the
Government, he fails to allege an actionable claim under the FCA, and we
affirm the judgment of the district court.
I.
In 2016, Comcast hired Jack Palmer to audit Tata Consulting Services,
Ltd. and its immigration practices. Tata is a major IT and professional
services firm, based in India but with significant operations in the United
States. Tata employs roughly 30,000 workers in the United States, about 75%
of whom require either an H-1B visa, an L-1A visa, or a B-1 visa. Because
the differences between these visa types are pertinent to Palmer’s claims, we
briefly sketch each type.
H-1B visas are intended for temporary workers in specialized fields
where the supply of qualified Americans is inadequate to meet employer
demand. See 8 C.F.R. § 214.2(h)(1)(ii)(B). To acquire an H-1B visa, an
employer must file an application with the Department of Labor certifying
that the foreign worker’s role presently exists and remains to be filled. See
20 C.F.R. § 655.730. The employer must further certify that the visa
recipient will be paid the higher of (a) wages paid to similarly situated
American employees or (b) the prevailing rate for the intended role. See id.
§ 655.731(a). Even after making this application, receiving an H-1B visa is
not a certainty: The number of visas available each year is strictly capped,
and applicants are subject to a lottery system. See 8 U.S.C. § 1184(g)(1)(A);
8 C.F.R. § 214.2(h)(8)(iv)(B). According to Palmer’s complaint, the total
fees payable for Tata to procure each H-1B visa during the relevant period
would have been $6,460.

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L-1A visas permit the cross-border transfer of managers within a
company, subject to certain requirements. See 8 C.F.R. § 214.2(l)(1)(i),
(ii)(A). The L-1A application process is more relaxed than the H-1B
equivalent; there is no lottery, annual cap, or wage requirement. Id. Palmer
alleges that the cost to Tata for each L-1A visa would have been $5,460.
B-1 visas are for short-term visitors. These visas allow workers to
enter the United States for up to a year to conduct certain business activities,
with no annual cap or lottery system. See id. § 214.2(b)(1). Palmer alleges
that Tata would only have paid a $160 application fee to obtain each B-1 visa.
Palmer alleges that his 2016 audit uncovered numerous forms of visa
fraud by Tata. Relevant to this appeal, Palmer alleges that, in order to
circumvent the stricter requirements for H-1B visas, Tata applied for L-1A
visas for non-managerial employees and then assigned L-1A recipients to
skilled labor properly reserved for H-1B holders. Similarly, Palmer alleges
that Tata applied for and received a large number of B-1 visas, using these
visa holders for both skilled and unskilled labor in violation of federal law. To
avoid detection by immigration officials, Palmer asserts that Tata
retroactively edited visa holders’ personnel files to comport with the visas
they held, even if those classifications conflicted with employees’ actual roles
or the work they performed. He further alleges that Tata systematically
underpaid H-1B workers relative to American employees in violation of 20
C.F.R. § 655.731(a). According to Palmer, this fraudulent visa scheme
drastically inflated the number of visas Tata received, creating a surplus of
“visa-ready” workers in India who could be imported to the United States as
the need arose.
Palmer filed this qui tam action under the FCA in January 2017. After
several years of discovery and extensions of the seal period, the United States
declined to intervene in August 2022. See 31 U.S.C. § 3730(b)(2)–(4).

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Palmer then opted to continue prosecuting the action on behalf of the United
States and submitted an amended complaint in March 2023. See id.
§ 3730(b)(1).
Relevant here, Palmer’s amended complaint alleged that Tata had
submitted “reverse” false claims under the FCA.1 A “reverse” false claim,
as the name suggests, arises when a defendant “improperly avoids or
decreases an obligation to pay or transmit money or property to the
Government,” as opposed to taking money fraudulently from the
Government. Id. § 3729(a)(1)(G) (emphasis added). Palmer contends that
Tata avoided its obligations in either (or both) of two ways: (1) Tata applied
for B-1 and L-1A visas instead of the proper H-1B visas, allowing the
company to pay lower visa fees to the federal government; and (2) Tata
systematically underpaid visa recipients in violation of 20 C.F.R. § 655.731,
and so necessarily withheld less for federal payroll taxes.
Tata moved to dismiss Palmer’s claims under Federal Rule of Civil
Procedure 12(b)(6). The district court granted the motion and dismissed all
of the claims. The court dismissed Palmer’s “reverse” FCA claims based
on its holding that Tata had no “obligation to pay or transmit money” for
visas Tata never applied for, nor any obligation to withhold taxes on wages
that were never paid to workers. Id. This appeal followed.

_____________________
1
Palmer’s amended complaint also alleged two types of “affirmative” false claims,
asserting that (1) Tata “knowingly present[ed] . . . a false or fraudulent claim for payment
or approval” by using false information to obtain visas; and (2) Tata used “false record[s]
or statement[s] material to a false or fraudulent claim” in carrying out this fraud. 31 U.S.C.
§ 3729(a)(1)(A)–(B). The district court dismissed these claims, concluding that the visas
Tata acquired were not the Government’s “money or property” within the meaning of the
FCA. Id. § 3729(b)(2)(A). Palmer appeals only the dismissal of his “reverse” FCA
claims.

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II.
“A dismissal pursuant to Rule 12(b)(6) is reviewed de novo.” Hinkley
v. Envoy Air, Inc., 968 F.3d 544, 552 (5th Cir. 2020). “To survive a motion
to dismiss, a complaint must contain sufficient factual matter, accepted as
true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (quotation omitted). Dismissal is proper if “it
appears beyond doubt that the plaintiff can prove no set of facts that would
entitle him to relief.” U.S. ex rel. Thompson v. Columbia HCA/Healthcare
Corp., 125 F.3d 899, 901 (5th Cir. 1997). And a claim for relief may be
foreclosed “on the basis of a dispositive issue of law.” Neitzke v. Williams,
490 U.S. 319, 326 (1989).
III.
We begin by reviewing the FCA’s operative legal standards and how
Palmer’s allegations fit within that framework. We then address each of
Palmer’s theories of liability in turn.
A.
The FCA imposes liability on those who defraud the federal
government by submitting false or fraudulent claims for the Government’s
money or property. 31 U.S.C. § 3729 et seq. The FCA is “enforced not just
through litigation brought by the Government itself, but also through civil qui
tam actions that are filed by private parties [such as Palmer], called relators,
in the name of the Government.” U.S. ex rel. Conyers v. Conyers, 108 F.4th
351, 354 (5th Cir. 2024) (quotation omitted).
But the FCA “is not ‘an all-purpose antifraud statute,’ or a vehicle
for punishing garden-variety breaches of contract or regulatory violations.”
Universal Health Servs., Inc. v. U.S. ex rel. Escobar, 579 U.S. 176, 194 (2016)
(quoting Allison Engine Co. v. U.S. ex rel. Sanders, 553 U.S. 662, 672 (2008)).

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Rather, the FCA “attaches liability, not to the underlying fraudulent
activity, but to the claim for payment. Therefore, a central question in
[FCA] cases is whether the defendant ever presented a false or fraudulent
claim to the [G]overnment.” U.S. ex rel. Willard v. Humana Health Plan of
Tex., Inc., 336 F.3d 375, 381 (5th Cir. 2003) (quoting Harrison v. Westinghouse
Savannah River Co., 176 F.3d 776, 785 (4th Cir. 1999)) (internal ellipsis and
quotation marks omitted). In short, even if Palmer’s complaint plausibly
alleges that Tata committed visa fraud, to trigger FCA liability he must allege
that Tata submitted a “false or fraudulent claim” depriving the federal
government of “money or property.” 31 U.S.C. § 3729(a).
The “prototypical” FCA claims are “those in which the claimant did
not perform the service he requests compensation for or did perform the
service but overcharged the [G]overnment.” U.S. ex rel. Parikh v. Citizens
Med. Ctr., 977 F. Supp. 2d 654, 662 (S.D. Tex. 2013). Put differently, the
usual scenario involves a defendant using false pretenses to obtain payment
from the Government. But the FCA also imposes liability for the inverse
situation, wherein a defendant “knowingly conceals or knowingly and
improperly avoids or decreases an obligation to pay or transmit money or
property to the Government.” 31 U.S.C. § 3729(a)(1)(G) (emphasis added).
In such “reverse” false claims, a “defendant’s action does not result in
improper payment by the [G]overnment to the defendant, but instead results
in no payment to the [G]overnment when a payment is obligated.” U.S. ex
rel. Bain v. Ga. Gulf Corp., 386 F.3d 648, 653 (5th Cir. 2004).
The central question here is whether Tata was under any “obligation”
to pay money to the federal government. 31 U.S.C. § 3729(a)(1)(G). The
FCA defines an “obligation” as “an established duty” to pay the
Government arising from “an express or implied contractual [relationship]”
or “from statute or regulation.” Id. § 3729(b)(3). Thus, if Tata was
contractually bound to pay the Government, that would be an “obligation.”

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See Bain, 386 F.3d at 657. Likewise, if federal law or regulations obligated
Tata to transmit money to the Government, failure to do so would give rise
to FCA liability. See U.S. ex rel. Simoneaux v. E.I. duPont de Nemours & Co.,
843 F.3d 1033, 1037 (5th Cir. 2016) (Obligations “can arise from a list of
sources, including statutes and regulations.”).
However, “obligations to pay that are merely potential or contingent”
cannot create reverse false claim liability. U.S. ex rel. Barrick v. Parker-
Migliorini Int’l, L.L.C., 878 F.3d 1224, 1231 (10th Cir. 2017); accord U.S. ex
rel. Marcy v. Rowan Cos., 520 F.3d 384, 391–92 (5th Cir. 2008) (rejecting
“potential or contingent obligations to pay . . . fines or penalties” under
environmental laws as “legally insufficient to make a reverse false claim”
(quoting Bain, 386 F.3d at 657)). Rather, there must be an “established duty
to pay” the federal government, and that debt must be “immediately due.”
Simoneaux, 843 F.3d at 1037, 1039 (quoting United States v. Q Int’l Courier,
Inc., 131 F.3d 770, 774 (8th Cir. 1997)); see also United States v. LabQ Clinical
Diagnostics, L.L.C., 771 F. Supp. 3d 401, 437 (S.D.N.Y. 2025) (“A duty to
pay is ‘established’ for a reverse FCA claim ‘only when it triggers an
immediate and self-executing duty to pay.” (quoting Miller v. U.S. ex rel.
Miller, 110 F.4th 533, 546 (2d Cir. 2024)). In other words, it is not enough
for Palmer to allege that some “potential or contingent” event would obligate
Tata to pay money to the federal government. Bain, 386 F.3d at 657. To
survive dismissal under Rule 12(b)(6), Palmer must show that Tata had a
“present duty” to pay the Government and failed to do so while that
obligation was ongoing. Q Int’l Courier, 131 F.3d at 773; see also Simoneaux,
843 F.3d at 1037, 1039.
B.
Mindful of these requirements, we turn to the theories of liability that
undergird Palmer’s claims. He asserts that (1) Tata was obligated to pay the

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Government higher fees for visas that would accurately reflect the work that
Tata’s visa holders would perform, and (2) federal law required Tata to pay
visa-dependent employees higher wages, which necessarily required Tata to
withhold more in federal payroll taxes.
1.
Palmer first alleges that federal labor regulations obligated Tata to pay
fees for H-1B visas in instances when Tata knew that H-1B visas would be
appropriate for the work that visa recipients would perform.2 Consequently,
his argument goes, Tata improperly avoided this obligation by applying and
paying for cheaper L-1A or B-1 visas. See 31 U.S.C. § 3729(a)(1)(G).
Palmer discerns this obligation from regulations requiring submission
of an accurate application to the Department of Labor as part of the H-1B
approval process, as well as the submission of appropriate fees based on the
visa type being sought. See 8 C.F.R. § 214.2(h)(2)(i)(A) (“United States
employer[s] seeking to classify an alien as an [H-1B] temporary employee
must file a petition on the form prescribed by USCIS in accordance with the
form instructions.”); see also 20 C.F.R. § 655.730(a) (“An employer [that]
intends to employ an H-1B nonimmigrant in a specialty occupation . . . shall
submit an [application] to the Department.”); 8 C.F.R. §§ 106.1(a), 106.2
(requiring payment of appropriate fees).
But the regulations Palmer cites merely require payments
corresponding to the visas actually sought; they create no freestanding

_____________________
2
Palmer contends, somewhat unclearly, that Tata’s use of the visa system placed
it in either a “regulatory,” “fee-based,” or “contractual or implied contractual”
relationship with the Government, obligating Tata to pay for accurate visas. See 31 U.S.C.
§ 3729(b)(3). But any such obligation, as Palmer articulates it, could only have been created
by federal labor regulations. Because the relevant provisions create no such obligation, the
exact nature of Tata’s hypothetical obligation is irrelevant.

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obligation to pay fees for a specific visa type. See 8 C.F.R. §§ 106.1,
106.2(a)(3), 214.2(h)(2)(i)(A); 20 C.F.R. §§ 655.700(b)(2), 655.730(a). And
as the district court aptly observed, payments for more expensive H-1B visas
were merely contingent on Tata actually applying for those visas and then
receiving them via the lottery process. Thus, Tata had no “established” duty
to pay higher visa fees corresponding to visas for which it never applied. 31
U.S.C. § 3729(b)(3).
Palmer further contends that, if Tata took on employees using other
visa types and then assigned them to perform work appropriate for H-1B
recipients, then Tata was required to file new or amended visa petitions,
along with the appropriate fees, to correct that discrepancy. See 8 C.F.R.
§ 214.2(h)(2)(i)(E), (l)(7)(i)(C) (requiring new or amended petitions in
response to changed circumstances affecting an earlier visa petition). Palmer
reasons that Tata triggered an immediate obligation to pay higher visa fees to
the federal government once the company began using non-H1-B visa holders
to perform work suited only for H-1B recipients.
Palmer’s contention here rests on similarly weak footing. The
regulations requiring new or amended petitions due to changed
circumstances only obligate employers to adjust their earlier petitions for
visas of the same type; they do not require application for a new type of visa.
See id.3 Thus, while Tata remained bound to abide by federal immigration
law, the company had no “obligation” per the FCA to apply and pay for new

_____________________
3
Moreover, amendment is designed to address an unexpected change in
circumstances affecting a visa petition, not to cure a purportedly fraudulent application.
See 8 C.F.R. § 214.2(h)(2)(i)(E), (l)(7)(i)(C). Indeed, it is unclear whether Tata would
even be allowed to amend a fraudulent petition, as opposed to having its visas and pending
petitions simply revoked. See id. § 214.2(h)(11)(iii)(A), (l)(9)(iii)(A).

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visas when it allegedly used non-H1-B recipients to perform work reserved
for H-1B holders.
Taken together, the relevant regulations impose no “obligation to
transmit money or property to the Government” giving rise to reverse false
claim liability, as every circuit court to address this question has held. The
D.C. Circuit, in a case involving not only similar claims but the same
defendant, concluded that the “requirement to pay the correct fee for the
visa application submitted does not create an FCA obligation. [The relevant]
immigration regulations . . . only oblige employers to pay fees on the visas for
which they applied.” U.S. ex rel. Kini v. Tata Consultancy Servs., Ltd., 146
F.4th 1184, 1194 (D.C. Cir. 2025). Likewise, the Second Circuit determined
that “an obligation to pay higher visa application fees does not exist by the
mere fact of a violation of immigration laws because that violation does not
trigger an immediate and self-executing duty to pay the [G]overnment those
fees.” U.S. ex rel. Billington v. HCL Techs. Ltd., 126 F.4th 799, 805 (2d Cir.
2024) (quotation and alterations omitted); see also U.S. ex rel. Handloser v.
Infosys Ltd., No. 4:20-CV-275, 2025 WL 2029862, at *6 (E.D. Tex. July 21,
2025) (same). And the Ninth Circuit straightforwardly held that “it [was]
not sufficient that defendants applied for the wrong visas or may face liability
for violating applicable regulations. They had no ‘established duty’ to pay
for visas for which they did not apply.” U.S. ex rel. Lesnik v. ISM Vuzem
d.o.o., 112 F.4th 816, 820 (9th Cir. 2024) (quoting 31 U.S.C. § 3729(b)(3)).
Palmer does not address this chorus of contrary authorities.4 Instead,
he relies extensively on the sole district court decision to impose FCA

_____________________
4
Palmer obliquely contests the applicability of Lesnik, arguing that the district
court opinion affirmed on appeal in that case relied on an outdated requirement that
obligations be a “fixed sum.” See Lesnik v. Eisenmann SE, 374 F. Supp. 3d 923, 940 (N.D.

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liability on a defendant that failed to apply and pay for appropriate visas. See
Franchitti v. Cognizant Tech. Sols. Corp., 555 F. Supp. 3d 63, 71 (D.N.J. 2021).
The Franchitti court held that a cognizable FCA “obligation” accrued upon
the submission of inaccurate visa applications. Id. However, that court
arrived at this conclusion based on precedent involving reverse false claims
outside the visa context; the court never so much as cited the labor
regulations that purportedly give rise to Tata’s obligation in this case. Id. at
70–71. Franchitti’s reasoning has also been roundly rejected by every court
to contemplate it. See Kini, 146 F.4th at 1194 (“Franchitti . . . lack[s]
persuasive value.”); Billington, 126 F.4th at 805 n.5 (same); Lesnik, 112 F.4th
at 820 (Franchitti “never identified any legal authority that would establish
. . . an obligation[.]”); see also Handloser, 2025 WL 2029862, at *6 (“[T]he
Franchitti court’s conclusion has proven to be an outlier, unsupported by
prior precedent and uniformly rejected by courts across the country[.]”).
And the Third Circuit itself recently granted interlocutory review of the
Franchitti decision. See Order, No. 25-8042, Franchitti v. Cognizant Tech.
Sols. Corp. (3d Cir. Mar. 4, 2026).
We are likewise unpersuaded. The precedents treated by Franchitti as
analogous are simply inapposite. First, in Pemco Aeroplex, an airplane
maintenance company underpaid the Air Force for some obsolete
equipment, and this underpayment was treated as improper avoidance of an
“obligation” to pay the correct amount. United States v. Pemco Aeroplex, Inc.,
195 F.3d 1234, 1236–38 (11th Cir. 1999). But that company’s government
contract expressly required it to value the equipment correctly before making
an offer to the Government, a contractual duty that was violated when the
company misrepresented the value of the Air Force’s property. Id. at 1235–
_____________________
Cal. 2019). But this reasoning did not guide the Ninth Circuit’s analysis, nor does it have
any bearing on our decision in this case.

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37. In this case, no equivalent contractual duty compelled Tata to pay for
alternative visas without actually applying for those visas.
Likewise, Franchitti’s treatment of U.S. ex rel. Customs Fraud
Investigations, L.L.C. v. Victaulic Co., 839 F.3d 242 (3d Cir. 2016), offers no
support for Palmer’s position. In Victaulic, an importer took in millions of
pounds of improperly marked foreign pipe fittings, and the court determined
that the firm was obligated to pay the marking duty once the improperly
marked goods entered the country. Id. at 253–56. The relevant customs law
in Victaulic plainly required immediate payment of the marking duty, a duty
the defendant ignored, see id., whereas the labor regulations relevant here
required Tata to pay higher visa fees only after applying for the corresponding
visas—something Tata never did.
The same goes for U.S. ex rel. Bahrani v. Conagra, Inc., 465 F.3d 1189
(10th Cir. 2006). In Conagra, a meat exporter violated federal law by failing
to apply and pay for replacement export certificates after discovering that its
certificates were erroneous. Id. at 1192–93, 1198–99. Analogizing to Conagra,
Palmer proposes that Tata was similarly required to apply and pay for new
visas once the company began assigning non-H-1B recipients to perform H-
1B jobs. But in Conagra, USDA regulations clearly required new
applications and payment when errors were discovered, a duty that the Tenth
Circuit later characterized as arising “automatically.” Barrick, 878 F.3d at
1232–33. The labor regulations at issue in this case impose no equivalent
requirement to make new applications or pay additional fees.
At bottom, while Tata was obligated under federal law to apply for
accurate visas, its duty to pay higher fees was contingent on first applying for
visas that required those fees. Given that contingency, Palmer’s allegation
that Tata failed to pay higher fees for visas for which it never applied cannot
be grounds for reverse false claim liability.

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2.
Palmer also alleges that Tata systematically paid visa-dependent
employees less than domestic workers, violating federal regulations requiring
that H-1B recipients be paid wages equivalent to those of non-visa workers.
See 20 C.F.R. § 655.731(a). According to Palmer, this underpayment
translated into Tata’s avoidance of an “obligation to . . . transmit money” to
the Government because the payment of lower wages necessarily led Tata to
withhold lower amounts for federal payroll taxes. 31 U.S.C. § 3729(a)(1)(G).
Complicating Palmer’s argument is the FCA’s “tax bar,” which
flatly prohibits relators from basing an FCA claim on tax violations. See 31
U.S.C. § 3729(d) (“[The FCA] does not apply to claims, records, or
statements made under the Internal Revenue Code.”). Accordingly, Palmer
makes the more indirect argument that the payment of the correct taxes on
incorrect wages, rather than the wages mandated by federal law, necessarily
cheated the Government of money that Tata was required to transmit.
Palmer’s second theory of recovery stalls out of the gate, as the
regulations at issue do not impose any “obligation to transmit money or
property” to the Government. 31 U.S.C. § 3729(a)(1)(G). Rather, the
relevant regulations only obligate payments of wages to employees. See 20
C.F.R. § 655.731(a) (“[T]he required wage rate will be paid to the H-1B
nonimmigrant(s) . . . on the same basis, and in accordance with the same
criteria, as the employer offers to U.S. workers.” (emphasis added)). The
rules on which Palmer relies merely define “wages paid” to visa recipients
and require that payments be “reported to the [IRS] as the employee’s
earnings” and account for “appropriate” withholding under the Internal
Revenue Code (IRC) and the Federal Insurance Contributions Act. 20
C.F.R. § 655.731(c)(2)(ii)–(iii). Other provisions contemplate that
deductions “may reduce [wages paid] below the level of the required wage,”

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but they impose no independent tax requirements on employers. Id.
§ 655.731(c)(1).
Put simply, the relevant regulations did not obligate Tata to withhold
more for payroll taxes without paying corresponding higher wages to its
workers. Instead, the regulations required Tata to pay visa recipients certain
wages and provided a rubric for calculating qualifying wages with reference
to “appropriate” withholding for payroll taxes. Id. § 655.731(c)(2)(ii)–(iii).
What counts as “appropriate” withholding is determined by the IRC, which
only requires withholding on the wages actually paid to employees. See, e.g.,
26 U.S.C. §§ 3111(a), 3121(a)–(b); 26 C.F.R. § 601.401. Without paying
higher wages to workers, Tata was thus not required to withhold more in
taxes. See Compaq Computer Corp. v. Commissioner, 277 F.3d 778, 783 (5th
Cir. 2001) (The basis for “an employer[’s] withholding and paying to the
Government income taxes for an employee [is] the full amount [of employee
income] before taxes are paid[.]” (first alteration in original)); Rowan Cos. v.
United States, 624 F.2d 701, 704 (5th Cir. 1980), rev’d on other grounds, 452
U.S. 247 (1981) (“If income tax is not due on some payments to employees,
it is unnecessary to withhold taxes from those payments.”).
Palmer cites 8 U.S.C. § 1182(n)(2)(A) to suggest that the Government
could enforce the visa wage requirements to collect lost tax revenue,
indicating an independent, ongoing requirement to withhold more in taxes.
But this enforcement statute does not help Palmer’s case. The Government
could only seek to recover from Tata if the Secretary of Labor, after a hearing,
determined that Tata had failed to meet its wage obligations for visa
recipients. See id. § 1182(n)(2)(D). Thus, any requirement for increased
withholding by Tata was contingent on a negative finding by the Secretary.
Because no such finding was ever made, no “obligation” on Tata’s part ever
materialized.

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Once more, every court to address similar claims has rejected
Palmer’s tax-related reverse false claim theory. The D.C. Circuit concluded
that the provisions Palmer cites for support “compel[] an employer to pay
H-1B employees specified wages” but “[do] not force an employer to pay or
transmit money or property to the [G]overnment.” Kini, 146 F.4th at 1193
(emphasis added); see also Billington, 126 F.4th at 804; Lesnik, 374 F. Supp.
3d at 940; Handloser, 2025 WL 2029862, at *5. Rightly so. Holding
otherwise would transform every failure to pay employees the wages required
by federal law into a reverse false claim under the FCA. Such an expansive
reading flatly contradicts the FCA’s language, the Supreme Court’s
cabining the FCA’s reach, and unanimous precedent indicating that unpaid
taxes fall outside the scope of the FCA. See 31 U.S.C. § 3729(d); United
States v. McNinch, 356 U.S. 595, 599 (1958) (“[I]t is . . . clear that the False
Claims Act was not designed to reach every kind of fraud practiced on the
Government.”); U.S. ex rel. Lissack v. Sakura Glob. Cap. Mkts., Inc., 377 F.3d
145, 153 (2d Cir. 2004) (The FCA clearly prohibits “actions that, on their
face, seek to recover taxes.”).
Palmer does not respond to these contrary authorities. Instead, he
cites precedents arising from inapt regulatory contexts, such as the duty of
healthcare providers to refund Medicare overpayments or the payment of
fees for export certificates. See, e.g., Conagra, 465 F.3d at 1209; U.S. ex rel.
Schaengold v. Mem’l Health, Inc., No. 4:11-cv-58, 2014 WL 6908856, at *1,
*11 (S.D. Ga. Dec. 8, 2014). Palmer submits U.S. ex rel. Frey v. Health Mgmt.
Sys., Inc., No. 3:19-CV-0920, 2021 WL 4502275 (N.D. Tex. Oct. 1, 2021), for
the proposition that Tata’s “antecedent” failure to comply with wage
requirements does not excuse Tata from its “obligation” to pay withholding
taxes based on the proper wages. But Frey cannot support this notion. In
Frey, third-party insurers were plainly required by law to reimburse the
federal government under certain federal insurance programs, regardless of

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No. 25-40368

whether other involved parties (such as state Medicaid agencies) had failed
to pay those insurers first. Id. at *1–2, *12–15. The regulations at issue here
impose no equivalent obligation to withhold more in taxes independent of
wages paid.
Palmer also points to a raft of administrative cases from the
Department of Labor to suggest that 20 C.F.R. § 655.731 imposes an
independent duty to pay income tax on the appropriate wages. But these
cases merely address the calculation of “wages paid” and what
documentation is required; they do not communicate any duty to pay higher
taxes without first paying higher wages to employees. See In re Avenue Dental
Care, No. 07-101, 2010 WL 348304 (DOL Adm. Rev. Bd. Jan. 7, 2010); In re
Bedi, No. 14-096, 2016 WL 866115 (DOL Adm. Rev. Bd. Feb. 29, 2016); In
re XCEL Sols. Corp., No. 12-076, 2014 WL 3886827 (DOL Adm. Rev. Bd.
July 16, 2014).
Last, Palmer proffers U.S. ex rel. Hunt v. Merck-Medco Managed Care,
L.L.C., 336 F. Supp. 2d 430 (E.D. Pa. 2004), in arguing that Tata may be
liable not only for failing in its direct obligations to the Government, but also
for any “actions [leading to] the predictable consequence of depriving the
Government of money it was owed.” Id. at 444. Hunt concerned a pharmacy
benefit manager that was obliged by contract to pay penalties to an
intermediary when its pharmacies failed to fill prescriptions for patients on
federal insurance plans, payments that would necessarily be passed on to the
Government. Id. at 445. By contrast, Tata was not required to withhold taxes
on wages it never paid to employees.
Palmer alleges a clever bank shot theory of liability in his effort to avoid
the FCA’s “tax bar.” But he provides no regulatory, statutory, or
precedential authority substantiating that Tata had an “obligation” to

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withhold more in taxes without first paying higher wages to workers. Thus,
Palmer fails to allege an actionable reverse false claim under the FCA.5
* * *
Palmer’s theories of reverse false claim liability fail. The pertinent
labor regulations did not obligate Tata to pay for visas for which the company
never applied, nor to withhold taxes on wages that were never paid. Thus,
Palmer fails to allege an actionable claim under the FCA, such that dismissal
was proper.
The judgment of the district court is
AFFIRMED.

_____________________
5
In view of this conclusion, we need not address the parties’ arguments in the
alternative concerning whether the FCA’s “tax bar” separately forecloses Palmer’s
claims.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/11317949. Public record. Not legal advice.