Living in California, illegal immigration has been a topic of debate for as long as I can remember. But I can’t think of a time when it has been more front and center than it is today. Nor of the myriad of issues that have sprung from it: Due process, the separation of powers and checks and balances, birthright citizenship under the 14th Amendment of the Constitution, and visceral feelings from both side as to what is just, fair, and decent along the continuum between right and wrong and which is premised at least in part on real world economic impacts in which there will be winners and losers.
No industry, other than agriculture, has the most to gain or lose in this debate than the construction industry. According to a 2021 report from the Center of American Progress, illegal immigrants make up approximately 23% of the construction labor workforce in the United States, or more than one in five workers. In raw numbers, this accounts for nearly 1.5 million of the estimated 7.5 million undocumented immigrants working in the United States.
The next case, U.S. Ex. Rel. Lesnik v. ISM Vuzem D.O.O., 112 F.4th 816 (2024), is an interesting one involving not only a very famous electric car company, but also the employment of noncitizen laborers, and the federal False Claims Act. An unusual fact pattern to say the least.
The ISM Vuzem D.O.O. Case
Gregory Lesnik, a resident of Slovenia, and Stjepan Papes, a resident of Croatia, were hired to perform unskilled labor on construction projects in the United States including at the Tesla manufacturing plant in Fremont, California.
The prime contractor on the projects was Eisenmann Corporation who subcontracted with various defendant entities, operated by Robert Vuzem and Ivan Vuzem, residents of Slovenia, to provide laborers for the construction projects including Lesnik and Papes.
According to the plaintiffs, the subcontractor defendants helped them obtain B-1 visas to enter the United States. B-1 visas are typically reserved for workers performing skilled work. According to the plaintiffs, the subcontractor defendants did so to avoid higher application fees for a type of visa known as a “petition-based” visa, intended for unskilled workers, including H2-B visas for temporary, non-agricultural workers.
When Lesnik and Papes arrived in the United States, they worked at Tesla’s manufacturing plant in Fremont, California. Papes worked at the plant from 2013 and 2015. Lesnik was terminated in 2017, and according to plaintiffs, defendants sued him and threatened to have him “criminally prosecuted” as example to coerce the remaining workers to continue working.
In 2016, Lesnik and Papes filed suit alleging two claims: (1) that the defendants violated the federal False Claims Act by fraudulently applying for B-1 visas instead of petition-based visas; and (2) Lesnik claimed that defendants violated the Trafficking Victims Prevention Reauthorization Act by filing suit against him and threatening him with criminal prosecution in order to coerce other workers to continue working.
The defendants did not appear and the plaintiffs filed motions for default judgment. However, the U.S. District Court for the Northern District of California denied both motions finding that plaintiffs had not adequately alleged a claim under the federal False Claims Act because defendants were under no obligation to pay application fees for petition-based visas for which they did not apply and that Lesnik’s claim under the Trafficking Victims Prevention Reauthorization Act failed because he did not allege that defendants’ actions coerced him to perform any labor.
Plaintiffs appealed.
The Appeal
On appeal to the 9th circuit Court of Appeal, the Court described the plaintiffs’ claim under the federal False Claims Act as a “reverse” false claim:
The complaint alleges that defendants should have applied for visas that cost more than the ones for which they actually applied. While an ordinary false claim involves seeking money from the government to which the claimant is not entitled, we have the reverse situation here: defendants allegedly paid the government less than they should have. The FCA expressly imposes liability for reverse false claims where a person “knowingly makes [or] uses … a false record or statement material to an obligation to pay… the Government, or … knowingly and improperly avoids or decreases [such] an obligation.” 31 U.S.C. § 3729(a)(1)(G).
The key issue thus becomes whether the defendants had an obligation to pay more than they did.
The federal False Claims Act, explained the Court of Appeal, defines “obligation” as “an established duty, whether or not fixed, arising from an express or implied contractual, grantor-grantee, or licensor-licensee relationship, from a fee-based or similar relationship, [or] from statute or regulation.” While noting that the 9th Circuit had not had occasion to interpret the definition of “obligation” since it was included in the statute in 2009, it noted that when Congress amended the statute in 2009, it included within the definition of “obligation” that the obligation be “established” at the time the false statement or record was made.
In this case, held the Court of Appeal, because the statute requires an established legal obligation, “it is not sufficient that defendants applied for the wrong visas or may face liability for violating applicable regulations” since “[t]hey had no ‘established duty’ to pay for visas for which they did no apply. Citing with approval the district court’s decision in a related-case against Eisenmann and Tesla, the Court explained:
[T]here are no allegations that [defendants] ever submitted a visa application for the petition-based visas. To the contrary, Plaintiffs’ allegations that [defendants] did not submit a visa application for the petition-based visas form the basis for Plaintiffs’ reverse FCA claim…. Thus, there was no obligation to pay the government for a petition-based visa because no visa application for a petition-based visa was ever actually submitted…. As the Ninth Circuit held in Bourseau, “[t]he obligation cannot be merely a potential liability.” 531 F.3d at 1169 (emphasis added). However, that is exactly what Plaintiffs are predicating their reverse FCA claim on: a potential liability incurred only if [defendants] had applied for the petition-based visas.
As to Lesnik’s claim under the Trafficking Victims Prevention Reauthorization Act, the Court of Appeal noted that the statue was intended to “combat trafficking in persons, a contemporary manifestation of slavery” that “includes forced labor,” and to that end, prohibits forced labor including “by means of the abuse or threatened abuse of law or legal process.” 18 U.S.C. § 1589(a).
However, explained the Court of Appeal, the statute defines ‘abuse or threatened abuse of law or legal process” as improperly using or threatening the same “to exert pressure on another person to cause that person to take some action.” 18 U.S.C. § 1589(c)(1) (emphasis in original).” “A plain reading of this section” held the Court, “is that the person facing abuse or threats must be the same person who is pressured to provide their labor” and that “[w]hile defendants allegedly threatened and sued Lesnik after he was terminated, plaintiffs admitted that these actions were not taken to coerce him to provide any labor or services.”
Conclusion
An unusual case to be sure although, not being an immigration attorney, it may occur more frequently than I think. It’s also an example of the granularity which can stem from immigration issues, something we’re all now witnessing, where the justice, fairness, and decency of deportations have come into question, such as deporting people to ostensibly dangerous countries, deporting underage U.S. citizens along with their undocumented parents even with the alleged consent of the parent, deporting people based on their viewpoints, etc. These are difficult questions.
