H1B Golden Attempt- Rejected after receipted Form I-797C stating that it was never picked in lottery

Applied for H1B- first attempt in April '19. Since I had OPT only till June 6th, my university received a case status change and issued me a Cap-gap extension. The employer received I-797C with receipt number thereafter. Today my attorney got the entire package returned. On calling USCIS, she was told case that was not picked in the lottery and there was some system error. Is this normal? Should I be filing a law-suit? Do I have any options? Please help.

Well, I am not sure, if lawsuit would work here. If it was a system issue and USCIS has evidence on the same saying that it was system issue then they will win…
You can definitely speak to an attorney and then see, if there is an option to file a law suit.

Attorney is not very keen for law suit because she this USCIS has evidence and also they did not cash the check but returned it with all the other docs. Are there any alternatives to extend my presence in the US till december? I’ve started applying for a Canadian transfer but they want me to complete my obligations for the year…

Well, I am not sure, if any options… discuss with an attorney on your options.