Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Taggart v. United States Department of Justice

United States District Court, E.D. Pennsylvania

January 20, 2017

KENNETH TAGGART, Plaintiff,
v.
UNITED STATES DEPARTMENT OF JUSTICE, et al., Defendants.

          MEMORANDUM

          GERALD J. PAPPERT, J.

         This case pertains to three Civil Investigative Demands issued by the Government and is Kenneth Taggart's third attempt to have the Court preclude the Government from investigating potential violations of the False Claims Act. Taggart continues to confuse the investigation into a possible violation of the statute with the filing of a lawsuit, the scope of the Court's inquiry in each phase and the proper stage at which to assert various arguments and defenses. For this and other reasons discussed below, the Court grants the Government's motion with respect to all but one of Taggart's myriad claims.

         I.

         In June 2008 Taggart, an appraiser, obtained a $658, 648.00 mortgage insured by the Department of Housing and Urban Development (“HUD”) for a property at 521 Cowpath Road in Telford, Pennsylvania.[1] (Pl.'s Am. Compl., at 1, ECF No. 6.) Taggart obtained his HUD-insured mortgage under Section 203(b) of the National Housing Act. See 12 U.S.C. § 1709. The statute requires any HUD-insured mortgage to be for the primary or secondary residence of the person receiving the mortgage. (Defs.' Mot. to Dismiss (“Defs.' Mot.”), ECF No. 10, at 8.)

         Subsequent to obtaining the mortgage, Taggart, in an unrelated lawsuit, stated that 709 Schwab Road in Hatfield, Pennsylvania was his primary residence. See Taggart v. Wells Fargo Home Mortg., Inc., No. 10-cv-00843, 2010 WL 3679091, at *1 (E.D. Pa. Sept. 27, 2010). This led the United States (“the Government”) to investigate, pursuant to the False Claims Act (“FCA”), see 31 U.S.C. § 3729, et seq., whether Taggart had maintained 521 Cowpath Road as his primary residence during the relevant year, in accordance with the statutory occupancy requirement. As part of that investigation, on October 21, 2015, the Government served upon Taggart two Civil Investigative Demands (“CIDs”) requiring him to produce documents relating to the HUD-insured mortgage and to appear for a deposition. (Pl.'s Am. Compl., at 1.)

         Taggart initially challenged these CIDs in a separate proceeding before this Court. See In re Taggart, No. 15-mc-255, 2016 WL 3902939 (E.D. Pa. July 19, 2016). In that case, on November 11, 2015, Taggart filed a pro se petition under seal to quash the Government's CIDs. (No. 15-mc-255, ECF No. 1.) He contended that the CIDs should be quashed because: (1) they were not made pursuant to a legitimate law enforcement investigation since any claim against him under the FCA would be time-barred; (2) they failed to plead with particularity the evidence supporting a claim under the FCA; (3) they failed to comply with procedural requirements under 12 U.S.C. 5562; (4) they interfered with his due process right to litigate claims without interference from the government since the validity of the mortgage contract was being litigated in another forum;[2] and (5) they violated his First Amendment rights because they were issued solely in retaliation for his “whistleblowing” against HUD. (Id.) Taggart also asserted several statutory defenses to a substantive claim under the FCA, including lack of knowledge, lack of a false statement and lack of materiality. (Id.)

         On December 24, 2015 Taggart, now represented by counsel, filed a motion to stay the proceedings for 90 days. (ECF Nos. 6 & 7.) Following a telephone conference, the Court issued an Order denying Taggart's motion to stay, granting the Government's motion for enforcement of the CIDs and ordering Taggart to produce the documents requested by the Government by April 15, 2016 and appear for oral testimony on April 25, 2016. (ECF No. 9.) The documents Taggart subsequently produced to the Government did not clearly confirm which properties were rented, which were not or where Taggart was living during the relevant year. (ECF No. 14.) The documents did reveal that Taggart was a customer of TD Bank. (Id.)

         The Government therefore issued on December 11, 2015 a third CID to TD Bank. (Id.) This CID requested, among other things, Taggart's deposit and withdrawal slips. (ECF No. 11.) On May 23, 2016 Taggart moved to quash the CID pursuant to the Right to Financial Privacy Act of 1978, see 12 U.S.C. § 3410, arguing that the CID constituted a “fishing expedition” and was “oppressive because it [sought] to compel production of privacy records” which impinged upon his “right to privacy.” (Id. at 8-9.) The Court held oral argument on the motion on June 27, 2016, (ECF No. 17), and denied it on June 29, 2016, (ECF Nos. 18-19). The Court found that the request did not violate the statute since it was made pursuant to a legitimate law enforcement inquiry into whether a violation of the FCA had occurred. (ECF No. 18.)

         Taggart obtained a new lawyer and on July 6, 2016 appealed the Court's decision approving the TD Bank CID[3] and moved for a stay pending his appeal. (ECF Nos. 20-22.) In his motion for stay, Taggart argued for the first time that HUD did not have standing to issue the CIDs because the occupancy requirement had been waived or eliminated with respect to his mortgage. (ECF No. 21.) He asserted that his mortgage contract, created by a HUD-approved lender, LBA Financial, LLC, and drafted using a standard form allegedly approved by HUD (“FHA Contract form”) delegated authority to the lender to waive the occupancy requirement. (Id.) He further contended that the lender waived the requirement through a “1-4 Family Rider” form which he claimed had been made part of his mortgage contract by reference. (Id.) He also argued that the Government lacked standing to issue the CIDs because the limitations period in which the Government could bring a FCA case against him had expired. (ECF No. 21.)

         On July 19, 2016 the Court denied Taggart's motion for stay, again stating that the Government's investigation was a legitimate law enforcement inquiry and the information sought was relevant to that inquiry. (ECF No. 26.) The Court noted that the 1-4 Family Rider form was undated, Dated:ly by Taggart and that its relation to the HUD-insured mortgage was unclear. (Id.) The Court further stated that it had no basis upon which to adjudicate any statute of limitations issues and that such a determination would be premature in the pre-complaint investigation phase. (Id.)

         Taggart filed his complaint in this case on July 27, 2016. (No. 16-cv-4040, ECF No. 1.) The Government filed a motion to dismiss the complaint on September 12, 2016. (ECF No. 5.) Taggart filed an amended complaint on September 26, 2016, (ECF No. 6), and the Government again moved for its dismissal on October 7, 2016, (ECF No. 10). Taggart's amended complaint is essentially a reiteration of his prior challenges to the CIDs, but this time he argues that the issuance and enforcement of the CIDs violate his constitutional rights[4] because (1) the Government lacks standing to investigate an alleged FCA violation based on the occupancy requirement since the 1-4 Family Rider form indicates that the requirement was waived (or at least creates ambiguity as to whether the requirement was waived), (Pl.'s Am. Compl. ¶¶ 28-29, 71-72); (2) the Government lacks standing to investigate because any claim it asserts under the FCA based on Taggart's conduct in 2008 would be time-barred, (id. ¶¶ 86-87); (3) the CIDs were issued and enforced without any adjudication of the applicability of the occupancy requirement, (id. ¶¶ 33, 47, 70); (4) the CIDs were issued and enforced despite unresolved issues regarding the validity of the mortgage contract, (id. ¶¶ 45, 51-52, 68); (5) the Government's claims rely on Ex Post Facto laws (FERA 2009), (id. ¶ 58); and (6) the Government is abusing the low standard for issuing CIDs and making false representations to the Court regarding the permissibility of waiving the occupancy requirement in order to retaliate against and harass Taggart, (id. ¶¶ 21, 26, 42). Taggart also seeks a declaratory judgment as to the validity of the purported waiver of the occupancy requirement. The Court held oral argument on the Government's motion on December 8, 2016. (ECF No. 23.)

         II.

         To survive a motion to dismiss under Rule 12(b)(6), a plaintiff must plead factual allegations sufficient “to raise a right to relief above the speculative level. . . on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The “mere possibility of misconduct” is not enough. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). The court must construe the complaint in the light most favorable to the plaintiff. See Connelly v. Lane Constr. Corp., 809 F.3d 780, 790 (3d Cir. 2016) (citations omitted). However, a court need not accept as true inferences drawn by the plaintiff that are unsupported by facts. See Cal. Pub. Emps.' Ret. Sys. v. Chubb Corp., 394 F.3d 126, 143 (3d Cir. 2004).

         “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the ‘grounds' of his ‘entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell, 550 U.S. at 555 (2007) (citations and alterations omitted); see Iqbal, 556 U.S. at 678 (2009) (“Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”). A court should “consider only the allegations in the complaint, exhibits attached to the complaint, matters of public record, and documents that form the basis of a claim.” Lum v. Bank of Am., 361 F.3d 217, 221 n.3 (3d Cir. 2004). Whether a complaint states a plausible claim for relief is a context-specific task that “requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679 (citations omitted).

         Under Twombly and Iqbal, a court reviewing the sufficiency of a complaint must take three steps. See Connelly, 809 F.3d at 787. First, it must “tak[e] note of the elements [the] plaintiff must plead to state a claim.” Id. (quoting Iqbal, 556 U.S. at 675). Second, it should identify allegations that, “because they are no more than conclusions, are not entitled to the assumption of truth.” Id. (quoting Iqbal, 556 U.S. at 679). Finally, “[w]hen there are well-pleaded factual allegations, [the] court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Id. (quoting Iqbal, 556 U.S. at 679).

         III.

         Many of Taggart's claims and supporting arguments attack the legality and enforceability of the CIDs. The Court has already held that the CIDs were properly issued pursuant to a legitimate purpose, within the Government's authority, and that they are reasonable in scope and enforceable. See In re Taggart, 2016 WL 3538604, at *2 (E.D. Pa. June 29, 2016); In re Taggart, 2016 WL 3902939, at *2-3 (E.D. Pa. July 19, 2016). Taggart's attempt to relitigate the Court's prior decision is barred by claim preclusion and/or issue preclusion. Under the doctrine of claim preclusion, a final judgment forecloses “successive litigation of the very same claim, whether or not relitigation of the claim raises the same issues as the earlier suit.” New Hampshire v. Maine, 532 U.S. 742, 748 (2001). Issue preclusion bars “successive litigation of an issue of fact or law actually litigated and resolved in a valid court determination essential to the prior judgment, ” even if the issue recurs in the context of a different claim. Id. at 748-49. The Court need not reexamine what it has already settled-that the Government was within its authority to issue the three CIDs; the Court will, however, address more fully Taggart's purported constitutional claims.

         IV.

         Taggart bases Counts 2, 3, 6, 8 and 9 of his amended complaint on the 1-4 Family Rider form, which he alleges was made part of his mortgage contract by reference and constitutes a valid waiver of the statutorily-imposed occupancy requirement on HUD-insured mortgages. Taggart obtained his HUD-insured mortgage under Section 203(b) of the National Housing Act. See 12 U.S.C. § 1709. The statute requires any HUD-insured mortgage to be for the primary and secondary residence of the person receiving the mortgage and states that the occupancy requirement can be waived if the Secretary determines that it is necessary to avoid undue hardship to the mortgagor. See 12 U.S.C. § 1709(g)(1). HUD's position, consistent with the statute, is that the occupancy requirement can only be waived pursuant to such a finding. See (No. 16-cv-4040, Tr. of Oral Arg., ECF No. 24, at 25:11-18); see also (No. 15-mc-255, Tr. of Hearing, ECF No. 30, at 23:16-24:3). The Secretary never found that the occupancy requirement would impose undue hardship on Taggart.

         Taggart nonetheless contends that private lenders have the authority to waive the occupancy requirement absent a finding of undue hardship from the Secretary. As evidence of this, Taggart contends that his lender, LBA Financial, was HUD-approved and used a standard FHA Mortgage form, allegedly approved by HUD, containing language that grants private lenders the authority to waive the occupancy requirement. (Id. ¶ 24.) Specifically, Taggart's mortgage states that the borrower must “occupy . . . the property as [his] principal residence within sixty days of the election” of the mortgage and “continue to occupy the property as [his] principal residence for at least one year after the date of occupancy unless Lender determines that the requirement will cause undue hardship for Borrower, unless extenuating circumstances exist which are beyond borrower's control.” (Id. ¶ 13.) Taggart further claims that, pursuant to this authority, LBA waived the occupancy requirement as to him by way of the 1-4 Family Rider form, which states that: “Unless Lender and Borrower otherwise agree in writing, Section #6 of Borrower's occupancy of the property is deleted.” (Id. ¶ 14.)

         Taggart advances three different arguments as to how the issuance and enforcement of the CIDs violates his constitutional right to due process. First, he contends that the language in the FHA Mortgage contract unequivocally shows that private lenders may waive the requirement, and the 1-4 Family Rider form read in conjunction with the FHA Mortgage contract constitutes clear evidence that Taggart's lender validly waived the requirement as to him. See (Pl.'s Am. Compl. ¶¶ 22, 28, 53, 71, 73, 74.) Therefore, the Government lacked standing to issue CIDs premised on an alleged violation of a nonexistent requirement, and the enforcement of the CIDs violates Taggart's constitutional right to due process. (Id.) Second, he argues that even if the FHA Mortgage contract and the 1-4 Family Rider form do not unequivocally demonstrate a valid waiver, they raise questions about the applicability of the occupancy requirement, and he is entitled to a determination, before the CIDs are issued and enforced, as to whether the contract and its terms are legal, binding requirements which can be enforced. See (id. ¶¶ 12-13, 17, 23-24, 28, 33, 51, 68, 75, 80-81). In Taggart's view, the enforcement of the CIDs prior to an adjudication of the validity of the mortgage or the applicability of the occupancy requirement violates Taggart's constitutional right to due process. (Id.) Finally, he claims that even if the FHA Mortgage contract and the 1-4 Family Rider form do not unequivocally demonstrate a valid waiver of the occupancy requirement, they create ambiguity about the requirement's applicability, and if the Government were to assert a claim against Taggart under the FCA, any ambiguity with respect to Taggart's legal obligations would be resolved in his favor. See (id. ¶¶ 23, 29-32). Because the Government's potential claims under the FCA are “in doubt” due to this ambiguity, the enforcement of the CIDs violates Taggart's constitutional right to due process. (Id.)

         A.

         As an initial matter, Taggart's legal conclusion that the documents he has proffered prove that the occupancy requirement was validly waived is not entitled to a presumption of truth. See Connelly, 809 F.3d at 787; Cal. Pub. Emps.' Ret. Sys., 394 F.3d at 143. At worst, the proffered documents are fraudulent or irrelevant. See (No. 15-mc-255, ECF No. 30, at 24:23-25). At best, they may introduce some ambiguity as to whether the requirement was waived. In any event, whether or not the lender validly waived the occupancy requirement and the legal effect of such a waiver depends upon several unresolved facts, namely whether: private lenders have the authority to waive the requirement absent a finding of undue hardship by the Secretary; the statutory knowledge requirement can even be waived; the 1-4 Family Rider form was made a part of Taggart's mortgage contract by reference; the 1-4 Family Rider form signed only by Taggart meets the requirements of a valid waiver; any equitable doctrines ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.