TAGGART et al v. UNITED STATES OF AMERICA

Filing 26

MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE GERALD J. PAPPERT ON 7/19/16. 7/19/16 ENTERED AND COPIES E-MAILED.(kw, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
IN RE:

CIVIL ACTION
NO. 15-mc-255

KENNETH TAGGART
PAPPERT, J.

July 19, 2016
MEMORANDUM

Kenneth Taggart (“Taggart”) filed a Motion for Stay pending his appeal of the Court’s
June 29, 2016 denial of Taggart’s May 23, 2016 Motion for Order Pursuant to Customer
Challenge Provisions of the Right to Financial Privacy Act (“RFPA”). The Motion for Stay is
denied.
I.
On November 11, 2015, Taggart, acting pro se, filed a petition under seal to quash or
modify two Civil Investigative Demands (“CIDs”) issued by the United States (“the
Government”). (ECF No. 1.) The CIDs required Taggart to produce documents relating to a
June 2008 Department of Housing and Urban Development (“HUD”) mortgage that Taggart
applied for and received for a property at 521 Cowpath Road in Telford, Pennsylvania. The
CIDs also required Taggart to appear for a deposition. (Id.) The Government’s CIDs pertain to
its investigation, under the False Claims Act, 31 U.S.C. Section 3729, et seq., into whether the
Cowpath Road property was Taggart’s primary residence, which was a condition of the HUD
insured mortgage. (ECF No. 1, Ex. C at 15.)
On December 24, 2015 Angela Halim, Esquire (“Halim”) entered her appearance for
Taggart and filed on his behalf a motion to stay the proceedings for 90 days. (ECF Nos. 6–7.)
Following a telephone conference with all counsel on April 11, 2016, the Court issued an Order
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which denied Taggart’s motion to stay and ordered production of the documents requested by the
Government on or before April 15, 2016. The Court also ordered Taggart to appear for a
deposition which has been rescheduled at least twice and is now set to occur on July 27, 2016.
(ECF Nos. 9, 24.)
The Government subsequently issued a third CID to TD Bank, which Taggart again
opposed in his Motion for Order. (ECF No. 11.) After hearing oral argument, the Court denied
the Motion. (ECF Nos. 17–19.) On July 6, Taggart, now represented by Joshua Thomas,
Esquire (“Thomas”), filed an appeal of that decision (ECF Nos. 20, 22) and the subject Motion
for Stay pending his appeal. (Pet’r’s Mot., ECF No. 21.)1 The Government responded on July
13, 2016. (Def.’s Resp., ECF No. 25.)
II.
The power to temporarily stay proceedings lies within the sound discretion of the district
court. See Nicholas v. Wyndham Int’l, Inc., 149 F. App’x 79, 81 (3d Cir. 2005) (citing Landis v.
N. Am. Co., 299 U.S. 248, 254 (1936) (“[T]he power to stay proceedings is incidental to the
power inherent in every court to control the disposition of the causes on its docket with economy
of time and effort for itself, for counsel, and for litigants. How this can best be done calls for the
exercise of judgment, which must weigh competing interests and maintain an even balance.”)).
The proponent of a stay “must make out a clear case of hardship or inequity in being
required to go forward, if there is even a fair possibility that the stay for which he prays will
work damage to some one else.” Landis, 299 U.S. at 255. The party seeking a stay also “bears
the burden of establishing its need.” Clinton v. Jones, 520 U.S. 681, 708 (1997) (citing Landis,
299 U.S. at 255); see also CTF Hotel Holdings, Inc. v. Marriott Int’l, Inc., 381 F.3d 131, 139 (3d

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On July 11 Taggart, Halim and Thomas filed a “Consent Order Granting Substitution of Attorney” pursuant to
which Thomas replaced Halim as Taggart’s attorney. (ECF No. 23.)

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Cir. 2004) (“The opposing party must state a clear countervailing interest to abridge a party’s
right to litigate.”). When deciding a motion to stay proceedings pending the resolution of
another action in federal court, courts consider four factors: “(1) whether the stay applicant has
made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will
be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the
other parties interested in the proceeding; and (4) where the public interest lies.” Nken v. Holder,
556 U.S. 418, 434 (2009); see also King Drug Co. of Florence, Inc. v. Cephalon, Inc., 06-cv1797, 2015 WL 9244638, at *3 (E.D. Pa. Dec. 17, 2015).
III.
Taggart has not made any showing, much less a strong one, that he is likely to succeed on
appeal. Taggart obtained his HUD insured mortgage pursuant to the National Housing Act of
1934, 12 U.S.C. Section 1709. Under the Act, HUD “may insure a mortgage . . . only if the
mortgagor is to occupy the dwelling as his or her principal residence or as a secondary residence,
as determined by the Secretary.” 12 U.S.C. § 1709(g)(1). If Taggart submitted false claims in
connection with his HUD insured mortgage, he may be liable under the False Claims Act. The
Government has the authority under 31 U.S.C. Section 3733(a)(1) to issue CIDs to investigate
Taggart’s conduct in regard to the HUD insured mortgage. The Court has stated this in two
separate Orders on April 11, 2016 and June 29, 2016. (ECF Nos. 9, 19.) Taggart now appeals
the latter decision.
The RFPA states, in relevant part, that “no Government may have access to or obtain
copies of, or the information contained in the financial records of any customer from a financial
institution unless the financial records are reasonably described and . . . such financial records
are disclosed in response to an administrative subpoena or summons which meets the

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requirements of section 3405 of this title . . . .” 12 U.S.C. § 3402. The requirements of Section
3405 are met if, among other things, “there is reason to believe that the records are relevant to a
legitimate law enforcement inquiry.” 12 U.S.C. § 3405. If the Court finds that “there is a
demonstrable reason to believe that the law enforcement inquiry is legitimate and a reasonable
belief that the records sought are relevant to that inquiry,” it “shall” deny Taggart’s Motion for
Order. 12 U.S.C. § 3410(c).
As the Court found on April 11, 2016 and again on June 29, 2016, the Government’s
investigation is a legitimate law enforcement inquiry. Taggart did not contest this in his Motion
for Order. (ECF No. 11 at 10 n.12.) He challenged “only the provision [of the statute] requiring
relevance to a legitimate law enforcement inquiry.” (Id. at 10.) The Court found that the records
and information sought by the TD Bank CID were relevant to a legitimate law enforcement
inquiry. The Government’s investigation centers on whether Taggart used 521 Cowpath Road as
his primary residence for at least one year. The information sought by the TD Bank CID may
allow the Government to trace deposits into and out of Taggart’s account to determine if he was
receiving rent payments from tenants at 521 Cowpath Road and/or if he was using money from
the account to pay for another property as his residence.
Taggart’s Motion for Stay advances two separate arguments as to why a stay should be
granted. Neither relates to the subject of Taggart’s pending appeal—the Court’s June 29, 2016
decision. First, Taggart argues that the mortgage occupancy requirement was “waived, or
deleted as a mortgage requirement as clearly provided in the language of the mortgage.” (Pet’r’s
Mot. at 5.) The HUD insured mortgage specifically required Taggart to “occupy . . . the property
as [his] principal residence within sixty days after the execution” of the mortgage and to
“continue to occupy the property as [his] principal residence for at least one year after the date of

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occupancy.” (ECF No. 1, Ex. C at 15.) Taggart contends a “1-4 Family Rider,” which he
attached with the mortgage to his motion to quash or modify the initial CIDs, eliminates the
mortgage’s occupancy requirement. The Rider is undated and signed only by Taggart. (ECF
No. 1, Ex. at 22–24.) Moreover, its relation and/or relevance to the HUD insured mortgage is
unclear. (Id.)
Taggart also argues, for the first time, that the limitations period in which the
Government may bring a False Claims Act case against him has expired. 31 U.S.C. Section
3731(b) states that:
A civil action under section 3730 may not be brought—
(1) more than 6 years after the date on which the violation of section 3729 is
committed, or
(2) more than 3 years after the date when facts material to the right of action are
known or reasonably should have been known by the official of the United
States charged with responsibility to act in the circumstances, but in no event
more than 10 years after the date on which the violation is committed,
Whichever occurs last.
31 U.S.C. § 3731(b)(1)-(2). Taggart applied for and received the HUD insured mortgage for the
Cowpath property in June of 2008. (ECF No. 5 at 13.) In a subsequent, an unrelated lawsuit he
took the position 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). Taggart’s allegation in that suit led the Government to begin this
investigation because “it appears that within 6 months of applying for the HUD insured mortgage
at 521 Cowpath Road, Taggart declared a different property as his primary residence.” (ECF No.
5 at 13.) The Court has no current basis upon which to adjudicate any statute of limitations
issues. In any event, such a determination would be premature in the pre-complaint investigation

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phase. Should the Government file a civil action against Taggart, he may assert such a defense
at that time.
Taggart has proffered no evidence that he will be “irreparably injured” absent a stay and
any such stay would delay and inhibit the Government’s investigation. The public interest lies in
allowing the Government to complete that investigation.
An appropriate Order follows.

BY THE COURT:

/s/ Gerald J. Pappert
GERALD J. PAPPERT, J.

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