Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_18-cv-01002/USCOURTS-casd-3_18-cv-01002-1/pdf.json

Nature of Suit Code: 376
Nature of Suit: other
Cause of Action: 31:3729 False Claims Act - Liability

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

UNITED STATES OF AMERICA,

ex rel. SARAH DUNTSCH,

Plaintiff,

v.

SUPERIOR CARE PHARMACY, et al.,

Defendants.

Case No. 18-cv-1002-MMA-MSB

ORDER DENYING DEFENDANT 

DAVID WALROD’S MOTION TO 

DISMISS

[Doc. No. 81]

On September 16, 2024, the United States of America filed a first amended 

intervenor complaint against Superior Care Pharmacy, Inc., Derek Ishaque, David 

Walrod, and Justus Benjamin alleging, among other things, violations of the False Claims 

Act, 31 U.S.C. § 3729 et seq., and the Controlled Substances Act, 21 U.S.C. § 801 et seq. 

Doc. No. 76 (“FAC”). On September 30, 2024, Defendant David Walrod filed a motion 

to dismiss. Doc. No. 81. The government filed a response in opposition to Walrod’s 

motion, to which Walrod replied. Doc. Nos. 83, 85. The Court found this matter suitable 

for determination on the papers and without oral argument pursuant to Civil Local Rule 

7.1.d.1. See Doc. No. 86. For the reasons set forth below, the Court DENIES Walrod’s

motion to dismiss.

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I. BACKGROUND1

The core factual allegations as alleged in the initial intervenor complaint, Doc. 

No. 34, remain largely unchanged. In short, Superior Care Pharmacy, Inc. (“SCP”) 

provides pharmacy services to skilled nursing facilities in San Diego County. FAC2

 ¶¶ 2,

19. Defendants Ishaque, Walrod, and Benjamin were SCP’s principals during the 

relevant events and time period. Id. ¶¶ 20–22. Generally speaking, the government 

alleges that Defendants defrauded the United States of millions of dollars by submitting 

false claims to Medicare and TRICARE. Id. ¶ 7–8. Additionally, the government alleges 

that when a search warrant was executed at SCP’s premises in 2023, 184,635 controlled 

substances were missing. Id. ¶ 168. As a result, the government brings seven claims: 

(1) presentation of false claims in violation of the False Claims Act (“FCA”), 31 U.S.C. 

§ 3729(a)(1)(A), against SCP and Ishaque; (2) using false statements to get false claims 

paid in violation of the FCA, id. § 3729(a)(1)(B), against SCP and Ishaque; 

(3 & 4) failure to make, keep, or furnish records in violation of the Controlled Substances 

Act (“CSA”), 21 U.S.C. § 842(a)(5), against SCP, Ishaque, and Benjamin; (5) fraudulent 

transfer in violation of the Federal Debt Collection Procedures Act (“FDCPA”), 28 

U.S.C. § 3304(b)(1)(A), against all Defendants; (6) payment by mistake against all 

Defendants; and (7) unjust enrichment against all Defendants. 

II. LEGAL STANDARD

A Rule3 12(b)(6) motion tests the legal sufficiency of the claims made in the 

complaint. See Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). A pleading must 

contain “a short and plain statement of the claim showing that the pleader is entitled to 

relief,” Fed. R. Civ. P. 8(a)(2), such that the defendant is provided “fair notice of what the 

1

 Because this matter is before the Court on a motion to dismiss, the Court accepts as true the allegations 

set forth in the Complaint. See Hosp. Bldg. Co. v. Trs. Of Rex Hosp., 425 U.S. 738, 740 (1976). 

2

 The government neglected to file a redline version of their amended pleading as is required by the 

Civil Local Rules. CivLR 15.1.c. The Court cautions the government that any further noncompliant 

filings may be rejected.

3 Unless otherwise noted, all “Rule” references are to the Federal Rules of Civil Procedure.

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. . . claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 

544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). However, plaintiffs 

must also plead “enough facts to state a claim to relief that is plausible on its face.” Fed. 

R. Civ. P. 12(b)(6); Twombly, 550 U.S. at 570. The plausibility standard demands more 

than “a formulaic recitation of the elements of a cause of action,” or “naked assertions 

devoid of further factual enhancement.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) 

(internal quotation marks omitted). Instead, the complaint “must contain allegations of 

underlying facts sufficient to give fair notice and to enable the opposing party to defend 

itself effectively.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011).

In reviewing a motion to dismiss under Rule 12(b)(6), courts must assume the truth 

of all factual allegations and must construe them in the light most favorable to the 

nonmoving party. See Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337–38 (9th Cir. 

1996). A court need not take legal conclusions as true merely because they are cast in the 

form of factual allegations. See Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 

1987). Similarly, “conclusory allegations of law and unwarranted inferences are not 

sufficient to defeat a motion to dismiss.” Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 

1998).

III. DISCUSSION

The Court previously issued an Order granting in part Defendants Walrod’s and 

Benjamin’s motions to dismiss the initial intervenor complaint. Doc. No. 64. The Court 

incorporates that Order by reference. Relevant here, the Court denied their requests to 

dismiss Claim 5 for violation of the FDCPA, finding that the government had adequately 

pleaded that SCP’s transfers to Walrod and Benjamin were fraudulent. Id. at 9–10, 13–

14. However, the Court dismissed Claims 6 and 7, for payment by mistake and unjust 

enrichment, based upon the government’s failure to plead the applicable law, id. at 14, as 

well as the government’s failure to plead Walrod’s involvement in the double-billing 

fraud with particularity as is required under Rule 9(b), id. at 9. Walrod now moves to 

dismiss Claims 5, 6, and 7. See Doc. No. 81. 

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A. Claim 5 – Federal Debt Collection Procedures Act

The government’s fifth claim is for violation of the FDCPA. As the Court 

previously explained, Doc. No. 64 at 13, the FDCPA includes a fraudulent transfer 

provision, which allows the government to void a fraudulent transfer by a debtor owing a 

debt to the United States. United States SBA v. Bensal, 853 F.3d 992, 996 (9th Cir. 

2017). In particular, the FDCPA provides that “a transfer made or obligation incurred by 

a debtor is fraudulent as to a debt to the United States, whether such debt arises before or 

after the transfer is made or the obligation is incurred, if the debtor makes the transfer or 

incurs the obligation . . . with actual intent to hinder, delay, or defraud a creditor.” 28 

U.S.C. § 3304(b)(1)(A). 

The Court has already determined that the government’s allegations are sufficient 

to state an FDCPA fraudulent transfer claim against Walrod. Doc. No. 64 at 10, 13–14. 

The Court previously described the alleged fraudulent transfer. Id. at 9–10. In short, the 

asserted debt here is SCP’s FCA liability—i.e., the money owed to the government that 

was improperly paid out through the double-billing scheme. FAC ¶ 216. And according 

to the government, SCP transferred money to Walrod to avoid this debt after Walrod and 

other SCP principals became aware SCP was being investigated by the government for 

FCA violations. Id. ¶¶ 212–215. As a result, SCP was unable to pay its debt to the 

government. Id. ¶ 220. This is, again, sufficient to state a claim against Walrod, and 

Walrod’s arguments to the contrary do not change this outcome. Issues of whether SCP 

actually incurred a debt to the government, whether Walrod was aware of this debt, and 

whether SCP was left insolvent after the transfers are not appropriate for resolution on 

this record and at the motion to dismiss stage. Here, accepting the allegations as true, 

SCP transferred to Walrod, and Walrod accepted, $697,500 after SCP incurred its FCA 

liability to the government, knowing that this money was owed to the government, and 

SCP was left unable to pay its debt to the government as a result. The Court finds that 

these allegations are sufficient to state an FDCPA claim against Walrod. Accordingly, 

the Court DENIES Walrod’s motion to dismiss Claim 5. 

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B. Claims 6 & 7 – Common Law Claims

The government’s sixth claim is for payment by mistake, and its seventh claim is 

for unjust enrichment. As noted above, the Court previously dismissed these claims with 

leave to amend. Doc. No. 64 at 9, 14. Walrod does not argue that the government failed 

to cure the previously identified deficiencies. Instead, Walrod makes the legal argument 

that he should not be held liable for SCP’s receipt of funds. Doc. No. 81-1 at 18–22.

As a threshold matter, it appears that these two claims, which the government now 

pleads pursuant to federal common law, FAC ¶¶ 221–28, are merely alternative theories 

of relief, which the government may bring alongside its FCA claims. United States 

v. Mead, 426 F.2d 118, 124 (9th Cir. 1970); United States v. Peters, No. 2:24-cv-00287 

WBS CKD, 2024 U.S. Dist. LEXIS 122120, at *15 (E.D. Cal. July 10, 2024) (collecting 

cases). As to the government’s payment by mistake claim, the Ninth Circuit has 

recognized that such a claim arises under the federal common law and is a remedy 

available to the United States independent of statute. United States v. Mead, 426 F.2d 

118, 124 (9th Cir. 1970). Here, the government identifies numerous claims SCP 

submitted to Medicare, FAC ¶ 96, and TRICARE, id. ¶ 98, and the funds SCP received 

from these government programs. “If the government made these payments under an 

erroneous belief which was material to the decision to pay, it is entitled to recover the 

payments.” Mead, 426 F.2d at 124. The government duly alleges that it was mistaken as 

to whether SCP was entitled to have these claims funded; according to the government, it 

was unaware at the time of payment that these claims were previously included in 

Medicare’s Part A and TRICARE’s pharmacy payments to the SNFs. FAC ¶¶ 95, 97, 

229. Thus, the government has duly pleaded a claim in the alternative for payment by 

mistake.

Similarly, because the government seeks to recover funds improperly paid pursuant 

to federal programs, it may pursue an unjust enrichment claim. See United States 

v. Bellecci, No. CIV S-05-1538 LKK GGH PS, 2008 U.S. Dist. LEXIS 23892, at *21–22 

(E.D. Cal. Mar. 25, 2008) (“However, federal common law supports reimbursement of 

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federal monies improperly paid pursuant to federal programs.”) (collecting cases).

Walrod’s arguments in support of dismissal of these claims are more appropriate 

for summary judgment. For example, Walrod attempts to distinguish Mead on the 

grounds that he did not receive any funds directly from the government. Doc. No. 81-1 at 

19. But based upon the government’s pleading, Walrod directly benefitted from the 

double-billing scheme. Mead, 426 F.2d at 124 (finding liable the farmers who “received 

benefits as a result of the transaction”). And ultimately, determination of whether the 

government’s payments to SCP “flow” to Walrod is not appropriate for resolution at this 

stage. Consequently, the Court DENIES Walrod’s motion to dismiss Claims 6 and 7.

C. Statute of Limitations

Finally, Walrod argues that “all claims prior to May 21, 2018, should be barred.” 

Doc. No. 81-1 at 22. So far as the Court can surmise, Walrod seeks dismissal of Claims 

5, 6, and 7 on the basis that the government failed to timely plead these claims within the 

statute of limitations. The parties agree that the applicable statute of limitations for 

federal claims for violation of the FDCPA, payment by mistake, and unjust enrichment is

six years. 28 U.S.C. § 2415(a); id. § 3306(b). 

In May 2018, Relator Sarah Duntsch initiated this action under seal asserting one 

cause of action for violation of the FCA. See Doc. No. 1. The factual basis for her claim 

was that Defendants submitted false claims to Medicare and TRICARE between 2013 

and 2018. See, e.g., id. ¶ 82. For over five and a half years, the government requested 

and obtained extensions of time to make an intervention decision based upon the 

assertion that it was still investigating the claim and allegations. Doc. Nos. 2–3, 5–27. 

After the Court issued an order to show cause in September 2023, Doc. No. 28, the 

government elected to intervene in October, and filed the initial intervenor complaint on

January 4, 2024, Doc. No. 34. 

By way of the initial intervenor complaint, the government pleaded seven claims 

alleging violations of the FCA (Claims 1 & 2), CSA (Claims 3 & 4), and FDCPA (Claim 

5) as well as payment by mistake (Claim 6) and unjust enrichment (Claim 7). See id. In

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September 2024, the government filed its first amended intervenor complaint, asserting 

these same seven causes of action. See FAC. 

As to the government’s FDCPA claim, the allegedly fraudulent transfers that the 

government seeks to void occurred in 2020. FAC ¶¶ 212–215. Thus, the government’s 

initial pleading of its FDCPA claim in January 2024 is facially timely. Walrod does not 

argue otherwise.

With respect to the government’s common law claims, the parties dispute whether 

they relate back to the Relator’s qui tam filing. As noted above, the Relator did not plead 

these common law claims against Defendants in her initial pleading. Rather, the 

government asserted them for the first time in its January 4, 2024 initial intervenor 

complaint. Doc. No. 34 at 30–31. Factually speaking, these common law claims are 

based upon the Defendants’ alleged double-billing of Medicare and TRICARE. Doc. 

No. 34 ¶¶ 162, 183, 185; FAC ¶¶ 229, 250, 255.

According to both the initial and first amended intervenor complaints, the alleged 

Medicare double-billing fraud took place between January 2013 and September 2019, 

FAC ¶ 116, and the alleged TRICARE double-billing fraud occurred between February 

2013 and September 2020, id. ¶ 117. These allegations comport with the Relator’s initial 

pleading in 2018, through which she alleged that SCP had been double-billing Medicare 

and TRICARE since 2013. See, e.g., Doc. No. 1 ¶ 82. Rule 15(c) provides that an 

amendment relates back to the date of an original pleading where, for example, “the 

amendment asserts a claim or defense that arose out of the conduct, transaction, or 

occurrence set out—or attempted to be set out—in the original pleading; . . . .” Fed. R. 

Civ. P. 15(c)(1)(B). Thus, the Court agrees with the government that these two common 

law claims relate back to the initial filing because they stem from the same conduct, 

transaction, or occurrence alleged by the Relator. 

Walrod does not contend that the factual basis underlying the government’s 

common law claims is not the same conduct, transaction, or occurrence set out in the 

Relator’s complaint. Instead, he argues against application of the relation back doctrine, 

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first asserting that the government does not allege any FCA claims against him. Doc. 

No. 81-1 at 23. But the Relator pleaded her FCA claim against Walrod as co-owner and 

President of SCP. Doc. No. 1 ¶ 18; id. at 18. And the government similarly pleaded its 

two FCA claims against Walrod in the initial intervenor complaint. Doc. No. 34 at 27–

28. Walrod does not explain why the government’s election to forgo pursuit of FCA 

liability as to Walrod in the first amended intervenor complaint, see FAC, undermines the 

ability for the government’s common law claims to relate back to the Relator’s 

complaint. 

Second, Walrod’s contends that pursuant to 31 U.S.C. § 3731(b)(2), the 

government’s FCA complaint is untimely because it was brought more than more than 

three years after the government learned facts material to these causes of action. Doc. 

No. 81-1 at 23. But this section, entitled “False claims procedure,” provides that a civil 

action may not be brought more than 6 years after the date of the asserted violation, or 

more than 3 years after facts material to the right of action are or reasonably should have 

been known (but in no event later than 10 years after the violation), “whichever occurs 

last.” 31 U.S.C. § 3731(b). Walrod does not explain why the 3-year tolling provision set 

forth in § 3731(b)(2) applies here. Moreover, the immediately proceeding subsection 

expressly provides that if the government elects to intervene, the government’s pleading 

“shall relate back to the filing date of the complaint of the person who originally brought 

the action, to the extent that the claim of the Government arises out of the conduct, 

transactions, or occurrences set forth, or attempted to be set forth, in the prior complaint 

of that person.” Id. § 3731(c). And again, Walrod does not argue that the factual basis 

underlying the common law claims was not set forth in the Relator’s complaint. Nor 

does he argue that the Relator’s filing of her May 21, 2018 complaint, which concerns 

events beginning in 2013, was untimely. 

In this same vein, Walrod argues that the government’s delay in intervening was 

dilatory and weighs against a finding that its intervenor complaint relates back. Doc. 

No. 81-1 at 23–24. The government did not apply for thirty (30) extensions, Doc. 

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No. 81-1 at 23, the government filed thirteen (13) motions for extension of time, Doc. 

Nos. 2 5, 7, 9, 11, 13, 15, 17, 19, 21, 23, 25, 27, twelve (12) of which the Court granted, 

Doc. Nos. 3, 6, 8, 10, 12, 14, 16, 18, 20, 22, 24, 26. Regardless, because Walrod offers 

no persuasive argument undermining the relation back of the government’s pleadings and 

common law claims, there is no need to consider whether the government should be 

equitably prohibited from relying on the FCA’s tolling provision. 

For all of these reasons, the Court DENIES Walrod’s motion to dismiss on statute 

of limitations grounds.

IV. CONCLUSION

Based upon the foregoing, the Court DENIES Walrod’s motion to dismiss. The 

Court DIRECTS Walrod to file an Answer to the first amended intervenor complaint no 

later than fourteen (14) calendar days from the date of this Order.

IT IS SO ORDERED.

Dated: January 15, 2025

_____________________________

HON. MICHAEL M. ANELLO

United States District Judge

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