Helping Hands Support Services, et al. v. Destiny 508, et al.

• Court: District Court, W.D. Washington
• Decided: November 3, 2025
• Docket: 3:24-cv-05566
• Status: Unknown

Opinion

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5 UNITED STATES DISTRICT COURT 6 WESTERN DISTRICT OF WASHINGTON AT TACOMA 7 HELPING HANDS SUPPORT CASE NO. 24-cv-5566 8 SERVICES, et al., ORDER 9 Plaintiffs, v. 10 DESTINY 508, et al., 11 Defendants. 12

13 This matter is before the Court on plaintiffs’ motion to dismiss defendants Legacy 14 508, Tamara Engwall, and Todd Engwall’s counterclaims 1–3 and strike affirmative 15 defenses, Dkt. 66. 16 Plaintiff Helping Hands Support Service (HHSS) is a Washington general 17 partnership that assists churches seeking to incorporate as tax-exempt non-profit entities 18 under Section 508(c)(1)(a) of the Internal Revenue Code. HHSS, along with Northwest 19 Corporate Services (NWCS), Futch & Associates, Dan Peterson, and Cleveland Futch, 20 assert copyright infringement claims against the Engwalls, their 508(c)(1)(a) entities 21 Destiny 508 and Divine Alliance, Legacy 508 Services, Destiny 508 Non-Profit Services, 22 1 and Impact 508 Non-Profit Services. In the interest of brevity, the Court incorporates by 2 reference the factual background described in its prior Order, Dkt. 38.

3 After this Court granted HHSS leave to amend its copyright claims, Dkt. 38, 4 HHSS amended its complaint, reasserting seven counts of copyright infringement. Dkt. 5 48. Defendants’ answer, filed May 21, 2025, asserts 35 general and affirmative defenses. 6 Dkt. 62. 7 Legacy 508 and the Engwalls also assert defamation, intentional interference, and 8 Washington Consumer Protection Act (CPA) counterclaims against the original plaintiffs

9 and a new counterclaim defendant, Helping Hand Outreach. Id. Legacy 508 alleges that 10 HHSS1 has been spreading false and misleading information about Legacy 508’s business 11 capabilities, with the intention of interfering with its business relationships. Id. at 30, 34, 12 37. It provides the following example defamatory statements: an email dated November 13 22, 2021; a website posting attached to that email; client communications dated July 19,

14 2022, and May 18, 2023; and a website posting dated April 28, 2023. Id. at 30–32. It also 15 claims HHSS’s actions, constitute unfair and deceptive business practices under 16 Washington’s CPA. Id. at 38. 17 HHSS moves to dismiss Legacy 508’s counterclaims. Dkt. 66. It argues the 18 defamation and tortious interference counterclaims are time-barred, and that Legacy 508

19 has not plausibly pled a CPA claim. Id. at 8. HHSS also seeks to strike defendants’ 20 affirmative defenses under Rule 12(f). 21 1 For ease of reference, this Order refers to counterclaim defendants, including Helping 22 Hand Outreach, as HHSS, and counterclaim plaintiffs as Legacy 508. 1 Legacy 508 responds that its defamation and tortious interference claims are 2 timely because the statutes of limitations were tolled. Dkt. 67 at 11. It contends its CPA

3 claim is cognizable because HHSS’s actions were “designed towards eliminating a 4 business competitor and thereby redirecting business to HHSS,” and that HHSS misused 5 its copyright registrations in an “unfair restraint on trade.” Id. at 18–19. Finally, 6 defendants maintain their affirmative defenses are cognizable and alternatively request 7 leave to amend. Id. at 20–24. 8 The issues are addressed in turn.

9 I. DISCUSSION 10 A. Rule 12(b)(6) standard 11 Dismissal under Federal Rule of Civil Procedure 12(b)(6) may be based on either 12 the lack of a cognizable legal theory or the absence of sufficient facts alleged under a 13 cognizable legal theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir.

14 1988). A plaintiff’s complaint must allege facts to state a claim for relief that is plausible 15 on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A claim has “facial plausibility” 16 when the party seeking relief “pleads factual content that allows the court to draw the 17 reasonable inference that the defendant is liable for the misconduct alleged.” Id. Although 18 courts must accept as true the complaint’s well-pleaded facts, conclusory allegations of

19 law and unwarranted inferences will not defeat an otherwise proper Rule 12(b)(6) motion 20 to dismiss. Vasquez v. Los Angeles County, 487 F.3d 1246, 1249 (9th Cir. 2007); 21 Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). “[A] plaintiff’s 22 obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than 1 labels and conclusions, and a formulaic recitation of the elements of a cause of action will 2 not do. Factual allegations must be enough to raise a right to relief above the speculative

3 level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations omitted). This 4 requires a plaintiff to plead “more than an unadorned, the-defendant-unlawfully-harmed- 5 me accusation.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555). The Court’s 6 review is “limited to the complaint, materials incorporated into the complaint by 7 reference, and matters of which the Court may take judicial notice.” Metzler Inv. GMBH 8 v. Corinthian Colleges, Inc., 540 F.3d 1049, 1061 (9th Cir. 2008).

9 When granting a Rule 12(b)(6) motion to dismiss, “a district court should grant 10 leave to amend even if no request to amend the pleading was made, unless it determines 11 that the pleading could not possibly be cured by the allegation of other facts.” Cook, 12 Perkiss & Liehe v. N. Cal. Collection Serv., 911 F.2d 242, 247 (9th Cir. 1990). However, 13 when the facts are not in dispute and the sole issue is whether there is liability as a matter

14 of substantive law, courts may deny leave to amend. Albrecht v. Lund, 845 F.2d 193, 15 195–96 (9th Cir. 1988). 16 Leave to amend a complaint under FRCP 15(a) “shall be freely given when justice 17 so requires.” Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 892 (9th Cir. 2010). 18 This policy is “to be applied with extreme liberality.” Eminence Cap., LLC v. Aspeon,

19 Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (internal quotation omitted). In determining 20 whether to grant leave under Rule 15, courts consider five factors: “bad faith, undue 21 delay, prejudice to the opposing party, futility of amendment, and whether the plaintiff 22 has previously amended the complaint.” United States v. Corinthian Colls., 655 F.3d 984, 1 995 (9th Cir. 2011). Among these factors, prejudice to the opposing party carries the 2 greatest weight. Eminence Cap., 316 F.3d at 1052.

3 B. Legacy 508 did not timely file its defamation and tortious interference counterclaims. 4 HHSS contends Legacy 508’s defamation and tortious interference claims are 5 time-barred. Dkt. 66 at 8. Legacy 508 responds that HHSS’s filing of the original 6 complaint tolled the statute of limitations on its compulsory counterclaims. Dkt. 67 at 11– 7 12 (citing Emps. Ins. of Wasau v. United States, 764 F.2d 1572, 1576 (Fed. Cir. 1985)). 8 Alternatively, Legacy 508 argues it is entitled to equitable tolling because “the very 9 nature of Helping Hands’ conduct is in bad faith.” Id. at 16–17. 10 In Washington, the statute of limitations is two years on defamation actions, RCW 11 4.16.100, and three years on tortious interference actions, RCW 4.16.080; City of Seattle 12 v. Blume, 134 Wn.2d 243, 251 (1997). However, where the injury alleged in both claims 13 is the same, both are subject to the same limitations period. Nw. Airlines, Inc. v. 14 Camacho, 296 F.3d 787, 792 (9th Cir. 2002) (the tortious interference claim was 15 premised on the “same factual allegations” as the malicious prosecution and abuse of 16 process claims, so the limitations period “applicable to the latter causes of action” was 17 applicable to the tortious interference claim as well); Nelson v. Jackson Cnty., 2010 WL 18 3893964, at *3 (D. Or. 2010); see also Eastwood v. Cascade Broad. Co., 106 Wn.2d 466, 19 472–73 (1986) (holding the same limitations period applies to false light and defamation 20 claims partially because “[t]he injuries resulting from invasion of privacy and defamation 21 are similar and become apparent at the same time.”). 22 1 Legacy 508’s tortious interference claim is premised entirely on the alleged 2 defamation. It asserts the same injury for both claims—that HHSS’s “false and

3 disparaging statements” were intended to interfere with Legacy 508’s business 4 relationships and caused harm to Legacy 508’s reputation, business, and profits. Dkt. 62 5 at 36–37. The Court concludes the tortious interference claim is governed by the two-year 6 limitations period applicable to the defamation claim. 7 Legacy 508’s counterclaims were filed on May 21, 2025. Any actions prior to 8 May 21, 2023, are time-barred, unless tolled.

9 1. The Ninth Circuit has not yet ruled that affirmative counterclaims relate back to the date of the filing of the original complaint. 10 The Ninth Circuit has not ruled on whether affirmative counterclaims relate back 11 to the filing date of the original complaint. It has held, however, that a “claim for 12 recoupment2 that would otherwise be barred by the statute of limitation may be brought 13 to defeat a claim arising out of the same transaction.” Klemens v. Air Line Pilots Ass’n, 14 Intern., 736 F.2d 491, 501 (9th Cir. 1984). 15 Other circuits vary in their approach to this matter. See e.g., Kirkpatrick v. Lenoir 16 Cnty. Bd. of Educ., 216 F.3d 380, 388 (4th Cir. 2000) (holding that compulsory 17 counterclaims relate back to the date of the original filing); cf. Basham v. Fin. Am. Corp., 18 19 20 2 Recoupment is the “setting up of a demand arising from the same transaction as the 21 plaintiff’s claim or cause of action, strictly for the purpose of abatement of reduction of such claim.” In re Straightline Invs., Inc., 525 F.3d 870, 882 (9th Cir. 2008) (citation modified). 22 1 583 F.2d 918, 927 (7th Cir. 1978) (limitations period is not tolled for counterclaims 2 seeking affirmative relief, as opposed to recoupment claims).

3 District courts in this Circuit similarly differ on whether a plaintiff’s complaint 4 equitably tolls the limitations period for a defendant’s compulsory counterclaims. 5 Compare Katherine G. ex rel. Cynthia G. v. Kentfield Sch. Dist., 261 F. Supp. 2d 1159, 6 1185, 1188 (N.D. Cal. 2003) (applying Klemens to decide defendant’s counterclaim 7 related back to timing of plaintiff’s suit because it “sound[ed] in recoupment”); Almont 8 Ambulatory Surgery Ctr. v. UnitedHealth Grp., Inc., 2015 WL 12778355, at *12–13

9 (C.D. Cal. 2015) (following Klemens to decide “counterclaims [for] affirmative relief 10 rather than defensive relief . . . will not relate back to the date of the filing of the 11 Complaint.”) with Yates v. Washoe Cnty. Sch. Dist., 2007 WL 3256576, at *2 (D. Nev. 12 2007) (agreeing with Kirkpatrick because it reflected a “majority view” that “a plaintiff’s 13 institution of a suit tolls or suspends the running of the statute of limitations governing a

14 compulsory counterclaim”); Orange Cnty. Health Care Agency v. Dodge, 793 F.Supp.2d 15 1121, 1129 (C.D. Cal. 2011) (relying on Yates and Kirkpatrick to hold that plaintiff’s 16 complaint tolled the statute of limitations on defendants’ counter claims). 17 The counterclaims here do not concern recoupment as in Klemens, but instead 18 seek affirmative relief. Absent guidance from the Ninth Circuit, the Court declines to

19 conclude that HHSS’s complaint tolled the statute of limitations on Legacy 508’s 20 counterclaims. 21 22 1 2. Legacy 508 has not shown it is entitled to equitable tolling of the statute of limitations on its defamation and tortious interference claims. 2 Equitable tolling is an “extraordinary form of relief.” Fowler v. Guerin, 200 3 Wn.2d 110, 118 (2022). A plaintiff seeking equitable tolling of statutes of limitations 4 must show, in part, that “the plaintiff has exercised diligence” and that “the defendant’s 5 bad faith, false assurances, or deception interfered with the plaintiff’s timely filing.” Id. at 6 125. 7 HHSS disputes Legacy 508’s diligence in pursuing its defamation and tortious 8 interference counterclaims and argues HHSS has not taken “action of any kind . . . that 9 interfered with or otherwise prevented the timely filing” of the counterclaims. Dkt. 70 at 10 10. It cites Legacy 508’s Cease and Desist letter to HHSS, dated June 28, 2023, which 11 provides that Legacy 508 knew of the defamatory statements as early as April 29, 2023. 12 Id. (citing Dkt. 69-5). The Court agrees. 13 Legacy 508 does not show it took any action to diligently pursue its tortious 14 interference and defamation claims between April 29, 2023, and May 21, 2023, when the 15 limitations period expired. Similarly, Legacy 508 does not allege HHSS’s actions in any 16 way interfered with its filing of the counterclaims. It simply argues the “very nature of 17 [HHSS’s] conduct” is in bad faith because it intended to undermine Legacy 508’s 18 business. Dkt. 67 at 16. Legacy 508 has not established the circumstances warrant 19 equitable tolling. Fowler, 200 Wn.2d at 125. 20 The statute of limitations on Legacy 508’s defamation and tortious interference 21 counterclaims were not tolled. Those counterclaims are time-barred. 22 1 Legacy 508 may amend its answer if it can demonstrate it diligently pursued its 2 defamation and tortious interference counterclaims and that HHSS’s actions interfered

3 with Legacy 508’s filing of these counterclaims. Legacy 508 has not yet amended its 4 answer and the Court finds that doing so would not unfairly prejudice HHSS. Corinthian 5 Colls., 655 F.3d at 995. 6 C. Legacy 508 has failed to plausibly allege a CPA claim. 7 To prevail on a Washington CPA claim, a private “plaintiff must prove (1) an 8 unfair or deceptive act or practice, (2) occurring in trade or commerce, (3) affecting the

9 public interest, (4) injury to a person’s business or property, and (5) causation.” Panang 10 v. Farmers Ins. Co. of Wash., 166 Wn.2d 27, 37 (2009); RCW 19.86.020. The plaintiff 11 may establish the public interest element if the defendant’s alleged conduct (1) violates a 12 statute that incorporates Washington’s Consumer Protection Act, RCW Chapter 19.86, 13 (2) violates “a statute that contains a specific legislative declaration of public interest

14 impact; or (3)(a) Injured other persons; (b) had the capacity to injure other persons; or (c) 15 has the capacity to injure other persons.” RCW 19.86.093. 16 HHSS contends Legacy 508 has not plausibly pled the public interest element. 17 Dkt. 66 at 16. Legacy 508 disagrees, arguing that HHSS’s conduct had the “capacity to 18 deceive a substantial portion of the public.” Dkt. 67 (citing Hangman Ridge Training

19 Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778, 785 (1986)). 20 Legacy 508 does not allege HHSS’s conduct violated any other statutes, and its 21 reliance on Hangman is misplaced. Hangman provides that a plaintiff may establish the 22 first two elements of their CPA claim—that defendants’ conduct was unfair or deceptive 1 in trade or commerce—by showing that the conduct had the “capacity to deceive a 2 substantial portion of the public.” 105 Wn.2d at 785. It does not define the public interest

3 requirement as Legacy 508 argues.3 4 Legacy 508 does not adequately allege HHSS’s conduct injured, or had the 5 capacity to injure, anyone other than Legacy 508 and the Engwalls. It is implausible that 6 HHSS’s alleged conduct—“to improperly damage and undermine [Legacy 508’s] 7 business and reputations” and “wrongful[]” use of its copyrights—can harm anyone other 8 than Legacy 508. Dkt. 62 at 38. Legacy 508 cannot amend to articulate a cognizable CPA

9 claim. Because amendment would be futile, the Court denies leave to amend. Cook, 911 10 F.2d at 247. 11 D. Rule 12(f) & affirmative defense pleading standard 12 Under Federal Rule of Civil Procedure 12(f), a district court “may strike from a 13 pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous

14 matter.” “The function of a 12(f) motion to strike is to avoid the expenditure of time and 15 money that must arise from litigating spurious issues by dispensing with those issues 16 prior to trial[.]” Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 973 (9th Cir. 2010) 17 (citation and quotation omitted). Rule 12(f) motions are generally “disfavored” because 18 they are “often used as delaying tactics, and because of the limited importance of

19 pleadings in federal practice.” SCHWARZER, ET AL., FEDERAL CIVIL PROCEDURE § 9:375 20 (citing Colaprico v. Sun Microsystems, Inc., 758 F. Supp. 1335, 1339 (N.D. Cal. 1991)). 21 3 Hangman was published 23 years before the statutory definition of public interest under 22 Washington’s CPA, RCW 19.86.093. 1 Federal Rule of Civil Procedure 8 governs pleadings generally, whether by 2 complaint or by answer. Rule 8(c) specifically addresses affirmative defenses and

3 requires a party responding to a pleading to “affirmatively state any avoidance or 4 affirmative defense.” Id. Affirmative defenses offer legal reasons why, accepting the 5 claims as true, the defendant is not liable. In re Wash. Mut., Inc., Secs., Derivative & 6 ERISA Litig., No. 08–md–1919MJP, 2011 WL 1158387, at *1 (W.D. Wash. 2011). 7 The Ninth Circuit has not yet decided whether the Iqbal and Twombly pleading 8 standard applies to affirmative defenses, creating a split among the district courts. See,

9 e.g., Barnes & Noble, Inc. v. LSI Corp., 849 F. Supp. 2d. 925, 928 (N.D. Cal. 2012); 10 Barnes v. AT&T Pension Ben. Plan, 718 F. Supp. 2d 1167, 1171–72 (N.D. Cal. 2010) 11 (collecting cases). However, many courts in this district have already declined to extend 12 heightened pleading standards to affirmative defenses. See Palmason v. Weyerhaeuser 13 Co., No. C11–695RSL, 2013 WL 392705, at *1 (W.D. Wash. 2013); U.S. v. Center for

14 Diagnostic Imaging, Inc., No. C05–0058RSL, 2011 WL 6300174, at *2 (W.D. Wash. 15 2011) (listing cases); In re Wash. Mut., 2011 WL 1158387, at *1 (W.D. Wash. 2011); 16 Kerzman v. NCH Corp., No. C05–1820JLR, 2007 WL 765202, at *7 (W.D. Wash. 2007). 17 Thus, this Court declines to apply a heightened pleading standard to affirmative 18 defenses generally. The key to determining the sufficiency of pleading for an affirmative

19 defense is whether it gives plaintiff fair notice of the defense. Wyshak v. City Nat. Bank, 20 607 F.2d 824, 827 (9th Cir. 1979). 21 22 1 E. Several of defendants’ affirmative defenses are stricken. 2 HHSS asks the Court to strike the 35 affirmative defenses asserted in defendants’

3 answer. Dkt. 66. It argues that every affirmative defense lacks factual support, is a 4 statement of legal principles, challenges plaintiffs’ prima facie case, or is not an 5 affirmative defense at all. Id. at 17–30. 6 Simply referring to doctrine is insufficient notice. Kohler v. Staples the Office 7 Superstore, LLC, 291 F.R.D. 464, 470 (S.D. Cal. 2013). The following defenses do not 8 meet Wyshak’s lenient pleading standard, do not adequately provide notice of supporting

9 facts, and are therefore stricken: (3) judicial estoppel; (27) agent is not liable for the 10 principal; (31) failure to mitigate damages; (32) offset, allocation, and comparative fault; 11 and (35) third parties at fault. 12 A defense which seeks to negate an element of a plaintiff’s claim or to 13 “demonstrate that plaintiff has not met its burden of proof” is not an affirmative defense.

14 Zivkovic v. S. Cal. Edison Co., 302 F.3d 1080, 1088 (9th Cir. 2002). The following 15 defenses challenge plaintiffs’ claims, are not affirmative defenses, and are therefore 16 stricken: (2) failure to state a claim; (4) copyright invalidity; (5) fraud or deception on the 17 Copyright Office; (14) copyright limitations and exclusions; (15) lack of notice; (16) 18 misuse; (17) dedication to the public; (18) lack of recoverable damages; (19) lack of

19 substantial similarity; (20) copyright exhaustion; (21) failure to identify allegedly 20 infringing works; (29) failure to state a claim for conspiracy; and (33) innocence 21 infringement. 22 1 Defendants also assert (11) lack of standing. Lack of standing is not an affirmative 2 defense, and it is stricken. However, standing is a jurisdictional issue that defendants may

3 assert at any time. 4 Before answering, several defendants already moved to dismiss based on lack of 5 personal jurisdiction, Dkt. 29. Plaintiffs are correct that any defendants who did not assert 6 lack of personal jurisdiction in that motion have now waived that defense. See Chilicky v. 7 Schweiker, 796 F.2d 1131, 1136 (9th Cir. 1986), reversed on other grounds, 487 U.S. 412 8 (1988) (“If a party files a pre-answer motion, but does not raise [lack of personal

9 jurisdiction], the party waives the omitted defense and cannot subsequently raise it in his 10 answer or otherwise.”). 11 The following affirmative defenses remain: (6) express license; (7) implied 12 license; (8) estoppel; (9) waiver and acquiescence; (10) statute of limitations and laches; 13 (12) free speech and right to engage in business; (13) right of fair competition; (22)

14 corporate entity shield; (23) distinct entity identity; (24) and (25) directors’ immunity 15 from liability; (26) volunteer immunity from suit; (28) innocence and good faith; (30) 16 unclean hands; (32) offset, allocation, and comparative fault; (34) good faith reliance on 17 advice of counsel; and (35) third parties at fault. 18 II. ORDER

19 Legacy 508 has insufficiently pled its defamation, tortious interference, and 20 Washington CPA counterclaims. HHSS’s motion to dismiss the counterclaims is 21 therefore GRANTED. The defamation and tortious interference claims are DISMISSED 22 1 without prejudice and with leave to amend. The CPA claim is DISMISSED with 2 prejudice and without leave to amend.

3 Plaintiffs’ motion to strike defendants’ affirmative defenses is GRANTED in part 4 and DENIED in part. 5 IT IS SO ORDERED. 6 Dated this 3rd day of November, 2025. 7 A 8 9 BENJAMIN H. SETTLE 10 United States District Judge 11

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