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Eastep v. KRH, Inc.

United States District Court, D. North Dakota

November 1, 2019

Jeremy Eastep, individually and on behalf of himself and all others similarly situated, Plaintiff,
v.
KRH, Inc., Defendant.

          ORDER GRANTING PLAINTIFF'S MOTION TO DISMISS AMENDED COUNTERCLAIM

          Daniel L. Hovland, Chief Judge.

         Before the Court is Plaintiff Jeremy Eastep's Rule 12(b)(6) motion to dismiss the Defendant's amended counterclaim filed on March 26, 2019. See Doc. No. 19. The Defendant, KRH, Inc. (“KRH”), filed a response in opposition to the motion on May 8, 2019. See Doc. No. 29. The Plaintiff filed a reply on May 15, 2019. See Doc. No. 30. For the reasons below, the motion is granted.

         I. BACKGROUND

         KRH is a corporation organized under the laws of Montana with its principle place of business in Kalispell, Montana. KRH provides oil and gas well monitoring services to energy companies in North Dakota and elsewhere in the United States. KRH employed Eastep and others as flowback operators. Eastep's job duties included monitoring and maintaining oil and gas wells. On January 2, 2019, Eastep filed a complaint contending he and other similarly situated flowback operators employed by KRH were misclassified as independent contractors rather than employees and were not paid overtime in violation of the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (“FLSA”). See Doc. No. 1. On January 28, 2019, KRH filed its answer and counterclaim. See Doc. No. 7. KRH filed an amended counterclaim on April 19, 2019, after obtaining leave of Court on April 15, 2019. See Doc. Nos. 21 and 24. In its amended counterclaim, KRH contends Eastep lacks standing and KRH should be awarded attorney's fees under N.D.C.C. § 28-26-01(2) which requires the Court to award attorney's fees “upon a finding that a claim for relief was frivolous.” On July 9, 2019, the Court granted Eastep's motion for conditional certification. See Doc. No. 40. Eastep has moved to dismiss the amended counterclaim for failure to state a claim upon which relief can be granted. See Doc. No. 19.

         II. STANDARD OF REVIEW

         Rule 8(a)(2) of the Federal Rules of Civil Procedure requires a pleading to contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Rule 12(b)(6) of the Federal Rules of Civil Procedure mandates the dismissal of a claim if there has been a failure to state a claim upon which relief can be granted. In order to survive a motion to dismiss under Rule 12(b)(6), a complaint must contain “sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quotes omitted). A plaintiff must show that success on the merits is more than a “sheer possibility.” Id. A complaint does not need detailed factual allegations, but it must contain more than labels and conclusions. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

         The court must accept all factual allegations of the complaint as true, except for legal conclusions or “formulaic recitation of the elements of a cause of action.” Ashcroft, 556 U.S. at 678. A complaint does not “suffice if it tenders ‘naked assertion[s]' devoid of ‘further factual enhancement.'” Id. The determination of whether a complaint states a claim upon which relief can be granted is a “context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679. Dismissal will not be granted unless it appears beyond doubt the plaintiff can prove no set of facts entitling him to relief. Ulrich v. Pope Cty., 715 F.3d 1054, 1058 (8th Cir. 2013).

         III. LEGAL DISCUSSION

         Eastep contends federal courts exercising diversity jurisdiction do not have authority to award attorney's fees and costs pursuant to N.D.C.C. § 28-26-01(2) because KRH's state law based counterclaim primarily regulates procedure, which under the Erie doctrine, is governed by federal law. See Burlington N. R. Co. v. Woods, 480 U.S. 1, 8 (1987) (finding Alabama statute which imposed mandatory penalties on unsuccessful appeals was supplanted by Fed. R. App. P. 38 which allowed costs and fees to be awarded if an appeal was found to be frivolous); Erie R. Co. v. Tompkins, 304 U.S. 64 (1938). KRH contends Section 28-26-01(2) is state substantive law that is not co-extensive with Rule 11 of the Federal Rules of Civil Procedure. Having carefully reviewed the parties' briefs and the relevant case law, the Court finds Eastep's argument to be persuasive.

         North Dakota's statute provides in relevant part as follows:

2. In civil actions the court shall, upon a finding that a claim for relief was frivolous, award reasonable actual and statutory costs, including reasonable attorney's fees to the prevailing party. Such costs must be awarded regardless of the good faith of the attorney or party making the claim for relief if there is such a complete absence of actual facts or law that a reasonable person could not have thought a court would render judgment in that person's favor, providing the prevailing party has in responsive pleading alleged the frivolous nature of the claim. This subsection does not require the award of costs or fees against an attorney or party advancing a claim unwarranted under existing law, if it is supported by a good-faith argument for an extension, modification, or reversal of the existing law.

N.D.C.C. § 28-26-01(2). This statute requires the court to award attorney's fees and costs to the prevailing party upon a finding that a claim was frivolous. Good faith is not a defense if there is a complete absence of law or facts that a reasonable person could have not expected to prevail on the claim. The frivolousness determination is made on an objective basis from the perspective of the pleader at the time the claim was asserted. Tank v. Burlington Res. Oil & Gas Co. LP, No. 4:10-cv-088, 2013 WL 6150783, at 16 (D.N.D. Nov. 22, 2013).

         Rule 11 provides as follows:

(a) Signature. Every pleading, written motion, and other paper must be signed by at least one attorney of record in the attorney's name--or by a party personally if the party is unrepresented. The paper must state the signer's address, e-mail address, and telephone number. Unless a rule or statute specifically states otherwise, a pleading need not be verified or accompanied by an affidavit. The court must strike an unsigned paper ...

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