In the case of Eastep v. KRH, Inc., John Eastep filed a lawsuit that claimed that he and other similarly situated individuals were misclassified as independent contractors and were not paid overtime wages. Eastep was a flowback operator for KRH (a corporation that provided oil and gas well monitoring services).
KRH counterclaimed against Eastep by asserting that he lacked standing and requested attorney’s fees under a North Dakota statute for filing a frivolous claim. Eastep moved to dismiss KRH’s counterclaim for failure to state a claim. The court applied the standard of review under the Federal Rules of Civil Procedure, which required a claim to contain sufficient factual matter that stated a plausible claim for relief. The court also considered the conflict between the North Dakota statute allowing attorney’s fees for frivolous claims and Rule 11 of the Federal Rules of Civil Procedure, which addressed sanctions for frivolous claims.
The court relied on the Supreme Court’s decision in Burlington N. R. Co. v. Woods, where it was held that a state statute imposing mandatory penalties on unsuccessful appeals was supplanted by a federal rule allowing costs and fees for frivolous appeals. Based on this precedent, the court concluded that KRH’s counterclaim for attorney’s fees under the state statute failed to state a claim upon which relief could be granted.
The court further noted that since Eastep’s claim had been conditionally certified as a class action, it could not be considered frivolous or lacking factual and legal basis. Consequently, KRH’s counterclaim would not survive a motion for summary judgment if Eastep were to make one.
Key lessons from this case:
- The Federal Rules of Civil Procedure mandate the dismissal of a claim if it fails to state a claim upon which relief can be granted.
- When a conflict arises between a state law and a Federal Rule, the court must determine whether the Federal Rule is sufficiently broad to control the issue.
- Employers can choose to counterclaim an overtime lawsuit but must provide enough evidence to support their claim.
Learn more about North Dakota Overtime Laws through our detailed guide.
