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Oil & Gas Transfer L.L.C. v. Karr

United States Court of Appeals, Eighth Circuit

July 9, 2019

Oil & Gas Transfer L.L.C. Plaintiff - Appellant
v.
John Karr Defendant-Appellee

          Submitted: March 13, 2019

          Appeal from United States District Court for the District of North Dakota - Bismarck

          Before GRUENDER, BENTON, and GRASZ, Circuit Judges.

          GRUENDER, Circuit Judge.

         John Karr appeals the district court's[1] grant of summary judgment in favor of Oil & Gas Transfer L.L.C. ("OGT"). We affirm.

          I.

         OGT is an oil field construction company that hired Karr to manage and expand its business in North Dakota. When Karr left OGT in April 2015, he claimed that OGT owed him $1, 304, 026.42, which OGT disputed. Karr filed a pipeline construction lien statement under North Dakota Century Code section 35-24-04, purporting to establish a lien on a pipeline construction project that he had managed while working for OGT. After filing the lien statement, Karr sued OGT in North Dakota federal court, alleging breach of contract, fraud, promissory estoppel, reformation, and unjust enrichment.

         OGT filed this action in January 2016 in North Dakota state court, seeking to quiet the pipeline title based on Karr's ineligibility to claim a lien under section 35-24-04. OGT also sought a declaratory judgment, claiming that, as an employee, Karr was not entitled to a lien. Karr removed the action to federal court on the basis of diversity jurisdiction. In federal court, OGT moved for summary judgment, arguing that the undisputed facts establish that Karr was an employee and that section 35-24-04 does not confer lien rights to employees. The district court agreed and granted OGT's motion. Karr appeals.

         II.

         We review de novo the district court's order granting summary judgment in favor of OGT. See Gibson v. Am. Greetings Corp., 670 F.3d 844, 852 (8th Cir. 2012). We agree with the district court that Karr was an employee and that section 35-24-04 does not confer lien rights upon employees.

         A. In this diversity action, we apply the substantive law of North Dakota to determine whether Karr was an employee or an independent contractor. See Vandewarker v. Cont'l Res., Inc., 917 F.3d 626, 629 (8th Cir. 2019). Under North Dakota law, Karr bears the burden of establishing that he was an independent contractor and not an employee. N.D. Cent. Code § 65-01-03(1) ("The person that asserts that an individual is an independent contractor under the common-law test . . . has the burden of proving that fact."). "The central question in determining whether an individual is an employee or independent contractor is: Who is in control?" BAHA Petroleum Consulting Corp. v. Job Serv. N.D., 2015 ND 199, ¶ 12, 868 N.W.2d 356, 360. This is determined by the common-law "right-to-control" test.[2] N.D. Admin. Code §§ 27-02-14-01(5)(a), 92-01-02-49(1)(a). "The right to control is dispositive, whether or not it has been exercised." Myers-Weigel Funeral Home v. Job Ins. Div. of Job Serv. N.D., 1998 ND 87, ¶ 9, 578 N.W.2d 125, 127.

         To assist in this inquiry, North Dakota administrative agencies adopted twenty factors to consider when determining whether an individual is an employee or an independent contractor. See N.D. Admin. Code §§ 27-02-14-01(5)(b)(1)-(20), 92-01-02-49(1)(b)(1)-(20). "The degree of importance of each factor varies depending on the occupation and the factual context in which the services are performed." Id. § 27-02-14-01(5)(b). But, several factors "must be given more weight in determining whether an employer-employee relationship exists." Id. § 92-01-02-49(2). Those factors-restated to indicate an employer-employee relationship-include (a) the company's significant integration of the individual's services into its operations, (b) a continuing relationship between the individual and the company, (c) the individual's lack of investment in business expenses and facilities, (d) the company not sharing its profits or losses with the individual, (e) the individual working exclusively for the company, (f) the individual not making his services available to the general public, and (g) the company's right to fire the individual without liability for breaching a contract. N.D. Admin. Code §§ 27-02-14-01(5)(b)(1)-(20), 92-01-02-49(1)(b)(1)-(20). Other relevant factors that need not be given as much weight include (h) the company requiring the individual to comply with its instructions about "when, where, and how . . . to work"; (i) the individual rendering services personally; (j) the company imposing set hours of work; (k) the individual working full-time for the company; (1) the company paying the employee by the hour, week, or month; and (m) the company paying the individual's business and traveling expenses. Id.

         Karr claims that he was an independent contractor and that the district court incorrectly weighed the factors when determining that he was an employee. First, he alleges that "OGT had neither control over nor the authority to direct [his] work." But his only support for this proposition is a statement in his own affidavit that he "took over all operational duties of the [pipeline] project" and that "[n]o one directed [his] work." The fact that no one directed his work, however, does not establish that OGT did not have the authority to do so. See Myers-Weigel, 1998 ND 87, ¶ 9, 578 N.W.2d 125. Second, Karr notes that he was entitled to a bonus of 12.5% of OGT's net income on profitable projects, but he also acknowledges that the weekly base salary he received is "similar to what is commonly found in employment relationships." Third, Karr highlights the fact that his contract with OGT was limited to a 12-month term. But the contract was renewable.[3]

          In response, OGT reiterates arguments that the district court considered when determining that Karr was an employee, including (1) that Karr earned a weekly salary that OGT paid him regardless of the number of hours, amount of work, or number of projects Karr completed; (2) that Karr completed a Form W-4 to indicate his tax withholdings; (3) that OGT withheld and paid employment taxes on Karr's wages and reported his income to him and the IRS on a Form W-2; (4) that OGT offered Karr regular employment benefits (e.g., health insurance, retirement benefits); (5) that Karr worked full-time for OGT and no one else; and (6) that OGT retained the right to direct Karr's work in all respects. OGT also notes that it provided a truck, housing, and communications equipment for Karr. While Karr "disagrees and vigorously disputes" these assertions on appeal, he does not ...


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