Note 10 - Commitments and Contingencies

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note 10 – Commitments and Contingencies

In the ordinary course of conducting our business, we become involved in litigation and other claims from private party actions, as well as judicial and administrative proceedings involving governmental authorities at the federal, state and local levels.

Wage and Hour Litigation

During the second quarter of 2014, a lawsuit was filed by Jesse Davida, a former employee, in Federal Court in Texas against Newpark Drilling Fluids LLC, alleging violations of the Fair Labor Standards Act (“FLSA”). The plaintiff seeks damages and penalties for the Company’s alleged failure to: properly classify its field service employees as “non-exempt” under the FLSA; and pay them on an hourly basis (including overtime). The plaintiff seeks recovery on his own behalf, and seeks certification of a class of similarly situated employees. The Court has conditionally certified a class of plaintiffs as those working as fluid service technicians for Newpark Drilling Fluids for the past 3 years. Beginning in early March of 2015, notification was given to 658 current and former fluid service technician employees of Newpark regarding this litigation and those individuals were given the opportunity to “opt-in” to the

Davida

litigation. The opt-in period closed in early May of 2015 and a total of 91 individuals have joined the

Davida

litigation. Counsel for the plaintiffs’ has moved to add state law class action claims for current and former fluid service technicians that worked for Newpark Drilling Fluids in New York, North Dakota, Ohio and Pennsylvania.

The Court granted the motion, but has given Newpark until November 23, 2015, to file a motion to dismiss these new claims, which we intend to file with regard to New York, and Ohio. Among other reasons, we intend to seek dismissal of those state law claims on the basis that an insufficient number of employees are located in those states to support a class action. We expect that the effect of the amendment (excluding New York and Ohio claims) will be to include in the litigation approximately 48 current and former fluid services technicians who worked in Pennsylvania that have not opted into the pending litigation, and approximately 42 current and former fluid services technicians who worked in North Dakota that have not opted into the pending litigation.

Discovery is in process. The trial of the case has been scheduled for September 2016.

A second case was filed by Josh Christensen in the fourth quarter of 2014, in Federal Court in Texas alleging that individuals treated as independent contractors should have been classified as employees and, as such, are entitled to assert claims for alleged violations of the FLSA (similar to the claims asserted in the

Davida

matter). Five additional plaintiffs joined this litigation after it was filed. In March of 2015, the Court denied the plaintiffs’ motion for conditional class certification. Counsel for the plaintiffs did not appeal that ruling and have now filed individual cases for each of the original plaintiffs plus three new plaintiffs, leaving a total of nine independent contractor cases pending. Discovery is in process.

Cases similar to the above have been filed against other companies in the oil and gas services industry, including some of our competitors. In addition, the U.S. Supreme Court is scheduled to consider a case regarding the use of class action procedures in wage and hour litigation (

Tyson Foods, Inc. v. Bouaphakeo

).We are monitoring developments in those matters. We cannot predict with any degree of certainty the outcome of our wage and hour litigation at this time and, as a result, cannot estimate any possible loss or range of loss. We have a number of defenses we can assert against these claims including that these employees are properly classified as exempt employees. We have retained counsel with experience in cases of this nature, and intend to vigorously defend this litigation. In the opinion of management, any liability in these matters should not have a material effect on our consolidated financial statements.

Escrow Claims Related to Sale of Environmental Services Business

Under the terms of the sale of the Environmental Services business to Ecoserv, LLC (“Ecoserv”), $8 million of the sales price was withheld and placed in an escrow account to satisfy claims for possible breaches of representations and warranties contained in the sale agreement. For the amount withheld in escrow, $4 million was scheduled for release to Newpark at each of the nine month and 18 month anniversary of the closing. In December, 2014, we received a letter from counsel for Ecoserv asserting that we had breached certain representations and warranties contained in the sale agreement; including failing to disclose service work performed on injection wells and increased barge rental costs. The letter indicated that Ecoserv expected the costs associated with these claims to exceed the escrow amount. Following a further exchange of letters, in July of 2015, we filed a declaratory judgment action against Ecoserv in state court in Harris County, Texas, seeking release of the escrow funds. Thereafter, Ecoserv filed a counterclaim seeking recovery of the escrow funds based on the alleged breach of representations and warranties. Ecoserv also alleges that we committed fraud in connection with the sale transaction. We believe there is no basis in the agreement or on the facts to support the claims asserted by Ecoserv and intend to vigorously defend our position, while pursuing release of the entire $8 million escrow. Discovery has commenced between the parties.