Sullivan v. Oracle Corporation

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
DONALD SULLIVAN; DEANNA EVICH; 
RICHARD BURKOW,
Plaintiffs-Appellants, No. 06-56649
v.
 D.C. No.
CV-05-00392-AHS
ORACLE CORPORATION, a Delaware
corporation; ORACLE UNIVERSITY, OPINION
form unknown,
Defendants-Appellees.

Appeal from the United States District Court
for the Central District of California
Alicemarie H. Stotler, District Judge, Presiding
Argued and Submitted
May 6, 2008—Pasadena, California
Filed November 6, 2008
Before: William A. Fletcher and Ronald M. Gould,
Circuit Judges, and Louis H. Pollak,*
United States District Judge.
Opinion by Judge William A. Fletcher
*The Honorable Louis H. Pollak, Senior United States District Judge
for the Eastern District of Pennsylvania, sitting by designation.
15257
SULLIVAN v. ORACLE CORP. 15261
COUNSEL
Charles Scott Russell, Robert Thompson, Callahan McCune
& Willis, Tustin, California, for the appellants.
Stephen L. Berry, Paul W Cane, Jr., Paul, Hastings, Janofsky
& Walker, Costa Mesa, California, for the appellees.
OPINION
W. FLETCHER, Circuit Judge:
Oracle Corporation (“Oracle”), a large software company,
has employed hundreds of workers to train Oracle customers
in the use of its software. During the period relevant to this
suit, Oracle classified these workers as teachers who were not
entitled to compensation for overtime work under either fed-
eral or California law. Three nonresidents of California
brought a would-be class action against Oracle seeking dam-
ages under California law for failure to pay overtime. Plain-
tiffs performed only some of their work for Oracle in
California. Plaintiffs’ first two claims are based on work per-
formed in California. Their third claim is based on work per-
formed anywhere in the United States.
The district court granted summary judgment to Oracle on
all three claims, on the ground that the relevant provisions of
California law did not, or could not, apply to the work per-
formed by Plaintiffs. We reverse the summary judgment on
the first two claims and affirm on the third claim.
I. Background
Oracle is a Delaware corporation with its principal place of
business in California. Plaintiffs are “Instructors” — to use
Oracle’s term — who trained customers to use Oracle soft-
15262 SULLIVAN v. ORACLE CORP.
ware. The parties stipulated that from April 1999 to June 2006
(the date of the stipulation) Oracle “utilized Instructors on a
contract basis through its subsidiary, Oracle Corporation Can-
ada, to perform work inside the United States [and] inside the
State of California.” Oracle provided the training materials
used by Plaintiffs. Oracle “recognized revenue” for work per-
formed by Plaintiffs in the United States (including Califor-
nia). Oracle “required its Instructors to travel to destinations
within the United States away from their city of domicile for
the purpose of performing work for Oracle.” At all relevant
times, all three plaintiffs resided in the United States. All
three of them received their letters of employment in their
home states.
Plaintiff Donald Sullivan worked as an Oracle Instructor
from June 1998 to January 2004. During this period, Sullivan
resided in Colorado. During 2001, Sullivan worked in Colo-
rado “on at least 150 days”; he worked in California “on 32
days”; and he worked in other states “on at least” 52 days.
During 2002, he worked in Colorado “on at least 150 days”;
he worked in California “on 12 days”; and he worked in other
states “on at least” 20 days. During 2003, he worked in Colo-
rado “on at least 150 days”; he worked in California “on 30
days”; and he worked in other states “on at least” 19 days.
The record does not reflect how many days, if any, Sullivan
worked in Canada.
Plaintiff Deanna Evich worked as an Oracle Instructor from
August 1999 to July 2004. During this period, Evich resided
in Colorado. During 2001, Evich worked in Colorado “at least
150 days”; she worked in California “on 33 days”; and she
worked in other states “on at least” 3 days. During 2002, she
worked in Colorado “on approximately 30 days”; she worked
in California “on 11 days.” During 2003, she worked in Colo-
rado “on approximately 30 days”; she worked no days in Cali-
fornia. During 2004, she worked in Colorado “on at least 100
days”; she worked in California “on 36 days”; and she worked
SULLIVAN v. ORACLE CORP. 15263
in other states “on at least” 4 days. The record does not reflect
how many days, if any, Evich worked in Canada.
Plaintiff Richard Burkow worked as an Oracle Instructor
from March 1998 to April 2002. During this period, Burkow
resided in Arizona. During 2001, Burkow worked in Arizona
“on at least 100 days”; he worked in California “on 15 days”;
and he worked in other states “on at least” 68 days. During
2002, he worked in Arizona “on at least 60 days”; he worked
in California “on five days”; and he worked in other states
“on at least” 12 days. The record does not reflect how many
days, if any, Burkow worked in Canada.
For a number of years, Oracle classified its Instructors as
“teachers,” who are exempt from the overtime provisions of
California’s Labor Code (“Labor Code”) and the federal Fair
Labor Standard Act (“FLSA”). See, e.g., 29 U.S.C.
§ 213(a)(1) (providing exemptions from the FLSA’s overtime
provisions); 29 C.F.R. §§ 541.303(a)-(b) (applying FLSA
exemption to certain categories of teachers); Cal. Sch. of Culi-
nary Arts v. Lujan, 4 Cal. Rptr. 3d 785, 791-92 (Ct. App.
2003) (describing regulations establishing exemption for
teachers from the Labor Code’s overtime provisions). The
parties stipulated that Oracle’s California offices were primar-
ily responsible for the decision to classify the Instructors as
“teachers” who were exempt from the overtime provisions of
the Labor Code and the FLSA.
In 2003, Oracle reclassified its California-based Instructors
and began paying them overtime under the Labor Code. In
2004, Oracle reclassified all of its Instructors working in the
United States and began paying them overtime under the
FLSA. Oracle has not retroactively provided overtime pay-
ments to Plaintiffs for the work they performed prior to the
reclassification.
Oracle’s reclassification of its Instructors appears to have
been prompted by a 2003 class action in federal district court
15264 SULLIVAN v. ORACLE CORP.
for the Central District of California. Plaintiffs in that suit
claimed that Oracle misclassified its Instructors under the
Labor Code and the FLSA. Gabel & Sullivan v. Oracle
(“Sullivan I”), Case No. SACV 03-348 AHS (MLGx) (C.D.
Cal. Mar. 29, 2005). The district court certified two classes.
The first was comprised of plaintiffs seeking damages under
the Labor Code; the second was comprised of plaintiffs seek-
ing damages under the FLSA. That suit was settled, resulting
in a dismissal with prejudice of the claims of both classes.
However, claims brought by plaintiffs under California law
“for periods of time they may have worked in the State of
California when they were not a resident of the State” were
excepted from the settlement. Those claims were dismissed
without prejudice.
Plaintiffs brought the present suit in state court shortly
thereafter. Oracle removed the suit to the federal district court
for the Central District of California, where it was assigned to
the same district judge as Sullivan I, the first suit. Plaintiffs
allege three claims in the present suit. They seek class certifi-
cation for all three claims.
The first claim, brought by all three Plaintiffs, alleges a vio-
lation of the California Labor Code. See, e.g., Cal. Lab. Code
§ 510(a); see also Burnside v. Kiewit Pac. Corp., 491 F.3d
1053, 1073 n.18 (9th Cir. 2007). Plaintiffs allege that Oracle
failed to pay overtime for work performed in California to
Instructors domiciled in other states who worked complete
days in California. We refer to this claim as the “Labor Code
claim.”
The second claim, brought by all three Plaintiffs, alleges a
violation of California’s Unfair Competition Law, commonly
referred to as § 17200. See Cal. Bus. & Prof. Code § 17200et seq. This claim is predicated on the violations of the Labor
Code alleged in the first claim. We refer to this claim as the
“§ 17200/Labor Code claim.”
SULLIVAN v. ORACLE CORP. 15265
The third claim, brought only by Plaintiffs Evich and Bur-
kow, alleges a different violation of § 17200. This claim is
predicated on violations of the FLSA. Plaintiffs allege that
Oracle failed to pay overtime for work performed throughout
the United States. Class members in Sullivan I who settled
their claims against Oracle are not included in the would-be
class. We refer to this claim as the “§ 17200/FLSA” claim.
The district court granted summary judgment to Oracle on
all three claims. On the first and second claims, the court held
that California’s Labor Code (and, derivatively, § 17200) do
not apply to nonresidents who work primarily in other states.
Further, the court held that if the Labor Code were construed
to apply to such work, it would violate the Due Process
Clause of the Fourteenth Amendment. On the third claim, the
court held that § 17200 does not apply to work performed out-
side California and that to the extent the third claim involved
work performed in California, the claim failed “for the same
reasons that Plaintiffs’ § 17200 claim based on Labor Code
provisions fails.”
Plaintiffs timely appealed.
II. Standard of Review
“We review the district court’s decision to grant summary
judgment de novo. Thus, viewing the evidence in the light
most favorable to the nonmoving party, we must determine
whether there are any genuine issues of material fact and
whether the district court correctly applied the relevant sub-
stantive law.” Fichman v. Media Ctr., 512 F.3d 1157, 1159
(9th Cir. 2008) (internal citation omitted). “A district court’s
decision concerning the appropriate choice of law is reviewed
de novo.” Abogados v. AT&T, Inc., 223 F.3d 932, 934 (9th
Cir. 2000).
15266 SULLIVAN v. ORACLE CORP.
III. Discussion
A. Labor Code Claim
We must decide two questions under Plaintiffs’ Labor Code
claim. First, we must decide whether the overtime provisions
of California’s Labor Code apply to work performed in Cali-
fornia by residents of Colorado and Arizona. Second, if the
Labor Code does apply to such work, we must decide whether
its application violates the United States Constitution.
1. Application of California’s Labor Code to Work
Performed in California by Residents of Colorado and
Arizona
[1] The California Labor Code provides that overtime must
be paid for work in excess of eight hours in any one day, and
for work in excess of forty hours in any one week. Plaintiffs
seek to apply the Labor Code to a day’s work when that work
was performed entirely in California, and to a week’s work
when that work was performed entirely in California. They do
not seek to apply the Labor Code to a day’s or week’s work
when only part of that day’s or week’s work was performed
in California. Oracle contends that the overtime provisions of
Colorado law should apply to work performed in California
by the two Colorado residents, Plaintiffs Sullivan and Evich.
It contends that the overtime provisions of the FLSA should
apply to work performed in California by the Arizona resi-
dent, Plaintiff Burkow. (Arizona has no overtime law of its
own.)
[2] In determining what state law to apply, a federal court
applies the choice-of-law rules of the state in which it sits.
Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496
(1941). In this case, we therefore look to the choice-of-law
rules of California. For the reasons that follow, we conclude
that a California court, applying California choice-of-law
rules, would apply California’s Labor Code to Plaintiffs’ suit.
SULLIVAN v. ORACLE CORP. 15267
In California (as in every other American jurisdiction) a
court begins with the presumption that the applicable substan-
tive rule is drawn from its own forum law. A California court
will consider whether its substantive law should be displaced
by the substantive law of another state or country if the party
seeking the application of non-California law is able to “dem-
onstrate that the latter rule of decision will further the interest
of the foreign state and therefore it is an appropriate one for
the forum to apply to the case before it.” Wash. Mut. Bank v.
Superior Court, 15 P.3d 1071, 1080 (Cal. 2001) (citations and
internal quotation marks omitted). When such a demonstra-
tion is made, it becomes the court’s obligation to assess the
competing substantive rules of law and apply the one which,
as it bears upon the issue before the court, the court deter-
mines to be the more appropriate of the two.
Under California choice-of-law rules, the analysis proceeds
in three steps. First, the court must determine whether the Cal-
ifornia law and the potentially applicable law of another state
are “materially” different. Id. As part of resolving this initial
question, the court must determine whether each state’s over-
time provisions are intended to cover Plaintiffs’ situations. If
one state has overtime provisions that would apply to the per-
tinent situation and another state does not, then the applicable
law in each state is materially different. Kearney v. Salomon
Smith Barney, Inc., 137 P.3d 914, 928 (Cal. 2006). Second, if
the laws are materially different, the court must determine
“what interest, if any, each state has in having its own law
applied to the case.” Wash. Mut. Bank, 15 P.3d at 1080. Even
if there are materially different laws, “there is still no problem
in choosing the applicable rule of law where only one of the
states has an interest in having its law applied.” Id. at 1081.
Third, if the laws are materially different and if each state has
an interest in having its own law applied, the court must “take
the final step and select the law of the state whose interests
would be ‘more impaired’ if its law were not applied.” Id.15268 SULLIVAN v. ORACLE CORP.
a. “Materially” Different
There are three potentially applicable laws. For Plaintiffs
Sullivan and Evich, they are California and Colorado law. For
Plaintiff Burkow, they are California and Arizona law. We
must compare the substantive provisions of California law
with the substantive provisions of Colorado law and Arizona
law, and must then consider whether each of the laws was
intended to apply to Plaintiffs’ claim.
[3] We begin with California’s overtime law. The Califor-
nia Labor Code provides:
Eight hours of labor constitutes a day’s work. Any
work in excess of eight hours in one workday and
any work in excess of 40 hours in any one workweek
and the first eight hours worked on the seventh day
of work in any one workweek shall be compensated
at the rate of no less than one and one-half times the
regular rate of pay for an employee. Any work in
excess of 12 hours in one day shall be compensated
at the rate of no less than twice the regular rate of
pay for an employee. In addition, any work in excess
of eight hours on any seventh day of a workweek
shall be compensated at the rate of no less than twice
the regular rate of pay of an employee.
Cal. Lab. Code § 510(a). To summarize, this provision
requires overtime pay of one and one-half times regular pay
beyond 8 hours worked in any single day, 40 hours in one
week, and the first 8 hours of work on the seventh day worked
of any one workweek. Additionally, it requires double pay for
hours worked beyond 12 in a day or 8 hours on the seventh
day of any one workweek.
[4] Contrary to Oracle’s assertions, the California Labor
Code is clearly intended to apply to work done in California
by nonresidents. The California Supreme Court has concluded
SULLIVAN v. ORACLE CORP. 15269
that California’s employment laws govern all work performed
within the state, regardless of the residence or domicile of the
worker. In Tidewater Marine Western, Inc. v. Bradshaw, 927
P.2d 296, 301 (Cal. 1996), the Court wrote, “Like the criminal
laws . . . , California employment laws implicitly extend to
employment occurring within California’s state law bounda-
ries[.]” Oracle relies on two cases to argue that the Labor
Code should not be construed to extend to Plaintiffs’ work in
California. We find Oracle’s arguments unconvincing.
First, Oracle quotes a sentence from Tidewater Marine. The
Court wrote, “If an employee resides in California, receives
pay in California, and works exclusively, or principally, in
California, then that employee is a ‘wage earner in California’
and presumptively enjoys the protection of . . . regulations
[promulgated under the Labor Code].” Id. at 309. Oracle asks
us to read into this sentence a negative inference that a non-
resident is not a “wage earner” within the meaning of the
Labor Code. But the status of a non-resident was not the issue
in Tidewater Marine. Rather, the issue was whether California
residents working outside California were covered by the
Labor Code. The Court answered that they were covered.
To the degree that any inference can be drawn from Tide-
water Marine, it is the opposite from that drawn by Oracle.
Two sentences before the sentence quoted by Oracle, the
Court speculated that the legislature “may not have intended”
the Labor Code to apply to “out-of-state businesses employ-
ing nonresidents, though the nonresident employees enter
California temporarily during the course of the workday.” Id.(emphasis added). If the Court described an out-of-state
employer’s employees coming into California temporarily
during the course of a workday as the marginal case for Labor
Code coverage, there is an inference that an in-state employ-
er’s employees coming into California for entire workdays
and workweeks is not a marginal case. That is, there is an
inference that such a case comes within the Code’s coverage.
15270 SULLIVAN v. ORACLE CORP.
Second, Oracle relies on Campbell v. Arco Marine, Inc., 50
Cal. Rptr. 2d 626 (Ct. App. 1996). In Campbell, Plaintiff had
sued her California-based employer for sexual harassment in
violation of California’s Fair Employment and Housing Act
(“FEHA”). The Court of Appeal dismissed her complaint as
not covered by FEHA. Oracle describes the Court as having
held “that the action must be dismissed because the plaintiff
was not a resident of California and worked in California only
on a limited basis.” That is not a fair description of the
Court’s holding. The actual words of the Court of Appeal
were: “We hold that the FEHA was not intended to apply to
non-residents where, as here, the tortious conduct took place
out of this state’s territorial boundaries.” Id. at 628 (emphasis
added). Even if we assume that the coverage of FEHA is con-
gruent with the coverage of the Labor Code, Campbell does
not support Oracle’s argument. In our case, unlike in Camp-
bell, the allegedly wrongful conduct took place inside rather
than outside California.
[5] We next consider Colorado and Arizona law. The rele-
vant Colorado minimum wage regulation provides:
Overtime Rate: employees shall be paid time and
one-half of the regular rate of pay for any work in
excess of: (1) forty (40) hours per workweek; (2)
twelve (12) hours per workday, or (3) twelve (12)
consecutive hours without regard to the starting and
ending time of the workday (excluding duty free
meal periods), whichever calculation results in the
greater payment of wages. Hours worked in two or
more workweeks shall not be averaged for computa-
tion of overtime. Performance of work in two or
more positions at different pay rates for the same
employer shall be computed at the overtime rate
based on the regular rate of pay for the position in
which the overtime occurs, or at a weighted average
of the rates for each position, as provided in the Fair
Labor Standards Act.
SULLIVAN v. ORACLE CORP. 15271
7 Colo. Code Regs. § 1103-1(4). Unlike California law, this
provision only requires one and one-half regular pay when an
employee works more than 12 hours in a day or more than 40
hours in a week. Also unlike California law, Colorado law
does not impose a double-pay requirement, as California law
does in some instances, nor does it require any overtime pay
for work on the seventh consecutive day.
[6] Arizona does not have its own state overtime law. The
FLSA provides the only overtime requirements for employees
in Arizona. See Industrial Commission of Arizona, Wage Pay-
ment Laws: Frequently Asked Questions, available at http://
www.ica.state.az.us/faqs/labor/wage_payment_laws.html#.
[7] The district court concluded that the differences
between California law and the laws of Colorado and Arizona
are material, and we agree. We therefore proceed to the next
step in the analysis.
b. Interests of the Respective States
[8] California has a clear interest in the economic welfare
of its own residents who perform work in California, both in
ensuring that they have work and that such work is fairly
compensated. California also has an interest in the effect com-
pensation for nonresidents working in California will have on
the compensation for California residents. The Labor Code
provides:
It is the policy of this state to vigorously enforce
minimum labor standards in order to ensure employ-
ees are not required or permitted to work under sub-
standard unlawful conditions or for employers that
have not secured the payment of compensation, and
to protect employers who comply with the law from
those who attempt to gain a competitive advantage
at the expense of their workers by failing to comply
with minimum labor standards.
15272 SULLIVAN v. ORACLE CORP.
Cal. Lab. Code § 90.5(a). See also Lusardi Const. Co. v.
Aubry, 824 P.2d 643, 648 (Cal. 1992) (describing California’s
public policy interests in enforcing § 90.5(a) for all work per-
formed within its boundaries). If a California employer may
avoid the requirements of the state Labor Code by the simple
expedient of hiring nonresidents, California residents will be
substantially disadvantaged in the labor market by the cheaper
labor that will thereby be made available to California
employers.
[9] We next compare California’s interest in applying its
Labor Code to work performed by nonresidents in California
with the interests of Colorado and Arizona in applying the
terms of their minimum wage laws (or the absence thereof) to
work performed by their residents in California. Colorado has
expressed the same interests as California in the welfare of its
workers. The Colorado minimum wage statute provides:
The welfare of the State of Colorado demands that
workers be protected from conditions of labor that
have a pernicious effect on their health and morals.
. . . The general assembly hereby finds and deter-
mines that issues related to the wages of workers in
Colorado have important ramifications for the labor
force in this state. The general assembly, therefore,
declares that the minimum wages of workers in this
state are a matter of statewide concern.
Colo. Rev. Stat. §§ 8-6-101(1) & (2). However, Colorado law
provides no protection whatsoever to workers performing
work outside Colorado. Id. § 1103.1(1) (providing that the
Wage Order “regulates wages, hours, working conditions and
procedures for certain employers and employees for work per-
formed within the boundaries of the state of Colorado”).
Thus, the interests expressed generally in Colorado’s mini-
mum wage statute are not significant here, where the only
work at issue was performed in California.
SULLIVAN v. ORACLE CORP. 15273
However, Oracle argues that Colorado has a strong interest
in the application of its overtime law (or lack thereof) to the
Colorado plaintiffs in this case, contending that Colorado has
expressed a general interest in the extraterritorial application
of its wage laws. To support its argument, Oracle cites
Hathaway Lighting, Inc. v. Industrial Claim Appeals Office,
143 P.3d 1187, 1190 (Colo. Ct. App. 2006), for the proposi-
tion that the Colorado Court of Appeals has affirmed the
power of Colorado to control the terms of employment of
Coloradans temporarily working outside Colorado because of
“the state’s interest in the welfare and protection of its citi-
zens.” However, that language in Hathaway Lighting indi-
cated the court’s approval of the interests motivating the
Colorado Workers’ Compensation Act, which has an explicit
extraterritorial provision. Id. at 1189. Hathaway Lighting is of
limited help in evaluating Colorado’s interests in the extrater-
ritorial application of overtime regulations that are explicitly
limited in their application to work performed within Colora-
do’s geographic boundaries.
[10] As indicated above, Arizona has no state law regulat-
ing overtime work. Protection is provided to Arizona workers
by the FLSA, which operates uniformly, as federal law,
throughout the country. Arizona has thus expressed no inter-
est in the wages paid to its residents except such interest as
is expressed in the FLSA.
[11] Nevertheless, we are willing to assume for the sake of
argument that Colorado and Arizona do in fact have interests
in the welfare of their residents when they work in other
states, even if those states have never expressed this interest
with respect to their overtime laws. However, we cannot dis-
cern how these interests would in any way conflict with the
interest of California in applying its Labor Code to Colorado
and Arizona residents performing work in California. To the
degree that Colorado or Arizona would be interested in the
economic welfare of its residents working in California, these
states both have an interest in the application of California
15274 SULLIVAN v. ORACLE CORP.
rather than Colorado or Arizona law, for California’s Labor
Code is by any measure the most advantageous to the
employee. We fail to see any interest Colorado or Arizona
have in ensuring that their residents are paid less when work-
ing in California than California residents who perform the
same work.
[12] We therefore conclude that California has a strong
interest in applying its Labor Code to the work performed by
Plaintiffs in California. By contrast, we conclude that Colo-
rado and Arizona have no interest in applying their minimum
wage laws (or lack thereof) to Plaintiffs’ work in California.
c. Comparative Impairment of Interests
Because we find that neither Colorado nor Arizona has an
interest in applying its minimum wage laws to Plaintiffs’
employment in California, we do not reach the third step of
the analysis under Washington Mutual.
2. Constitutional Constraints
Oracle argues that California’s Labor Code may not be
applied to Plaintiffs’ work in California without violating the
Due Process Clause of the Fourteenth Amendment and the
Dormant Commerce Clause. Neither argument has merit.
a. Due Process Clause
[13] We apply the same test under the Due Process Clause
of the Fourteenth Amendment and the Full Faith and Credit
Clause to determine whether a state’s law may be applied in
a particular case. “[F]or a State’s substantive law to be
selected in a constitutionally permissible manner, that State
must have a significant contact or significant aggregation of
contacts, creating state interests, such that choice of its law is
neither arbitrary nor fundamentally unfair.” Phillips Petro-
leum Co. v. Shutts, 472 U.S. 797, 818 (1985). It is a rare case
SULLIVAN v. ORACLE CORP. 15275
in which a state court is constitutionally forbidden to apply its
own state’s law. Compare Phillips, 472 U.S. 797 (holding that
Kansas court may not apply Kansas prejudgment interest rules
to all of the natural gas leases at issue in a class action involv-
ing royalties from 6,232 leases, of which only four were
located in Kansas, and 14,477 royalty owners, of whom only
504 were Kansas residents) with Allstate Ins. Co. v. Hague,
449 U.S. 302 (1981) (holding that Minnesota court may apply
Minnesota rule permitting “stacking” of motorcycle insurance
policies because plaintiff now lived in Minnesota and her
deceased spouse had worked in Minnesota, even though
plaintiff had lived in Wisconsin at the time of the accident,
and even though decedent had lived in Wisconsin, had taken
out the insurance policies in Wisconsin, and had been killed
in Wisconsin).
[14] The contacts creating California interests are clearly
sufficient to permit the application of California’s Labor Code
in this case. The employer, Oracle, has its headquarters and
principal place of business in California; the decision to clas-
sify Plaintiffs as teachers and to deny them overtime pay was
made in California; and the work in question was performed
in California.
b. Dormant Commerce Clause
[15] If a statute “regulates even-handedly to effectuate a
legitimate local public interest, and its effects on interstate
commerce are only incidental, it will be upheld unless the
burden imposed on such commerce is clearly excessive in
relation to the putative local benefits.” Pike v. Bruce Church,
Inc., 397 U.S. 137, 142 (1970). California has chosen to apply
its Labor Code equally to work performed in California,
whether that work is performed by California residents or by
out-of-state residents. There is no plausible Dormant Com-
merce Clause argument when California has chosen to treat
out-of-state residents equally with its own.
15276 SULLIVAN v. ORACLE CORP.
B. § 17200/Labor Code Claim
[16] Section 17200 prohibits, inter alia, unlawful business
practices. Plaintiffs’ second claim alleges a violation of
§ 17200, with the predicate underlying violation of law the
failure to pay overtime as required by the Labor Code. For the
same reasons we have just concluded that the Labor Code
applies to Plaintiffs’ work in California, we conclude that
§ 17200 also applies.
C. § 17200/FLSA Claim
Only Plaintiffs Evich and Burkow bring the third claim.
Plaintiff Sullivan was part of the settlement class for FLSA
claim in Sullivan I and is therefore not a plaintiff in this third
claim.
[17] The predicate underlying violation of law in the third
claim is Oracle’s failure to pay overtime everywhere in the
United States, not merely in California. California’s Labor
Code is more protective than the FLSA. See 29 U.S.C.
§ 207(a)(1) (stating that “no employer shall employ any of his
employees . . . for a workweek longer than forty hours unless
such employee receives compensation for his employment in
excess of the hours above specified at a rate not less than one
and one-half times the regular rate at which he is employed”).
It thus appears to us that any damages for work performed in
California that Plaintiffs might be able to recover under their
third claim for violations of the FLSA would be included in
damages that they could recover for violations of the Labor
Code under their second claim. If we are mistaken on this
point, the district court on remand will be able to address
Plaintiffs’ § 17200/FLSA claim for work performed in Cali-
fornia.
The only question we decide here is whether Plaintiffs have
a valid claim under § 17200 for alleged violations of the
FLSA outside of California. The district court concluded that
SULLIVAN v. ORACLE CORP. 15277
§ 17200 does not apply to any violations of the FLSA outside
of California. We agree with the district court.
[18] In Norwest Mortgage, Inc. v. Superior Court, 85 Cal.
Rptr. 2d 18 (Ct. App. 1999), the California Court of Appeal
held that § 17200 does not have extraterritorial application.
The court wrote:
We ordinarily presume the Legislature did not intend
the statutes of this state to have force or operation
beyond the boundaries of the state. Accordingly, we
do not construe a statute as regulating occurrences
outside the state unless a contrary intention is clearly
expressed or reasonably can be inferred from the lan-
guage or purpose of the statute. . . . Plaintiffs do not
cite any pertinent California authority construing
[§ 17200] as applicable to claims of non-California
residents injured by conduct occurring beyond Cali-
fornia’s borders.
Id. at 23 (internal citations omitted). Based on Norwest Mort-
gage, we conclude that § 17200 does not apply to the claims
of nonresidents of California who allege violations of the
FLSA outside California.
Conclusion
We reverse the district court’s grant of summary judgment
on Plaintiffs’ first two claims. We hold that California’s
Labor Code applies to work performed in California by non-
residents of California. We affirm the district court’s grant of
summary judgment on Plaintiffs’ third claim. We hold that
§ 17200 does not apply to allegedly unlawful behavior occur-
ring outside California causing injury to nonresidents of Cali-
fornia.
REVERSED in part, AFFIRMED in part, and
REMANDED for further proceedings. Costs to Plaintiffs-
Appellants.