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 § 17200

et 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.