Sullivan v. Oracle Corp.

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

Submission Withdrawn Feb. 17, 2009

Resubmitted December 6, 2011

Pasadena, California

Filed December 13, 2011

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.

20965

20968 SULLIVAN v. ORACLE CORPORATION

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. After certifying several questions of

state law to the California Supreme Court and receiving

answers from that Court, 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

SULLIVAN v. ORACLE CORPORATION 20969

Oracle’s term — who trained customers to use Oracle soft-

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

20970 SULLIVAN v. ORACLE CORPORATION

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.” Teachers 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

SULLIVAN v. ORACLE CORPORATION 20971

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 class consisted of plaintiffs seeking damages under

the Labor Code; the second consisted of plaintiffs seeking

damages under the FLSA. That suit was settled, resulting in

a dismissal with prejudice of the claims of both classes. How-

ever, claims brought by plaintiffs under California law “for

periods of time they may have worked in the State of Califor-

nia 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 named Plaintiffs,

alleges a violation 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.”

20972 SULLIVAN v. ORACLE CORPORATION

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 for this third claim. 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) does

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 for which payment was less than that required

by the FLSA; to the extent the third claim involved work per-

formed in California the claim failed “for the same reasons

that Plaintiffs’ § 17200 claim based on Labor Code provisions

fails.” Plaintiffs timely appealed.

In a published opinion, we reversed in part and affirmed in

part the decision of the district court. Sullivan v. Oracle Corp.

(Sullivan II), 547 F.3d 1177 (9th Cir. 2008). We reversed on

the first and second claims, holding that the Labor Code and

§ 17200 apply to the overtime work that Plaintiffs performed

in California. Id. at 1181-86. We affirmed on the third claim,

holding that § 17200 does not apply to Plaintiffs’ overtime

work performed outside of California even if the employer

violated the FLSA. Id. at 1186-87.

Oracle filed a petition for rehearing en banc of our decision

on the first and second claims. Plaintiffs filed a petition for

rehearing by the panel on the third claim. The California

Employment Law Council, the California Restaurant Associa-

tion, and the Employers’ Group each filed amicus briefs in

SULLIVAN v. ORACLE CORPORATION 20973

support of Oracle’s petition for rehearing en banc on the first

and second claims.

We withdrew our published opinion, and certified the fol-

lowing questions of state law to the California Supreme

Court:

First, does the California Labor Code apply to

overtime work performed in California for a

California-based employer by out-of-state plaintiffs

in the circumstances of this case, such that overtime

pay is required for work in excess of eight hours per

day or in excess of forty hours per week?

Second, does § 17200 apply to the overtime work

described in question one?

Third, does § 17200 apply to overtime work per-

formed outside California for a California-based

employer by out-of-state plaintiffs in the circum-

stances of this case if the employer failed to comply

with the overtime provisions of the FLSA?

Sullivan v. Oracle Corp. (“Sullivan III”), 557 F.3d 979, 983

(9th Cir. 2009). The California Supreme Court agreed with

the answers we had given in our original opinion to these

three questions. Sullivan v. Oracle Corp. (“Sullivan IV”), 51

Cal. 4th 1191 (2011). In answer to the first question, the Court

concluded that California’s overtime law applies to the work

described in the question that had been performed in Califor-

nia by nonresidents. Id. at 1196-1206. In answer to the second

question, the Court concluded that § 17200 applies to the

work described in the first question. Id. at 1206. In answer to

the third question, the Court concluded that § 17200 does not

reach Plaintiffs’ FLSA claims for work performed outside

California under the circumstances of this case. Id. at

1206-09.

20974 SULLIVAN v. ORACLE CORPORATION

We address the few remaining issues below.

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).

III. Discussion

A. Labor Code Claim

[1] Oracle makes two arguments against Plaintiffs’ Labor

Code claim. First, Oracle argues that the overtime provisions

of California’s Labor Code do not apply to work performed

in California by residents of Colorado and Arizona. The Cali-

fornia Supreme Court disagreed and concluded: “The Califor-

nia Labor Code does apply to overtime work performed in

California for a California-based employer by out-of-state

plaintiffs in the circumstances of this case, such that overtime

pay is required for work in excess of eight hours per day or

in excess of forty hours per week.” Sullivan IV, 51 Cal. 4th

at 1206. The Court’s answer to Oracle’s state-law argument

is conclusive.

Second, Oracle argues that if California’s Labor Code

applies to Plaintiffs’ work in California the Code violates the

Due Process Clause of the Fourteenth Amendment and the

Dormant Commerce Clause of the United States Constitution.

We disagree with both the due process clause and commerce

clause arguments.

1. Due Process Clause

[2] We apply the same test under the Due Process Clause

of the Fourteenth Amendment and the Full Faith and Credit

SULLIVAN v. ORACLE CORPORATION 20975

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) (quoting Allstate

Ins. Co. v. Hague, 449 U.S. 302, 312-13 (1981)). A state court

is rarely forbidden by the Constitution to apply its own state’s

law. Compare Phillips, 472 U.S. at 814-23 (holding that a

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., 449 U.S. at

304-20 (holding that a 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 Wis-

consin).

[3] 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.

2. Dormant Commerce Clause

[4] 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

20976 SULLIVAN v. ORACLE CORPORATION

relation to the putative local benefits.” Pike v. Bruce Church,

Inc., 397 U.S. 137, 142 (1970). California applies 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 Commerce Clause

argument when California has chosen to treat out-of-state res-

idents equally with its own.

B. § 17200/Labor Code Claim

[5] Oracle argues that California Business and Professions

Code § 17200 does not apply to the overtime work performed

by Plaintiffs, described above. The California Supreme Court

held: “Business and Professions Code section 17200 does

apply to the overtime work” performed by Plaintiffs. Sullivan

IV, 51 Cal. 4th at 1206. The Court’s answer to Oracle’s state-

law argument is conclusive.

C. § 17200/FLSA Claim

[6] Plaintiffs Evich and Burkow argue that § 17200 applies

to alleged violations of the FLSA outside of California. The

California Supreme Court held: “Business and Professions

Code section 17200 does not apply to overtime work per-

formed outside California for a California-based employer by

out-of-state plaintiffs in the circumstances of this case based

solely on the employer’s failure to comply with the overtime

provisions of the FLSA.” Id. at 1209. The Court’s answer to

Oracle’s state-law argument is conclusive.

Conclusion

[7] Based on the foregoing, we reverse the district court’s

grant of summary judgment to Oracle on Plaintiffs’ first two

claims. We affirm the district court’s grant of summary judg-

ment to Oracle on Plaintiffs’ third claim.

SULLIVAN v. ORACLE CORPORATION 20977

REVERSED in part, AFFIRMED in part, and

REMANDED for further proceedings. Costs to Plaintiffs-

Appellants.