New Ninth Circuit decision on the UCL's extraterritorial operation: Sullivan v. Oracle Corp.

In Sullivan v. Oracle Corp., ___ F.3d ___ (9th Cir. Nov. 6, 2008), the Ninth Circuit addressed whether non-residents of California may invoke the UCL's "unlawful" prong against a defendant with its principal place of business in California. According to the Ninth Circuit (opinion by Judge Fletcher), the answer depends on the underlying, "borrowed" law.

After a lengthy analysis, the court held that non-Californians may invoke the Labor Code directly for work performed in California (slip op. at 15266-75), and therefore may also state a UCL "unlawful" prong claim for Labor Code violations (id. at 15276). However, they could not invoke the UCL's "unlawful" prong to obtain redress for violation of the federal Fair Labor Standards Act for work performed outside California. Id. at 15276-77 (citing Norwest Mortgage, Inc. v. Superior Court, 72 Cal. App. 4th 214 (1999)). The opinion concludes:

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 nonresidents 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 occurring outside California causing injury to nonresidents of California.

Id. at 15277 (emphasis added). 

The opinion spends little time discussing the fact that the defendant's principal place of business is in California or the possibility that its FLSA violations may have emanated from California.  That factor could have impacted the analysis of the UCL's extraterritorial application under Norwest.  The opinion seems to assume that for non-Californians performing work outside California, any FSLA violations also necessarily emanated from outside California.  I do not think that is necessarily true in every case against a California-based defendant who employs workers out of state.  For more discussion of the Norwest decision, see this blog post. 

Comments

[TommyK]

So does it, or does it not, overrule Judge Patel's decision on extraterritorial application of 17200 in the In Re Wells Fargo Overtime case? She specifically found that conduct emanated from California, and this case did not make the point clear. The case did state that "The employer, Oracle, has its headquarters and
principal place of business in California; the decision to classify Plaintiffs as teachers and to deny them overtime pay was
made in California; and the work in question was performed in California." So there is an argument that they were implicitly setting forth a blanket rule. It would have been better for them to have taken the issue on in more detail.

[Kimberly A. Kralowec]

The Ninth Circuit's holding on the FLSA claim (and the UCL "unlawful" prong claim stemming from that violation) was specifically limited to work performed outside California. Please post the citation for the ruling by Judge Patel.

[TommyK]

The Patel decision is In Wells Fargo Home Mortg. Overtime Pay Litig., 2007 U.S. Dist. LEXIS 60551(N.D. Cal. Aug. 13 2007). She held that WFHM could be held liable for misclassification decisions that took place outside California even though the management was in Iowa because the management allegedly received advice from an in-house counsel in California not to reclassify employees as non-exempt.

If Oracle actually stands for the proposition that the making of the decision to classify employees as exempt in California is insufficient to allow extraterritorial application of 17200 to employees out of state, that would seem to conflict with this case. Do you disagree?

[Kimberly A. Kralowec]

I haven't read Judge Patel's decision, but based on your summary, it doesn't sound like a conflict to me. That part of the Oracle opinion related only to a UCL "unlawful" prong claim based on an alleged violation of the federal FLSA. It doesn't sound like that's what Judge Patel's case involved.

By the way, TommyK, you are a relatively frequent commenter; why not identify yourself?

[TommyK]

I prefer limited anonymity. If I run into you in court sometime, I'll introduce myself. Keep on blogging!

[Kimberly A. Kralowec]

I have a pretty good idea of who you are but I won't out you on my blog. I put myself out there publicly every day so I have a little trouble understanding those who are unwilling or reluctant to do the same. I look forward to meeting you in court someday.