A Federal judge applied California law (in this case, a law against unfair business conduct). That’s normal, just like state courts can (sometimes) apply Federal law.
Federal courts can “certify” questions of state law to the state courts if they don’t know how they should be applying state law, but in this case neither the district court nor the 9th Circuit felt the need to ask for clarification. The Supreme Court has final say on questions of Federal and Constitutional law. State courts have final say on State law and State Constitutions.
A State law that directly conflicts with a Federal law is preempted. There are also sometimes “zones” of preemption created by broad Federal laws. But, in this case, there is no conflict.