Contract analysis

I. Executive Summary On Friday, August 11, 2023, the Honorable Raymond Escobedo, sitting in Department 34 of the Los Angeles Superior Court, issued an Order granting in part and denying in part Plaintiffs' Motion for Class Certification in Fuentes v. Aurelius Media Americas Inc., LASC Case No. 22STCV38214 (Consolidated). This memorandum provides a detailed analysis of the Court's Order, assesses the favorable and unf

II. Detailed Analysis of the Court's Order We turn now to a detailed, claim-by-claim analysis of the Court's August 11, 2023 Order, addressing both the certified and denied claims, the class definition, the appointment of class representatives and class counsel, and the Court's observations regarding individual damages. A. Claims Certified

1. First Cause of Action — First Meal Period (Certified) The centerpiece of the Court's Order is the certification of a class on the first meal period claim. Importantly, the Court limited certification to first meal periods only, declining to extend class treatment to the second meal period claim (discussed separately below in Section II.B.1). This distinction is significant and reflects the Court's recognition that

2. Fifth Cause of Action — Wage Statement (Cal. Lab. Code § 226) (Certified) The Court certified the wage statement claim under California Labor Code Section 226 as derivative of the meal period claim. The Court's reasoning was straightforward: if AMA's auto-deduction system resulted in the systematic underpayment of meal period premiums to class members, then the wage statements issued to those class members that di

Section 226 provides for statutory penalties of $50 for the first violation and $100 for each subsequent violation, per employee, per pay period, up to an aggregate penalty of $4,000 per employee. The aggregate exposure on this claim is discussed in Section IV below.

3. Seventh Cause of Action — UCL (Cal. Bus. & Prof. Code § 17200) (Certified) The Court also certified the UCL claim under California Business and Professions Code Section 17200, again as derivative of the meal period claim. The UCL "unlawful" prong borrows the underlying Labor Code violation as its predicate — here, the alleged violation of California Labor Code Section 512 and the meal period premium provisions of

4. PAGA Claim The Court noted that the PAGA claim proceeds as a representative action under California Labor Code Section 2698 et seq. and does not require class certification. The PAGA framework is distinct from class action procedure: a PAGA plaintiff acts as a proxy for the State of California to recover civil penalties for Labor Code violations, and the representative nature of the action is established by statut

1. First Cause of Action — Second Meal Period (Denied) The Court denied certification for the second meal period claims — i.e., claims arising from the alleged failure to provide compliant second meal periods to employees who worked shifts exceeding ten hours, as required by California Labor Code Section 512(a). The Court found that the question of whether employees working shifts exceeding ten hours received complia

2. Second Cause of Action — Rest Period (Denied) The Court denied certification on the rest period claim, finding "no common proof of a systematic failure to provide rest periods." This ruling was grounded in two related observations. First, rest periods are not recorded in the TimeTrack Pro system. This is consistent with standard industry practice in California: because rest periods are paid time (unlike meal perio

3. Third Cause of Action — Overtime / Off-the-Clock Work (Denied) The Court denied certification on the off-the-clock and overtime claims, finding that the question of whether each employee performed compensable off-the-clock work "is inherently individualized and depends on the employee's specific job duties, show unit, and supervisor's expectations." The Court noted that Plaintiffs did not present evidence of a com

4. Fourth Cause of Action — Minimum Wage (Denied) The Court denied certification of the minimum wage claim, finding that it was derivative of the overtime/off-the-clock claim and thus could not proceed on a class-wide basis when the predicate claim was denied certification. Plaintiffs' minimum wage theory was that employees who performed uncompensated off-the-clock work effectively received less than the minimum wage

5. Sixth Cause of Action — Waiting Time Penalties (Cal. Lab. Code §§ 201–203) (Denied) The Court denied certification of the waiting time penalties claim under California Labor Code Sections 201 through 203. The Court found that waiting time penalties "depend on whether individual class members were owed wages at separation, which cannot be determined on a class-wide basis without individual adjudication." Waiting ti

III. Assessment — Favorable and Unfavorable Aspects We assess the Court's Order as a mixed result that, on balance, is more favorable than unfavorable to AMA. The denial of five of seven causes of action substantially narrows AMA's class-wide exposure and validates the defense strategy we have pursued throughout the certification process. However, the certification of the meal period auto-deduction claim — and in par

1. Denial of Certification on Five of Seven Causes of Action. The most significant favorable aspect of the Order is the denial of class certification on the rest period, off-the-clock/overtime, minimum wage, second meal period, and waiting time penalties claims. These were, collectively, the most exposure-heavy claims in Plaintiffs' case. Dr. Rennick's damages model attributed over $20 million in aggregate damages to

2. Dr. Makhija's Analysis Vindicated in Part. The Court credited AMA's variability evidence in denying certification on several claims, particularly the second meal period, rest period, and off-the-clock claims. Dr. Makhija's statistical analysis — which demonstrated statistically significant differences in shift lengths, scheduling patterns, and supervisory practices across AMA's 14 show units and 7 facilities — was

3. Individual Damages Observation. The Court's comment that "individual damages calculations may be required" preserves AMA's argument that damages cannot be determined on a class-wide basis through a single formula or calculation. As discussed in Section II.F above, this creates leverage in settlement negotiations by increasing the complexity and risk that Plaintiffs would face in a damages phase, incentivizing Plai

1. Rejection of the Facility-Based Subclass Argument. The Court's refusal to limit the certified class to the three facilities where the attestation feature was not activated is the most consequential unfavorable ruling. The Court's finding that the low attestation feature utilization rates (ranging from 1.8% to 4.1%) at the four "active" facilities made the distinction between active and inactive facilities "functio

2. The Court's Characterization of the Attestation Feature. The Court's statement that "a mechanism that employees do not know about is functionally equivalent to no mechanism at all" is a strong and unfavorable merits signal. This characterization essentially treats AMA's auto-deduction system as universally deficient, regardless of whether the attestation feature was technically available at a given facility. If th

3. Breadth of the Common Question. The Court framed the common question broadly: whether the auto-deduction system denied meal period premium pay "without providing an adequate mechanism for employees to report missed or shortened breaks." This formulation tilts the merits analysis toward Plaintiffs because it focuses on the adequacy of the mechanism rather than on whether individual employees actually missed meal pe

IV. Impact on Exposure Analysis A. Reduced Exposure from Denied Claims The denial of five of seven causes of action significantly reduces AMA's aggregate exposure. Plaintiffs' expert, Dr. Carolyn Rennick, presented a total damages figure of approximately $38.6 million across all claims. A substantial portion of that figure was attributable to the claims that were denied certification: • Rest period premiums: approxim

V. Implications for Settlement Strategy A. Updated Settlement Range In our pre-certification settlement authority memorandum (dated August 15, 2023), we recommended a settlement range of $10–15 million. In light of the Court's Order, we update our recommendation as follows: Updated recommended settlement range: $12–16 million (Gross Settlement Amount). The rationale for adjusting the range upward from the pre-certifi

VI. Interlocutory Appellate Review — Not Recommended Under California law, AMA has the right to seek interlocutory appellate review of the certification order by petitioning the Court of Appeal for a writ of mandate pursuant to California Rules of Court, Rule 8.495 et seq. A writ petition would ask the appellate court to vacate or modify the trial court's certification order. We have carefully considered this option

1. The Partial Certification Order Is Defensible. The Court applied the correct legal framework, relying on the California Supreme Court's decisions in Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, and Duran v. U.S. Bank National Assn. (2014) 59 Cal.4th 1. The Court made factual findings supported by the record, including the auto-

2. Appellate Review Is Discretionary and Rarely Granted. Unlike appeals of right, writ petitions challenging certification orders are subject to the appellate court's discretionary decision whether to issue an order to show cause and entertain the petition on the merits. The California Courts of Appeal grant such petitions in a small minority of cases, and the standard for intervention is high: the petitioner must de

3. Appellate Proceedings Would Cause Substantial Delay. Even if review were granted, the appellate process would delay resolution of the case by an estimated 12 to 18 months. During that period, defense costs would continue to accrue, and AMA would remain exposed to the risk of an unfavorable trial outcome if the certification order were ultimately upheld. The delay would also forfeit the current window for settlemen

4. The Denial of Five of Seven Causes of Action Is a Strong Result. Seeking appellate review of the partial grant of certification risks "winning the battle but losing the war." An appellate challenge would draw judicial attention to the certified meal period claim — arguably the strongest claim in Plaintiffs' case — and could result in unfavorable appellate dicta on the merits. Moreover, Plaintiffs could cross-petit

5. Cost-Benefit Analysis Disfavors Appellate Review. The estimated cost of appellate proceedings — including preparation of the writ petition, the record on appeal, briefing, and oral argument — is in the range of $200,000 to $300,000. This expenditure is disproportionate to the marginal benefit that might be obtained (at best, a reduction in the certified class from approximately 1,850 to approximately 700 members),

VII. Recommendations Based on the foregoing analysis, we make the following recommendations:

1. Do Not Seek Interlocutory Appellate Review. The partial certification order represents the expected outcome, and the risk-reward calculus does not favor an appeal. The order is defensible, appellate review is discretionary and rarely granted, and the process would delay resolution by 12 to 18 months at a cost of $200,000 to $300,000. AMA's resources are better allocated to settlement efforts.

2. Proceed to Mediation Promptly. We recommend contacting the Honorable Patricia Okoro (Ret.) at Westpark Dispute Resolution Inc. immediately to schedule Mediation Session #1 for late August 2023, targeting the week of August 21–25, 2023. If that week is unavailable, we should secure the earliest available date in the following two weeks. We will coordinate with Castellano Byrne & Salas LLP and Veltrano Employment La

3. Prepare a Settlement Authority Memorandum. We will prepare a settlement authority memorandum for client approval recommending authority of $12–16 million for the class action (Gross Settlement Amount), with a combined authority covering the Aldrich matter ($1.5–3.0 million) if both matters are addressed in the same mediation process. The total maximum authority sought will be up to $18 million. We note that settle

4. Engage Pemberton Mutual Assurance Co. Immediately. Bernard Crawford of our insurance recovery practice group will send an updated claim information letter to Pemberton advising of the certification order, the anticipated settlement range, and the need for Pemberton to authorize a contribution within the identified range. The letter should address allocation concerns regarding the PAGA component and request a meeti

5. Prepare a Mediation Brief. We will prepare a comprehensive mediation brief that accomplishes the following objectives: (a) Frames the partial certification as a mixed result that creates substantial trial risk for Plaintiffs on the merits. Even with the auto-deduction common question certified, Plaintiffs must still prove at trial that individual class members actually missed meal periods and were denied premium p

6. Consider the Aldrich Matter Timing. The Aldrich individual action (Case No. 22STCV41087) remains pending before the Honorable Catherine Villanueva in Department 52. AMA's cross-claims in the Aldrich matter — including claims for breach of the Employment Agreement (Section 9.4, restrictive covenants), trade secret misappropriation under the California Uniform Trade Secrets Act (CUTSA), breach of fiduciary duty, and

7. Continue Monitoring the Non-Certified Claims. Although the rest period, off-the-clock, overtime, minimum wage, and waiting time claims were denied class treatment, these claims remain available to individual class members. Any class settlement should include a broad release covering all claims — both certified and non-certified — arising from the facts and circumstances alleged in the operative complaint, to preve

VIII. Conclusion The August 11, 2023 partial certification order is a manageable outcome that positions the case for a favorable settlement. The denial of the majority of Plaintiffs' claims — including the rest period, off-the-clock/overtime, minimum wage, second meal period, and waiting time claims — substantially narrows AMA's class-wide exposure and eliminates the prospect of class-wide liability on the most specu

1. Schedule mediation with Hon. Patricia Okoro (Ret.) for late August 2023;

2. Obtain settlement authority of up to $18 million (combined) through the required corporate approval channels;

3. Engage Pemberton Mutual Assurance Co. regarding settlement contribution authorization and PAGA allocation; and

4. Prepare mediation materials, including a comprehensive mediation brief. We are available to discuss this analysis at the client team's convenience and recommend a strategy call this week — ideally Wednesday, August 16, or Thursday, August 17 — to align on next steps and confirm the action items set forth in this memorandum. Please let us know your availability. CALDERWOOD & HARKNESS LLP By: ________ Renata Vasquez