Contract analysis

I. Executive Summary and Recommendation The purpose of this memorandum is to request formal settlement authority in advance of Mediation Session #1, which is currently scheduled for August 25, 2023, before the Honorable Patricia Okoro (Ret.) of Westpark Dispute Resolution Inc., located at 1925 Century Park East, Suite 1700, Los Angeles, California 90067. As discussed in greater detail below, the recent partial certif

II. Current Posture of the Class Action A. Certification Order (August 11, 2023) On August 11, 2023, the Honorable Raymond Escobedo, sitting in Department 34 of the Los Angeles County Superior Court, issued an order granting in part and denying in part Plaintiffs' Motion for Class Certification in Fuentes v. Aurelius Media Americas Inc., Case No. 22STCV38214. The order, which is attached hereto as Exhibit A, represen

III. Damages Analysis — Class Action A. Competing Expert Valuations The parties' respective experts have produced materially divergent damages valuations, a circumstance that is typical in California wage-and-hour class actions. The following table summarizes the competing valuations and our risk-adjusted assessment: Several points merit emphasis regarding the above comparison. Dr. Rennick's total of $38.6 million en

IV. Trial Risk Assessment — Class Action A. AMA's Strengths at Trial AMA possesses several meaningful defensive strengths that would be presented at trial if the class action does not settle: Facially Compliant Policies. AMA maintained written meal and rest break policies that are facially compliant with California law and the applicable IWC Wage Order. The employee handbook, which was distributed to all non-exempt e

V. Aldrich Individual Action — Current Posture and Settlement Considerations A. Case Status Aldrich v. Aurelius Media Americas Inc., Case No. 22STCV41087, is assigned to the Honorable Catherine Villanueva, Department 52, of the Los Angeles County Superior Court. The case arises from the termination of Derek Aldrich, who served as Senior Vice President of Development at AMA from September 2017 until his termination on

Section 9.1 — Non-Competition (18 months). This provision restricts Aldrich from engaging in competitive activities for a period of eighteen months following termination. The provision is void under California Business & Professions Code § 16600, which broadly prohibits contractual restraints on an individual's ability to engage in a lawful profession, trade, or business. AMA has effectively conceded the unenforceabi

Section 9.2 — Employee Non-Solicitation (24 months). This provision restricts Aldrich from soliciting AMA employees for a period of twenty-four months following termination. Employee non-solicitation provisions remain generally enforceable in California, and this provision is a key negotiating point in any settlement. AMA has a legitimate interest in preventing Aldrich from recruiting key production personnel to comp

Section 9.3 — Business Non-Solicitation (24 months). This provision restricts Aldrich from soliciting AMA's business relationships (including advertisers, distribution partners, and content licensees) for a period of twenty-four months. This provision is more vulnerable to challenge than § 9.2, as California courts have increasingly scrutinized business non-solicitation provisions that function as de facto non-compet

Section 9.4 — Confidentiality (Indefinite). This provision imposes an indefinite obligation of confidentiality with respect to AMA's proprietary information. Confidentiality provisions are generally enforceable in California, and § 9.4 is AMA's strongest restrictive covenant provision. It must be preserved in full force in any settlement. Settlement Framework for Restrictive Covenants. In any settlement of the Aldric

VI. Insurance Coordination — Class Action A. EPL Policy (Pemberton Mutual Assurance Co.) AMA's Employment Practices Liability insurance for the class action is provided by Pemberton Mutual Assurance Co. under Policy No. PMA-EPL-2022-00837. The key terms of the Policy are as follows: • Self-Insured Retention (SIR): $5,000,000 • Aggregate Policy Limit: $15,000,000 • Policy Period: January 1, 2022 – December 31, 2023 AM

VII. Mediation Strategy A. Session #1 (August 25, 2023) — Class Action Focus Mediation Session #1, scheduled for August 25, 2023, will be focused exclusively on the class action claims. The following outlines our recommended approach: Opening Position. We recommend that AMA open with a settlement offer in the range of $8,000,000 to $9,000,000 (gross settlement amount). This opening position establishes AMA's credibil

VIII. Approval Process Pursuant to AMA's Outside Counsel Guidelines § 7.4, settlement authority for matters in which Calderwood & Harkness serves as outside counsel must be approved as follows: • For settlement amounts up to $5,000,000: Approval by Gregory Tanaka (VP, Legal & Compliance) and Philippa Cartwright (General Counsel, AGMG); • For settlement amounts exceeding $5,000,000: The foregoing approvals, plus final

IX. Conclusion Both the Fuentes class action and the Aldrich individual action are ripe for resolution. The partial certification ruling issued on August 11, 2023, creates strong incentives for both sides to negotiate: for Plaintiffs, because certification was denied for five of seven causes of action, substantially limiting the recoverable class exposure; and for AMA, because the certified first meal period claim, c