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CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT This memorandum and its contents are protected by the attorney-client privilege and the work product doctrine. This memorandum is intended solely for the use of the addressees identified below and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP. Any unauthorized disclosure may result in a waiver of applicable privileges.
MEMORANDUM
TO: Gregory Tanaka, Vice President, Legal & Compliance, Aurelius Media Americas Inc. Philippa Cartwright, General Counsel, Aurelius Global Media Group PLC
FROM: Renata Vasquez, Partner, and Devon Archer, Senior Associate
DATE: November 7, 2022
RE: Preliminary Case Assessment — Fuentes v. Aurelius Media Americas Inc., Superior Court of the State of California, County of Los Angeles, Case No. 22STCV38214
C&H Matter No.: 1017-00004
I. EXECUTIVE SUMMARY
On November 1, 2022, Marisol Fuentes, a former production coordinator in the Unscripted Programming Division of Aurelius Media Americas Inc. ("AMA" or the "Company"), filed a putative class action complaint in the Superior Court of the State of California, County of Los Angeles, styled Fuentes v. Aurelius Media Americas Inc., Case No. 22STCV38214 (the "Complaint" or the "Action"). The Complaint alleges systematic wage-and-hour violations affecting non-exempt, hourly production-support employees across AMA's seven California production facilities.
The Complaint defines a putative class of approximately 1,850 current and former non-exempt, hourly employees. The alleged class period spans from November 1, 2018 through the present. The Complaint asserts seven causes of action arising under the California Labor Code and the Unfair Competition Law ("UCL"), encompassing claims for failure to provide compliant meal and rest periods, failure to pay overtime compensation, failure to pay minimum wages, failure to provide accurate wage statements, waiting time penalties, and UCL restitution. The Complaint is accompanied by a Private Attorneys General Act ("PAGA") representative action component.
Plaintiffs are represented by Castellano Byrne & Salas LLP, with Marco Castellano and Diane Salas serving as lead counsel. PAGA co-counsel is the Veltrano Employment Law Group PC, with Sandra Higuera as the attorney of record. Both firms are well-regarded plaintiffs' employment practices firms with significant experience in California wage-and-hour class actions and PAGA litigation, particularly in the entertainment and media sectors.
A PAGA notice was filed with the California Labor & Workforce Development Agency ("LWDA") on September 15, 2022. The LWDA's 65-day response deadline falls on November 14, 2022, and to date, the LWDA has taken no action and has not issued a citation or expressed an intent to investigate. The Complaint was filed on November 1, 2022, which is 47 days after the PAGA notice — approximately 18 days before the expiration of the mandatory 65-day waiting period. As discussed in greater detail below, this premature filing constitutes a procedural defect, although it is one that is likely curable under current case law.
Plaintiffs' counsel has asserted aggregate claimed damages of approximately $38.6 million, inclusive of approximately $12.2 million in PAGA penalties. Based on our preliminary analysis, we believe Plaintiffs' claimed exposure is significantly overstated. Our preliminary realistic exposure estimate, which accounts for the strength of available defenses, the likelihood of substantial judicial reduction of PAGA penalties, and the individualized nature of several claims, ranges from $8 million to $15 million.
The purpose of this memorandum is to provide the Company with an initial assessment of the claims asserted, the factual and legal landscape, key vulnerabilities, available defenses, preliminary exposure analysis, and recommended initial defense strategy. More detailed analyses on specific issues — including the auto-deduction risk, Wage Order 12 applicability, and PAGA standing — will follow in forthcoming memoranda as additional factual investigation is completed.
II. CLIENT BACKGROUND
A. Aurelius Global Media Group PLC (AGMG)
Aurelius Global Media Group PLC ("AGMG" or the "Parent") is a United Kingdom-headquartered public media, entertainment, and e-commerce conglomerate. AGMG is listed on the London Stock Exchange under the ticker symbol AGMG and is registered with Companies House under Company No. 08412667. AGMG's principal offices are located at 34 Kingsway, London WC2B 6EX, United Kingdom. The company's Chief Executive Officer is Sir Edmund Halesworth, its General Counsel is Philippa Cartwright, and its Chief Financial Officer is Malcolm Dunmore.
As of November 1, 2022, AGMG's market capitalization was approximately £3.82 billion (approximately $4.41 billion at current exchange rates). For the fiscal year ended December 31, 2022, AGMG reported consolidated global revenue of approximately £2.14 billion (approximately $2.47 billion). AGMG employs approximately 18,500 individuals globally across operations in 14 countries, with significant footprints in the United Kingdom, the United States, Canada, Australia, and Germany. AGMG's business encompasses television and film production, digital content creation, live events, brand licensing, and direct-to-consumer e-commerce.
B. Aurelius Media Americas Inc. (AMA)
Aurelius Media Americas Inc. ("AMA" or the "Company") is a wholly owned subsidiary of AGMG. AMA is incorporated in the State of Delaware (Secretary of State File No. 5284731) and is qualified to do business in the State of California. AMA's principal office is located at 8500 Sunset Boulevard, Suite 1400, West Hollywood, California 90069. AMA's registered agent for service of process in California is Pacific Statutory Agents Inc., located at 2901 W. Alameda Avenue, Suite 200, Burbank, California 91505.
AMA maintains a United States headcount of approximately 3,200 employees, of whom approximately 2,400 are based in the State of California. For the fiscal year ended December 31, 2022, AMA generated revenue of approximately $687.4 million, representing approximately 27.8% of AGMG's consolidated global revenue. AMA's operations encompass unscripted television programming, scripted development, digital content production, live events, and e-commerce studio operations.
AMA's key management personnel relevant to this Action include the following:
•  Jonathan Mercer, President
•  Lorraine Okafor, Senior Vice President, Human Resources
•  Gregory Tanaka, Vice President, Legal & Compliance
C. Insurance Coverage
AMA maintains the following insurance policies relevant to the claims asserted in this Action:
•  Employment Practices Liability ("EPL") Insurance: Issued by Pemberton Mutual Assurance Co., Policy No. PMA-EPL-2022-00837, with a $5 million self-insured retention ("SIR") and a $15 million aggregate limit. A formal tender letter was dispatched to Pemberton on November 8, 2022.
•  Directors & Officers ("D&O") Insurance: Issued by Redcliffe Specialty Insurance Ltd., Policy No. RSI-DO-2022-04419, providing $10 million in primary coverage. Excess coverage of $25 million is provided through an excess tower maintained by Ashford Re Ltd. under Policy No. ARL-EX-2022-01102. A precautionary notice was sent to Redcliffe on November 8, 2022.
Further analysis of insurance coverage and coordination is addressed in Section XII below.
III. COMPLAINT OVERVIEW — SEVEN CAUSES OF ACTION
The Complaint asserts seven causes of action against AMA. Each cause of action is summarized below, together with our preliminary assessment of the factual and legal basis for the claims.
A. First Cause of Action: Failure to Provide Compliant Meal Periods (Cal. Lab. Code §§ 226.7, 512)
The First Cause of Action alleges that AMA systematically failed to provide its non-exempt, hourly production-support employees with compliant, uninterrupted thirty-minute meal periods as required by California Labor Code sections 226.7 and 512 and the applicable Industrial Welfare Commission ("IWC") Wage Order.
Specifically, the Complaint alleges that AMA's electronic timekeeping system — the NovaPay Solutions "TimeTrack Pro" platform — was configured to automatically deduct thirty minutes from employees' recorded work time for a meal period, regardless of whether the employees actually received a compliant, uninterrupted thirty-minute meal break. The Complaint further alleges that production personnel were routinely required to remain "on call" during meal periods, particularly during active shooting days, and were expected to resume work immediately if called upon by supervisors or production managers. Under these circumstances, the Complaint alleges, employees did not receive a bona fide, duty-free meal period.
The Complaint additionally identifies a threshold discrepancy in the auto-deduction configuration. Specifically, the auto-deduction was configured to trigger at six hours — meaning that a thirty-minute meal period was not automatically deducted (or expected) until the employee had worked six hours. However, IWC Wage Order 12, which governs the Motion Picture Industry, requires that a meal period be provided for any work period exceeding five hours. This six-hour threshold is inconsistent with the five-hour requirement under Wage Order 12 and represents an independent compliance issue that we address in greater detail in Section IX below.
The Complaint claims one-hour premium pay at the employee's regular rate of compensation for each missed or non-compliant meal period, as provided by California Labor Code section 226.7(c).
B. Second Cause of Action: Failure to Provide Compliant Rest Periods (Cal. Lab. Code § 226.7)
The Second Cause of Action alleges that AMA failed to authorize and permit ten-minute paid rest breaks for every four hours worked, or major fraction thereof, as required by California Labor Code section 226.7 and the applicable IWC Wage Order.
The Complaint alleges that this failure was particularly problematic during extended production days, which commonly involve twelve- to sixteen-hour shifts — a widespread practice in the motion picture and television production industry. Under IWC Wage Order 12, employees working shifts of this length are entitled to multiple rest periods. The Complaint alleges that the demands of production schedules, combined with the absence of adequate tracking and supervisory oversight of rest periods, resulted in employees routinely missing or truncating their entitled rest breaks.
The Complaint claims one-hour premium pay at the employee's regular rate of compensation for each missed or non-compliant rest period under California Labor Code section 226.7(c).
C. Third Cause of Action: Failure to Pay Overtime Compensation (Cal. Lab. Code §§ 510, 1194)
The Third Cause of Action alleges that AMA failed to compensate non-exempt employees for all hours worked, resulting in unpaid overtime compensation in violation of California Labor Code sections 510 and 1194.
Specifically, the Complaint alleges that employees were required to perform off-the-clock work during pre-production setup — typically involving approximately thirty to forty-five minutes of preparatory activities before the official shift start time, including setting up equipment, reviewing production notes, and attending informal briefings — and during post-production wrap activities — typically involving approximately fifteen to thirty minutes of work after the official shift end time, including equipment breakdown, data transfer, and closeout procedures. The Complaint alleges that this off-the-clock work was not recorded in the TimeTrack Pro system and was not compensated.
Because production days frequently exceeded eight hours, any uncompensated pre-shift or post-shift time would, in many cases, constitute overtime work compensable at one and one-half times the employee's regular rate of pay. The Complaint further alleges that certain employees worked in excess of twelve hours in a day, entitling them to double-time compensation for all hours worked beyond twelve, and that such extended hours were also not fully captured or compensated.
D. Fourth Cause of Action: Failure to Pay Minimum Wage (Cal. Lab. Code §§ 1197, 1197.1)
The Fourth Cause of Action is derivative of the overtime claim. The Complaint alleges that when the uncompensated off-the-clock time is factored into the total hours worked during certain shifts, the effective hourly rate paid to employees fell below the applicable California minimum wage. This cause of action targets shifts where the total uncompensated time was sufficiently large relative to the shift length to reduce the effective rate below the statutory minimum.
While this claim is likely limited to a small subset of shifts and class members, it serves to anchor the broader off-the-clock work allegations and provides an additional basis for statutory penalties.
E. Fifth Cause of Action: Failure to Provide Accurate Wage Statements (Cal. Lab. Code § 226)
The Fifth Cause of Action alleges that AMA's wage statements did not accurately reflect all hours worked by non-exempt employees, in violation of California Labor Code section 226. The Complaint alleges that the auto-deduction of meal period time, combined with the failure to record off-the-clock pre-shift and post-shift work, resulted in wage statements that understated the total hours worked, the total wages earned, and the applicable rates of pay.
California Labor Code section 226(e) provides for statutory penalties of fifty dollars ($50) for the initial violation and one hundred dollars ($100) for each subsequent violation, up to an aggregate penalty of four thousand dollars ($4,000) per employee, in addition to actual damages or an amount sufficient to recover underpaid wages. The Complaint claims penalties for each biweekly pay period during the class period.
F. Sixth Cause of Action: Waiting Time Penalties (Cal. Lab. Code §§ 201–203)
The Sixth Cause of Action alleges that former employees of AMA were not paid all wages owed at the time of their separation from employment, in violation of California Labor Code sections 201 through 203. The Complaint alleges that because AMA failed to compensate employees for missed meal and rest period premiums and for off-the-clock overtime, the final paychecks issued to separated employees did not include all wages earned and unpaid at the time of separation.
Under California Labor Code section 203, if an employer willfully fails to pay wages due at the time of separation, the employee's wages continue as a penalty from the date of the demand for payment or the date of separation (whichever is later) for up to thirty calendar days. The Complaint claims the maximum thirty-day penalty for each separated class member, calculated at eight hours per day at the employee's final regular rate of pay.
G. Seventh Cause of Action: Unfair Competition Law (Cal. Bus. & Prof. Code § 17200)
The Seventh Cause of Action asserts an umbrella claim under California's Unfair Competition Law ("UCL"), Business and Professions Code section 17200 et seq., seeking restitution of all wages and benefits allegedly owed as a result of the underlying Labor Code violations described in the First through Sixth Causes of Action. The UCL claim is premised on the "unlawful" prong, alleging that AMA's employment practices constitute unlawful business acts or practices because they violate the California Labor Code.
We note that the UCL claim may be subject to challenges on standing and specificity grounds. Under Proposition 64, a UCL plaintiff must demonstrate that she suffered "injury in fact" and "lost money or property" as a result of the unfair competition. While this standard is generally satisfied where the plaintiff alleges unpaid wages, the entirely derivative nature of the UCL claim may present opportunities for demurrer, particularly if the underlying Labor Code claims are narrowed or dismissed. We will evaluate this further in connection with our responsive pleading strategy.
IV. NAMED PLAINTIFF PROFILE
A. Marisol Fuentes (Lead Named Plaintiff)
The lead named plaintiff, Marisol Fuentes, was employed by AMA as a Production Coordinator in the Unscripted Programming Division from March 14, 2019 through August 5, 2022. At the time of her separation, Ms. Fuentes earned an hourly rate of $28.50 per hour and was classified as a non-exempt, hourly employee. Ms. Fuentes resides at 4227 Los Feliz Boulevard, Apartment 6, Los Angeles, California 90027.
During her tenure with AMA, Ms. Fuentes worked primarily at the Studio City production facility located at 4024 Penmark Strategy Partners Avenue, Studio City, California 91604 (identified as Facility 2 in Section VI below). This facility houses Stage A and Stage B for unscripted programming production and is one of the three facilities where the TimeTrack Pro Missed Meal Attestation feature was not activated during the relevant period. This fact is significant, as it means Ms. Fuentes did not have access to the electronic mechanism for reporting missed or shortened meal periods, which strengthens her individual claims and the narrative of the Complaint.
Based on our preliminary review, Ms. Fuentes appears to be a credible and sympathetic plaintiff. Her role as a production coordinator placed her in the middle of the production hierarchy — senior enough to have responsibility for coordination tasks before and after official shift times, but junior enough to lack the authority or leverage to decline supervisory directives to work through breaks or arrive early for setup. Her position at a facility where the attestation feature was not activated further supports her individual claims.
B. Anticipated Additional Named Plaintiffs
Based on intelligence gathered from public filings and industry sources, we anticipate that plaintiffs' counsel intends to add additional named plaintiffs and may file a related action in the near term. Specifically:
Derek Halloran. We have reason to believe that a second, related action by Derek Halloran is anticipated imminently. Mr. Halloran was employed by AMA as a Post-Production Assistant in the Digital Content Division from June 1, 2020 through November 30, 2022, at an hourly rate of $24.75 at the time of separation. Mr. Halloran worked primarily at the Hollywood production facility located at 1438 N. Gower Street, Hollywood, California 90028 (Facility 5). Notably, the Hollywood facility is one of the four facilities where the Missed Meal Attestation feature was activated, which may distinguish Mr. Halloran's experience from that of Ms. Fuentes. We should be prepared to file a motion for consolidation upon the filing of the Halloran action.
Yesenia Padilla. We also have information suggesting that Yesenia Padilla may be added as a named plaintiff either in the Fuentes action or in the anticipated Halloran action. Ms. Padilla was employed by AMA as a Segment Coordinator in the Live Events Division from January 10, 2018 through May 17, 2022, at an hourly rate of $31.00 at the time of separation. Ms. Padilla worked primarily at the Burbank facility located at 3800 W. Alameda Avenue, Burbank, California 91505 (Facility 4), which is another facility where the Missed Meal Attestation feature was not activated. Ms. Padilla's earlier start date — January 10, 2018 — would extend back further than the alleged class period commencement date of November 1, 2018, although her individual claims would be subject to the same statute of limitations analysis applicable to other class members.
The addition of named plaintiffs from different facilities and divisions may bolster plaintiffs' argument for commonality and typicality at the class certification stage, as it would allow them to argue that the alleged violations were company-wide rather than isolated to a single facility or division. Conversely, the differences in their experiences — particularly with respect to the attestation feature — may support our defense that individualized inquiry predominates.
V. PUTATIVE CLASS DEFINITION AND SIZE
A. Class Definition
The Complaint defines the putative class as follows:
All current and former non-exempt, hourly employees of Aurelius Media Americas Inc. who worked in the State of California at any time from November 1, 2018 through the date of preliminary approval of the class settlement (the "Class Period").
This is a broad class definition that encompasses all non-exempt, hourly employees across AMA's California operations, without limitation by division, facility, job title, or production unit. The class definition does not distinguish between employees who worked on active production sets and those who worked in post-production, digital content, e-commerce, or administrative support roles — all of whom may have had materially different experiences with respect to meal and rest break practices, pre-shift and post-shift work, and supervisory oversight.
B. Estimated Class Size
Based on AMA's payroll records and headcount data, we estimate that the putative class encompasses approximately 1,850 individuals — including both current and former employees — who were employed by AMA in a non-exempt, hourly capacity at one or more California facilities during the Class Period.
C. Applicable Wage Order
The Complaint cites IWC Wage Order 12 (Motion Picture Industry) as the applicable wage order governing the putative class members' employment. During the Class Period, AMA operated 14 distinct production units (commonly referred to as "show units") across its seven California facilities. Wage Order 12 governs employers in the motion picture industry and provides specific rules regarding hours, meal periods, rest periods, and overtime that differ in certain respects from the rules applicable to other industries under other IWC Wage Orders.
We note that the applicability of Wage Order 12 to all putative class members may be subject to challenge. Certain AMA employees — particularly those working in the e-commerce studio (Facility 6, Santa Monica) and the post-production annex (Facility 7, El Segundo) — may be more appropriately classified under other wage orders depending on the nature of their work. This issue warrants further analysis and may have implications for the class definition and certification.
D. Claimed Violations
The Complaint cites violations of the following statutory and regulatory provisions: California Labor Code sections 226.7, 510, 512, 1194, 1197, 1197.1, and 1198; California Business and Professions Code section 17200; and applicable IWC Wage Orders, including Wage Order 12.
VI. AMA CALIFORNIA PRODUCTION FACILITIES
AMA operates seven production facilities in the State of California. During the Class Period, 14 distinct show units operated across these facilities under IWC Wage Order 12. There is significant variation in production schedules, shift lengths, and operational profiles across the facilities, reflecting the diverse nature of AMA's California operations — which range from studio-based unscripted production to live field events, scripted development, digital content creation, e-commerce photography, and post-production editing.
The seven facilities are as follows:
The variation across these facilities is operationally significant and directly relevant to the class certification analysis. Studio-based unscripted production (Facility 2) involves production days that are typically twelve to sixteen hours in length, with meal and rest period timing dictated by production schedules, lighting conditions, and talent availability. Field-based live events production (Facility 4) involves even more unpredictable schedules, with location shoots that may involve extensive travel time and variable start and end times. Post-production facilities (Facilities 1 and 7) operate on more regular business-hour schedules, although crunch periods around delivery deadlines can involve extended shifts. Digital content production (Facility 3) and e-commerce studio operations (Facility 6) tend to have shorter and more predictable shifts, though overtime is not uncommon during product launch cycles.
These operational differences will be central to our class certification defense. The argument that a single, common policy or practice caused uniform harm to all 1,850 putative class members is substantially undermined by the diversity of operational environments, scheduling practices, and supervisory structures across AMA's California facilities.
VII. PRELIMINARY EXPOSURE ANALYSIS
A. Plaintiffs' Claimed Exposure
Based on the Complaint and the PAGA notice, Plaintiffs' counsel has asserted aggregate claimed damages of approximately $38.6 million. The following table sets forth a breakdown of Plaintiffs' claimed exposure by category:
Plaintiffs' total claimed exposure, after elimination of certain overlapping categories, is approximately $38.6 million. On a per-class-member basis, Plaintiffs' calculation implies an average alleged underpayment of approximately $20,865 per class member ($38,600,000 ÷ 1,850).
Plaintiffs' exposure model is, in our assessment, significantly inflated. It assumes a violation rate of essentially 100% — i.e., that every putative class member missed a meal period and a rest period on every single working day throughout the entire Class Period, and that every putative class member performed uncompensated off-the-clock work on every shift. This assumption is unrealistic and is contradicted by the data available from AMA's own records, including the TimeTrack Pro attestation logs (where the feature was activated), which show that the vast majority of shifts did not generate a missed-meal attestation.
B. Our Preliminary Realistic Exposure Estimate: $8–15 Million
Based on our preliminary analysis, we estimate AMA's realistic exposure in this Action at between $8 million and $15 million. This range accounts for the following factors:
Significant variation in meal and rest break experiences. The putative class encompasses employees across 14 show units and 7 facilities, with materially different production schedules, shift lengths, break practices, and supervisory environments. Many class members — particularly those working in post-production, digital content, and e-commerce studios — regularly received compliant meal and rest breaks. A 100% violation rate assumption is unsupportable.
AMA's written policies facially comply with California law. AMA maintains written meal and rest break policies in its employee handbook (most recently revised in March 2021) that, on their face, comply with the requirements of the California Labor Code and IWC Wage Order 12. These written policies provide a foundation for the defense that AMA took affirmative steps to provide compliant breaks.
Auto-deduction is not per se unlawful. Under Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, an employer's obligation is to provide meal and rest periods — not to ensure that employees take them. An auto-deduction system is lawful if employees are given a genuine opportunity to take compliant breaks and a reliable mechanism to report when they do not. While the inconsistent activation of the attestation feature complicates this defense at certain facilities, it does not render the system unlawful at all facilities.
Off-the-clock claims are difficult to prove on a class-wide basis. The off-the-clock work allegations involve pre-shift setup and post-shift wrap activities. The nature, duration, and frequency of these activities vary significantly across job titles, facilities, and show units. Proving these claims requires individualized evidence of what each employee did before and after each shift, which is difficult to establish through common proof.
PAGA penalties are subject to substantial judicial reduction. Courts have broad discretion under California Labor Code section 2699(e)(2) to reduce PAGA penalties where the award would be unjust, arbitrary, oppressive, or confiscatory. In our experience, PAGA penalties of the magnitude claimed here — $12.2 million — are routinely reduced by 75% to 90% in settlements and judgments. Case law, including Turrieta v. Lyft, Inc. and related authority, supports the application of significant judicial discretion in moderating PAGA awards.
Based on a preliminary, defense-oriented damages model, we calculate an alternative average per-class-member recovery of approximately $3,135, derived from a midpoint damages figure of $5,800,000 divided across 1,850 class members. This figure will be refined by our defense economics expert as additional data becomes available.
The range of $8 million to $15 million reflects the uncertainty inherent in any preliminary assessment and accounts for the possibility that class certification is granted (which would increase settlement leverage and exposure) as well as the possibility that the auto-deduction issue proves more damaging at discovery than our current analysis suggests. The lower end of the range assumes a favorable certification outcome (either denial or significant narrowing of the class) and substantial PAGA penalty reduction. The upper end assumes full or broad certification and a less favorable resolution of the auto-deduction issue.
VIII. TIMEKEEPING SYSTEM — NOVAPAY SOLUTIONS TIMETRACK PRO
The Complaint's central factual allegation concerns AMA's electronic timekeeping system, which is identified as the NovaPay Solutions "TimeTrack Pro" platform. Because the timekeeping system and its configuration are at the heart of the claims — particularly the meal period and wage statement claims — we set forth below a detailed overview of the system, its configuration, and the critical findings from our preliminary review.
A. System Overview
AMA transitioned to NovaPay Solutions Inc. ("NovaPay") as its payroll processor and electronic timekeeping provider effective January 1, 2019. NovaPay is headquartered at 2200 Powell Street, Suite 600, Emeryville, California 94608. The key custodian for electronically stored information ("ESI") relating to the TimeTrack Pro system at NovaPay is Marcus Yee, Director of Client Data Services.
Prior to January 1, 2019, AMA utilized a manual time-sheet system in which employees recorded their start times, end times, and meal periods by hand on paper timesheets that were submitted to supervisors for approval and forwarded to payroll for processing. The transition to TimeTrack Pro was implemented as part of a broader payroll modernization initiative coordinated by AMA's Human Resources and Finance departments.
TimeTrack Pro is an electronic punch-in/punch-out system. Employees clock in and clock out using terminals located at each facility, and the system records the time stamps electronically. The system generates payroll data that feeds directly into NovaPay's payroll processing platform, which calculates gross pay, deductions, and net pay for each biweekly pay period.
B. Auto-Deduction Configuration
A critical feature of the TimeTrack Pro system, as configured for AMA, is the automatic deduction of meal period time. Specifically, the system was configured to automatically deduct thirty minutes from an employee's recorded work time for a meal period on any shift of six hours or longer. The auto-deduction activates at the sixth hour of the shift — i.e., thirty minutes is deducted from the employee's total recorded hours, and the system treats the employee as having taken a thirty-minute meal break beginning at the six-hour mark.
This auto-deduction operates regardless of whether the employee actually took a meal break. Unless the employee takes an affirmative step to override the deduction (as discussed in Section VIII.C below), the system will record the employee as having taken a compliant thirty-minute meal period, and the employee's pay will be calculated accordingly.
We note a significant threshold discrepancy in the auto-deduction configuration. The system was configured to trigger the auto-deduction at six hours, rather than five hours. Under IWC Wage Order 12, an employer in the motion picture industry must provide a meal period to an employee for any work period that exceeds five hours. The six-hour trigger threshold is inconsistent with this five-hour requirement and constitutes an independent compliance deficiency. This means that for shifts lasting between five and six hours, no meal period was auto-deducted, and — more importantly — no meal period may have been provided or prompted by the system. This gap is a separate issue that warrants immediate corrective action, as discussed in Section XIII below.
Additionally, the TimeTrack Pro system was not configured to automatically deduct a second thirty-minute meal period for shifts exceeding ten hours, as required by California Labor Code section 512(a). Instead, employees were expected to manually adjust their time records or report the need for a second meal period to their supervisors. There is no evidence that AMA implemented any systematic process to ensure that second meal periods were provided or recorded for shifts exceeding ten hours.
C. Missed Meal Attestation Feature
The TimeTrack Pro system includes a feature known as the "Missed Meal Attestation" feature. When this feature is activated, employees can report a missed or shortened meal period by pressing a designated button on the time clock terminal at the end of their shift or during the shift. When an employee activates the Missed Meal Attestation feature, the system overrides the automatic thirty-minute deduction, adds the thirty minutes back to the employee's recorded work time, and simultaneously triggers a one-hour meal period premium payment at the employee's regular rate of compensation.
In concept, the Missed Meal Attestation feature provides the type of exception-reporting mechanism that California courts have identified as important for employers who use auto-deduction systems. If implemented consistently and accompanied by adequate training, such a feature could provide a strong factual foundation for the defense that employees had a meaningful opportunity to report missed meals and receive premium pay.
However, our preliminary investigation has revealed a critical finding: the Missed Meal Attestation feature was inconsistently activated across AMA's seven California facilities.
Specifically:
•  Attestation Feature ACTIVATED at the following four facilities:
•  Facility 1: West Hollywood HQ (8500 Sunset Blvd.)
•  Facility 3: Sherman Oaks (15301 Ventura Blvd.)
•  Facility 5: Hollywood (1438 N. Gower Street)
•  Facility 6: Santa Monica (2120 Colorado Avenue)
•  Attestation Feature NOT ACTIVATED at the following three facilities:
•  Facility 2: Studio City (4024 Penmark Strategy Partners Avenue)
•  Facility 4: Burbank (3800 W. Alameda Avenue)
•  Facility 7: El Segundo (888 N. Sepulveda Blvd.)
At the three facilities where the attestation feature was not activated, there was no electronic mechanism for employees to report missed or shortened meal periods through the timekeeping system. Instead, employees at these facilities would have been required to manually report missed meals to their supervisors or directly to the payroll department — a process for which there is no documented procedure, training protocol, or record-keeping system.
Furthermore, even at the four facilities where the attestation feature was activated, usage rates were strikingly low:
These low usage rates are significant. Plaintiffs' counsel will likely argue that the low rates demonstrate not that employees were receiving compliant meal breaks, but rather that employees were unaware of the attestation feature or were discouraged from using it. This argument is supported by the following additional finding:
No formal training materials or written notices have been identified that informed employees of the Missed Meal Attestation feature. AMA's employee handbook references the employee's duty to notify a supervisor if a meal or rest period is missed, but it does not reference the TimeTrack Pro attestation feature specifically, does not describe how to use it, and does not inform employees that activating the feature will result in a premium payment.
The absence of training materials and the low usage rates, combined with the inconsistent activation across facilities, create a troubling factual picture for the defense. This issue is the single most significant vulnerability in AMA's position, as discussed further in Section IX below.
IX. KEY VULNERABILITIES
Based on our preliminary review of the Complaint, AMA's internal records, and the TimeTrack Pro data, we have identified the following key vulnerabilities in AMA's position.
A. Auto-Deduction System (HIGH RISK)
The auto-deduction system is the most significant vulnerability in AMA's defense. California case law has increasingly disfavored auto-deduction policies that operate without a reliable, accessible mechanism for employees to report exceptions. The California Supreme Court's decision in Donohue v. AMN Services, LLC (2021) 11 Cal.5th 58 established the principle that time recording practices must not systematically favor the employer and that rounding policies that result in undercompensation are unlawful. While Donohue addressed time rounding rather than auto-deduction, the decision's broader reasoning — that timekeeping practices must be fair and must not create a systematic bias against employees — is directly applicable to AMA's auto-deduction system.
The inconsistent activation of the Missed Meal Attestation feature across AMA's facilities is particularly damaging. This inconsistency creates a facility-by-facility disparity that undermines AMA's defense that employees had a meaningful opportunity to report missed meals and receive premium pay. At the three facilities where the feature was not activated — which include the Studio City facility where the named plaintiff worked — employees had no electronic mechanism to override the auto-deduction, and there is no evidence of any alternative, documented reporting procedure.
Even at facilities where the feature was activated, the low attestation usage rates (1.8% to 4.1%), combined with the absence of any training materials or written notices informing employees about the feature, support Plaintiffs' narrative that the auto-deduction system was implemented primarily as a cost-saving measure without adequate employee protections or meaningful exception-reporting mechanisms.
The six-hour versus five-hour threshold discrepancy is an additional, independent compliance issue. Under IWC Wage Order 12, an employer must provide a meal period to an employee who works a period of more than five hours per day. By configuring the auto-deduction to trigger at six hours rather than five, AMA created a gap in which employees working shifts of between five and six hours received neither an auto-deduction (which would at least prompt a meal period or premium payment) nor any other systematic mechanism to ensure a meal period was provided. This threshold error is difficult to defend and suggests a lack of careful attention to the specific requirements of the applicable Wage Order during the system configuration process.
B. Production-Day Culture
The entertainment industry is widely acknowledged — by courts, regulators, and industry participants alike — as an industry characterized by extended work days, demanding production schedules, and a culture that prioritizes creative output and production timelines over adherence to administrative processes such as meal and rest break compliance.
Even where an employer has compliant written policies, the practical reality of production shoots — where stopping for a full thirty-minute meal break may disrupt filming schedules, lighting setups, talent availability, or location permits — creates a cultural expectation that employees will forego or shorten breaks in service of the production. Production coordinators, assistants, and support staff are particularly vulnerable to this dynamic, as they occupy positions in which they are expected to facilitate the smooth operation of the production, often at the expense of their own break time.
Entertainment production frequently involves twelve- to sixteen-hour shooting days, and the demands of production do not pause neatly at the five-hour or ten-hour marks that trigger meal period requirements under California law. This practical reality creates a systemic pressure against break compliance that pervades the industry and is well documented in prior litigation, LWDA investigations, and industry publications.
This production-day culture cuts against AMA on multiple fronts. On the question of commonality at the class certification stage, Plaintiffs will argue that the culture is systemic and applies uniformly across AMA's production operations. On the merits, Plaintiffs will argue that AMA's written policies were mere window dressing — that the Company had compliant policies on paper but failed to create an operational environment in which employees could realistically exercise their rights to compliant breaks.
C. Volume of Potential Plaintiffs
The sheer volume of the putative class — approximately 1,850 individuals — amplifies AMA's exposure across every claim category. Even a modest per-employee recovery, when multiplied across 1,850 class members and a four-year class period, produces substantial aggregate liability. This volume effect is particularly significant for the PAGA component, where penalties are calculated on a per-pay-period, per-employee basis. With approximately 26 biweekly pay periods per year and a four-year class period, the total number of pay-period/employee combinations is enormous, and even heavily discounted PAGA penalties produce meaningful aggregate exposure.
The volume also increases the practical difficulty and cost of defending the Action. Discovery will require the collection, processing, and review of timekeeping records for 1,850 employees across 14 show units and 7 facilities over a four-year period. Depositions of named plaintiffs and putative class members will be time-consuming and expensive. Expert analysis will need to account for the full scope of the class.
X. KEY DEFENSES
Notwithstanding the vulnerabilities identified above, AMA has several strong defenses available. Our recommended strategy is to press these defenses aggressively in the early stages of the litigation to build leverage for a favorable resolution, whether through a certification denial, a narrowed class, or a mediated settlement.
A. Compliance with *Brinker*
The foundational defense to the meal and rest period claims is the principle established by the California Supreme Court in Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004. Under Brinker, an employer satisfies its meal period obligations by providing meal periods — that is, by making them available and not impeding employees from taking them. The employer is not required to ensure that employees actually take their meal periods. An employer that has a policy of providing meal periods and does not discourage or impede employees from taking them is not liable for meal period violations merely because some employees voluntarily choose to forego or shorten their breaks.
AMA has written policies in its employee handbook (most recently revised in March 2021) that facially comply with California law and IWC Wage Order 12. These policies state that non-exempt employees are entitled to a thirty-minute meal period for shifts exceeding five hours, a second thirty-minute meal period for shifts exceeding ten hours, and paid rest periods of ten minutes for every four hours worked or major fraction thereof. The policies direct employees to notify their supervisors if they are unable to take a compliant break and to report any instances of supervisory interference with break time.
If AMA can demonstrate through discovery and at trial that employees were given a genuine opportunity to take compliant breaks — and that the auto-deduction system, the attestation feature, and supervisory practices collectively provided employees with a meaningful mechanism to record and be compensated for breaks they did not take — then AMA has a viable defense to the meal and rest period claims.
However, the effectiveness of this defense is significantly compromised by the auto-deduction issues identified in Section VIII and the vulnerabilities identified in Section IX. At the three facilities where the attestation feature was not activated, AMA will have difficulty demonstrating that employees had a "meaningful opportunity" to report missed meals. At all facilities, the absence of training materials regarding the attestation feature and the low usage rates will be used by Plaintiffs to argue that the opportunity to report exceptions was illusory rather than genuine.
B. Individualized Inquiry / Certification Defense
In our assessment, the strongest strategic defense available to AMA is the argument that the putative class is not amenable to certification because the claims require individualized inquiry that predominates over common issues.
Several features of this case support this defense:
Facility and show-unit variability. The putative class encompasses employees across 14 show units and 7 facilities with materially different production schedules, break practices, and supervisory environments. What happened during meal and rest periods at the Studio City unscripted production stages is fundamentally different from what happened during breaks at the Santa Monica e-commerce studio or the El Segundo post-production annex. A single class-wide trial cannot meaningfully adjudicate the meal and rest period experiences of employees in such disparate operational settings.
Named plaintiff representativeness. The named plaintiff, Marisol Fuentes, worked in one division (Unscripted Programming) at one facility (Studio City) for approximately three and a half years. Her experience may not be representative of the experiences of employees in other divisions, at other facilities, or during other time periods. If additional named plaintiffs from other facilities are added, the variation among the named plaintiffs' own experiences may actually underscore the individualized nature of the claims.
Off-the-clock claims require employee-by-employee analysis. The Third Cause of Action (overtime) and Fourth Cause of Action (minimum wage) are based on allegations of off-the-clock pre-shift setup and post-shift wrap work. Proving these claims on a class-wide basis is extremely difficult because the nature, duration, and frequency of pre-shift and post-shift activities vary by job title, facility, show unit, and even day-to-day depending on production needs. There is no common documentary evidence of this off-the-clock work — by definition, it was not recorded in the timekeeping system — and proving it will require individualized testimony about what each employee did before and after each shift.
Rest periods are not tracked. It is standard practice in California — and consistent with legal requirements — for employers not to track paid rest periods in their timekeeping systems. Because rest periods are paid time, there is no clock-in or clock-out associated with rest breaks. As a result, there are no electronic records documenting when rest breaks were taken, their duration, or whether they were missed. This creates evidentiary challenges for both sides, but it particularly complicates Plaintiffs' effort to prove the rest period claims on a class-wide basis through common proof.
Defeating or significantly limiting class certification is the single most effective way to reduce AMA's exposure in this Action. If the class is not certified, or if it is narrowed to a smaller subset of employees at specific facilities, the PAGA representative claims will still proceed, but the overall damages exposure will be substantially reduced, and Plaintiffs' settlement leverage will diminish considerably. We recommend investing significant resources in the class certification defense, including the retention of experts to analyze variability across facilities and show units.
C. PAGA Penalty Reduction
The $12.2 million PAGA penalty claim is the single largest component of Plaintiffs' claimed exposure. However, PAGA penalties are subject to broad judicial discretion. California Labor Code section 2699(e)(2) authorizes the court to exercise discretion to reduce PAGA penalties where the amount of the penalty "would be unjust, arbitrary and oppressive, or confiscatory." Courts routinely exercise this discretion to reduce PAGA awards by 75% to 90% in settlements and judgments, particularly where the penalties are disproportionate to the actual harm suffered by employees.
In cases such as Turrieta v. Lyft, Inc. and similar authority, courts have approved PAGA settlement amounts that represent a small fraction of the maximum statutory penalties. Factors considered by courts in exercising this discretion include the nature and severity of the violations, the employer's history of compliance, the employer's good faith in implementing corrective measures, and the deterrent purpose of PAGA penalties.
Based on our experience and the facts of this case, we estimate a realistic PAGA settlement component of $500,000 to $1,500,000 — representing a reduction of approximately 88% to 96% from the claimed $12.2 million. This estimate assumes a negotiated resolution rather than a court-imposed penalty and accounts for AMA's written compliance policies, the availability of the attestation feature at four of seven facilities, and the anticipated implementation of corrective measures.
D. UCL Standing and Specificity
The Seventh Cause of Action under the UCL may be subject to demurrer on the grounds that the claim is entirely derivative of the underlying Labor Code claims and that Plaintiff has not independently alleged facts sufficient to establish standing under Proposition 64. While UCL claims based on the "unlawful" prong are routinely asserted in wage-and-hour class actions and are generally sustained where the underlying Labor Code violations are adequately alleged, a demurrer may be warranted here to narrow the scope of the Action and to test the specificity of Plaintiffs' allegations.
E. PAGA Procedural Defect
As noted above, the PAGA notice was filed with the LWDA on September 15, 2022, and the Fuentes Complaint was filed on November 1, 2022 — only 47 days after the PAGA notice and approximately 18 days before the expiration of the mandatory 65-calendar-day waiting period prescribed by California Labor Code section 2699.3(a)(2)(A). This premature filing constitutes a procedural defect in the PAGA claim.
However, this defect is likely not fatal to the PAGA claim. Under Brown v. Ralphs Grocery Co. (2018) 28 Cal.App.5th 824, the 65-day waiting period is treated as a claim-processing requirement rather than a jurisdictional prerequisite, and a premature filing may be cured by the passage of time. Because the 65-day period has now expired (as of November 14, 2022), the defect is likely cured. We recommend preserving this defense in AMA's affirmative defenses but not leading with it as a primary defense strategy, as it is unlikely to result in dismissal of the PAGA claims.
F. Arbitration
We have conducted an initial review of AMA's arbitration agreements with its employees. Based on this review, AMA does not appear to have a class action waiver or a PAGA waiver in its current arbitration agreements. As a result, the arbitration avenue — which has proven to be a highly effective defense in many California wage-and-hour class actions since Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639 — does not appear to be available in this case. We will confirm this conclusion through a more thorough review of all applicable arbitration agreements, including any revisions adopted during the Class Period, but our initial assessment is that compelled arbitration is not a viable defense strategy here.
XI. PAGA COMPONENT — SEPARATE ANALYSIS
Given the significance of the PAGA component to AMA's overall exposure and the unique procedural and strategic considerations that attend PAGA claims, we provide a separate analysis of the PAGA issues below.
PAGA Notice. The PAGA notice was filed with the LWDA on September 15, 2022. We have confirmed the filing through the LWDA's public online database. AMA confirms that it received a copy of the PAGA notice by certified mail on September 19, 2022.
LWDA Response. Under California Labor Code section 2699.3(a)(2), the LWDA has 65 calendar days from the date of the PAGA notice to decide whether to investigate the alleged violations, issue a citation, or take other action. The 65-day deadline in this case fell on November 14, 2022. As of the date of this memorandum, the LWDA has taken no action — it has not issued a citation, has not notified the parties of an intent to investigate, and has not taken any other responsive action. This inaction is consistent with the LWDA's practice in the vast majority of PAGA notices; the agency rarely intervenes in private PAGA actions.
Premature Filing. The Fuentes Complaint was filed on November 1, 2022, which is 47 days after the PAGA notice and 18 days before the expiration of the 65-day waiting period. As discussed in Section X.E above, this premature filing constitutes a procedural defect, but one that is likely cured by the passage of time under Brown v. Ralphs Grocery Co. and related authority. The 65-day period has now expired, and the LWDA has not intervened.
Standing. Marisol Fuentes appears to have standing as an "aggrieved employee" under PAGA. She was employed by AMA as a non-exempt production coordinator from March 14, 2019 through August 5, 2022, and alleges that she personally experienced the wage-and-hour violations described in the Complaint. Under Kim v. Reins Int'l California, Inc. (2020) 9 Cal.5th 73, an "aggrieved employee" is any employee who was employed by the alleged violator and against whom one or more of the alleged violations was committed. Fuentes's allegations, taken at face value, satisfy this standard.
PAGA Penalties Claimed. The PAGA notice claims aggregate penalties of approximately $12.2 million, calculated based on $100 per employee for the initial violation and $200 per employee for each subsequent violation, multiplied across all putative aggrieved employees and all applicable pay periods during the PAGA limitations period.
Realistic Assessment. As discussed in Section X.C, we assess the realistic PAGA settlement component at between $500,000 and $1,500,000, reflecting the application of judicial discretion to reduce the penalties under California Labor Code section 2699(e)(2). This estimate will be refined as the litigation progresses and additional data regarding the frequency and severity of violations becomes available.
XII. INSURANCE COVERAGE SUMMARY
A. Employment Practices Liability Policy
AMA's primary insurance response for the class action claims is the Employment Practices Liability ("EPL") policy issued by Pemberton Mutual Assurance Co., Policy No. PMA-EPL-2022-00837. The EPL policy provides coverage for claims arising out of employment-related wrongful acts, including wage-and-hour class actions, subject to a self-insured retention ("SIR") of $5 million and an aggregate coverage limit of $15 million. A formal tender letter was dispatched to Pemberton on November 8, 2022, requesting that Pemberton acknowledge coverage and reimburse defense costs in excess of the SIR.
We expect Pemberton to accept the tender subject to a reservation of rights. The most likely areas of reservation include PAGA penalties (which Pemberton may argue are not "damages" or "loss" within the meaning of the policy and are therefore not covered) and willful violations (which are typically excluded from EPL coverage under standard policy language). We will review the specific policy terms and respond to any reservation-of-rights letter issued by Pemberton.
Based on our preliminary litigation budget — which anticipates total fees and expenses of approximately $3.45 million through resolution — total defense costs are likely to fall within the $5 million SIR, meaning that AMA will bear defense costs out of pocket unless the litigation becomes more complex or protracted than currently anticipated. Settlement payments, if any, would be subject to a separate coverage analysis, and we would expect Pemberton to contribute to settlement payments above the SIR, subject to the reservations identified above.
B. Directors & Officers Policy
A precautionary notice was sent to Redcliffe Specialty Insurance Ltd., AMA's D&O insurer, on November 8, 2022, under Policy No. RSI-DO-2022-04419. The D&O policy provides $10 million in primary coverage, with an excess tower of $25 million maintained by Ashford Re Ltd. under Policy No. ARL-EX-2022-01102. While the class action claims are primarily employment practices claims that fall within the EPL policy, we sent a precautionary notice to preserve AMA's rights under the D&O policy in the event that any claims are asserted against individual directors or officers of AMA or AGMG.
C. Insurance Coordination
We will coordinate with AMA's insurance broker, Kestrel Risk Advisors Ltd. (contact: Samuel Okonkwo, One Broadgate, London EC2M 2QS), to ensure that all notice obligations are satisfied, that coverage positions are documented, and that any reservation-of-rights issues are addressed promptly. We anticipate that the insurance coordination process will involve ongoing communication with Pemberton regarding SIR erosion, defense cost reporting, and settlement authorization as the litigation progresses.
We also note that we anticipate Pemberton may deny coverage for the separate, anticipated executive dispute involving former SVP Gavin Aldrich, which involves distinct legal theories (including for-cause termination, restrictive covenant enforceability, and trade secret misappropriation). Coverage analysis for the Aldrich matter will be addressed in a separate memorandum.
XIII. RECOMMENDED INITIAL STEPS
Based on our preliminary assessment, we recommend the following initial steps to position AMA for an effective defense of this Action:
1. Litigation Hold. AMA should immediately implement a comprehensive litigation hold. A draft litigation hold notice has been prepared separately and is under review by AMA's legal department. The litigation hold should identify and notify all custodians who may possess documents, electronically stored information ("ESI"), or other materials relevant to the claims asserted in the Complaint. AMA should coordinate with its IT department to suspend any routine document destruction or data retention protocols that could result in the loss of relevant materials. Preservation of NovaPay TimeTrack Pro data — including punch records, auto-deduction logs, attestation records, and system configuration files — should be prioritized, and NovaPay should be notified of the preservation obligation promptly.
2. NovaPay Data Acquisition. AMA should obtain and review all TimeTrack Pro data for the entire Class Period (November 1, 2018 through the present) from NovaPay Solutions. This data should be obtained through a third-party subpoena or, if NovaPay cooperates voluntarily, through a direct data production request. The data acquisition should include, at a minimum: (a) all employee punch records (clock-in and clock-out times); (b) auto-deduction configuration records, including the date of implementation, the threshold settings, a