Philippa and Greg,
Thank you both for the productive call this morning. I wanted to memorialize the initial strategic recommendations we discussed regarding the Fuentes class action and the anticipated Aldrich individual matter (Matter No. 1017-00004) so that we have a clear roadmap going forward.
**1. Litigation Hold**
Devon has prepared a draft litigation hold notice and custodian acknowledgment form, both of which are attached to this email. Greg, we recommend you issue the hold immediately to all identified custodians and relevant department heads. Each custodian should return a signed acknowledgment form to your office, and we'd appreciate receiving copies for our files as well.
In terms of prioritization, it is critical that we preserve the NovaPay Solutions TimeTrack Pro data across all California facilities. Devon will be preparing a third-party preservation subpoena directed to NovaPay shortly to ensure that data is secured on their end as well.
**2. Insurance Tender**
As you know, Bernard sent formal tender letters yesterday to both carriers — Pemberton Mutual Assurance Co. under the EPL policy (Policy No. PMA-EPL-2022-00837, $5M SIR, $15M aggregate limit) and Redcliffe Specialty Insurance Ltd. under the D&O policy (Policy No. RSI-DO-2022-04419). Bernard will serve as the primary point of contact for insurance coordination going forward.
Our expectation is that Pemberton will accept the Fuentes class action tender, subject to the $5,000,000 self-insured retention and likely a reservation of rights on PAGA penalties. We do anticipate pushback from Pemberton on coverage for the Aldrich matter, given the nature of those claims. Once we receive Pemberton's formal response, we will prepare a detailed coverage analysis for your review so we can assess any gaps and plan accordingly regarding SIR erosion and potential carrier participation in defense costs above the retention.
**3. Pleadings Timeline**
The Fuentes complaint was filed on November 1, 2022 (Case No. 22STCV38214). AMA's responsive pleading will be due 30 days after service, and as of today, AMA has not yet been served, so the clock has not started. We anticipate service within the next 7 to 10 days.
We intend to use this window productively. We will begin preparing a draft Answer and will evaluate whether a Demurrer to the UCL cause of action (Cal. Bus. & Prof. Code § 17200) is warranted. I'll have a preliminary assessment on the demurrer question before the response deadline is triggered.
**4. Aldrich Matter**
Greg, thank you for forwarding the demand letter dated October 28, 2022, from Cameron Whitfield of Whitfield & Associates on behalf of Marcus Aldrich, seeking $4.15 million. At this time, we do not recommend engaging in pre-suit settlement discussions. Aldrich has not yet filed, and frankly, our leverage will improve substantially once AMA files a cross-complaint asserting confidentiality and trade secret claims against him.
As we discussed, Aldrich was terminated for cause on October 14, 2022, from his position as SVP of Original Content & Executive Producer. The key issues supporting the termination — and the anticipated cross-claims — include his unauthorized transmission of confidential information (approximately 340 emails forwarded to his personal account, along with materials transmitted to Halcyon Creek Productions LLC) and his insubordination regarding the restructuring directive from Jonathan Mercer. We should begin preparing both a detailed case assessment and a draft cross-complaint now so that we are ready to move quickly once Aldrich files.
**5. Auto-Deduction Issue**
Based on our preliminary review, AMA's TimeTrack Pro auto-deduction practice is the most significant exposure driver in the Fuentes matter. Devon is preparing a detailed risk assessment, which we expect to have to you by the week of November 21.
Our initial view is that the inconsistent activation of the Missed Meal Attestation feature across AMA's California facilities presents a serious vulnerability. As I understand it, the feature is currently activated at only 4 of the 7 California facilities. This inconsistency will be difficult to defend.
We should discuss whether to implement corrective measures now — specifically, activating the attestation feature at the remaining three facilities and potentially revising the auto-deduction protocol entirely. There are strategic considerations on both sides: corrective action taken during litigation may be cited by plaintiffs' counsel as an implicit admission that the prior practice was deficient, but it also demonstrates good faith and limits prospective damages. I'd like to walk through this in more detail with you both before any changes are made.
**6. Budget**
Bernard and I are preparing a phase-based litigation budget for your review, which we expect to deliver by tomorrow, November 10. Our preliminary estimate is total fees and expenses of approximately $3.45 million through resolution, assuming both the Fuentes and Aldrich matters settle without trial. We will coordinate with Pemberton regarding SIR erosion tracking and the mechanics of carrier participation in defense costs once we exceed the retention.
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I think we're in good shape to move quickly on all fronts. If it would be helpful, I'm available next week to schedule a more detailed strategy session — particularly on the auto-deduction issue and the Aldrich cross-complaint. Just let me know what works for your calendars.
Best, Renata
**Renata Vasquez**