1017-00004 · Entities. Aurelius Global Media Group · Engagement & Administration

budget-memo-preliminary.docx DOCUMENT Finance & Banking

67 / 150 ← → ✕

CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP 777 South Flower Street, Suite 4200 Los Angeles, California 90017 Telephone: (213) 555-7800 Facsimile: (213) 555-7801

MEMORANDUM

TO: Gregory Tanaka, Vice President, Legal & Compliance, Aurelius Media Americas Inc. Philippa Cartwright, General Counsel, Aurelius Global Media Group

FROM: Renata Vasquez, Partner, and Bernard Crawford, Partner

DATE: November 10, 2022

RE: Preliminary Budget — Fuentes v. Aurelius Media Americas Inc. and Related Matters (C&H Matter No. 1017-00004)

I. Purpose

This memorandum sets forth a preliminary phase-based litigation budget for the defense of Fuentes v. Aurelius Media Americas Inc., Case No. 22STCV38214, filed in the Superior Court of the State of California for the County of Los Angeles on November 1, 2022. The budget encompasses the full scope of defensive work anticipated in connection with the Fuentes class action and Private Attorneys General Act ("PAGA") representative claims, the anticipated related action to be filed by plaintiffs' co-counsel on behalf of Derek Halloran and other similarly situated employees (the "Halloran action," expected imminently), and the anticipated individual wrongful termination and breach of contract action to be brought by Gavin Aldrich, former Senior Vice President of Scripted Development at Aurelius Media Americas Inc. ("AMA").

The budget presented herein is based on our initial assessment of the scope, complexity, and anticipated trajectory of these matters, drawing on the factual information and documentation that AMA has provided to date, as well as our experience in comparable wage-and-hour class actions in the entertainment and media production industries. The estimates set forth in this memorandum are necessarily preliminary in nature and are subject to revision as the litigation develops, as additional facts come to light, as the Court issues scheduling and substantive rulings, and as the parties' respective litigation strategies crystallize.

This budget has been prepared in compliance with AMA's Outside Counsel Guidelines, dated March 15, 2021 (the "OCG"), and specifically Section 6.2 thereof, which requires that outside counsel submit a preliminary budget within ten business days of engagement and thereafter report actual expenditures against budget on a monthly basis in connection with monthly invoice submissions. All budgeted amounts and staffing allocations are consistent with the rate schedule, staffing requirements, and expense protocols set forth in the OCG.

We welcome the opportunity to discuss this budget with you at your convenience and to refine the estimates as additional information becomes available.

II. Phase-Based Budget Summary

The following table presents our estimated fees, estimated expenses, and combined totals for each of the ten phases of work we anticipate in connection with the defense of the Fuentes class action, the related Halloran action, the PAGA claims, and the Aldrich individual action. A detailed description of the scope of work encompassed by each phase follows in Section III below.

The fee estimates above are based on the staffing model and hourly rates described in Section IV below and in the Staffing Plan Memorandum provided separately. Expense estimates include e-discovery vendor costs, expert witness fees, court reporter and videography charges, mediation fees, filing fees, process service costs, travel expenses, and other disbursements customarily incurred in litigation of this nature. Certain expense categories — particularly expert witness fees and e-discovery vendor costs — are subject to significant variability depending on the volume and complexity of the work ultimately required.

III. Phase Descriptions

The following sections describe the anticipated scope of work for each phase, identify the principal tasks and deliverables, and provide additional detail regarding expense estimates where applicable.

Phase 1 — Case Assessment & Engagement Setup (November–December 2022) — $197,000

Phase 1 encompasses the initial assessment, fact-gathering, and administrative work necessary to establish the foundation for AMA's defense across all pending and anticipated matters.

Complaint and Regulatory Notice Review. We will conduct a thorough initial review of the Fuentes Complaint, filed November 1, 2022, bearing Case No. 22STCV38214, in the Superior Court of California for the County of Los Angeles. The Complaint alleges nine causes of action on behalf of a putative class of approximately 1,850 non-exempt, hourly employees, asserting claims for failure to provide compliant meal periods, failure to authorize and permit rest periods, failure to pay overtime wages, failure to pay minimum wages, failure to provide accurate wage statements, failure to timely pay wages at separation, unfair business practices under the California Business & Professions Code section 17200 et seq., and civil penalties under the Private Attorneys General Act, Labor Code section 2698 et seq. We will also review the PAGA Notice submitted to the Labor and Workforce Development Agency ("LWDA") by plaintiffs' counsel, Castellano Byrne & Salas LLP, dated September 15, 2022, to assess the adequacy and scope of the administrative exhaustion and to identify any procedural defenses available to AMA.

Litigation Hold. We will prepare and issue a comprehensive litigation hold notice to all AMA custodians identified as potentially possessing relevant documents and electronically stored information ("ESI"). Based on our initial discussions with Mr. Tanaka and Ms. Okafor, we have identified seven custodians whose document preservation obligations will be triggered: Lorraine Okafor (Senior Vice President, Human Resources), Gregory Tanaka (Vice President, Legal & Compliance), Jonathan Mercer (President, AMA), Celine Arroyo (Director of Production Operations), Dwayne Prescott (Vice President, Unscripted Programming), Karen Fong (Payroll Manager), and the direct supervisors of each of the three named plaintiffs. The litigation hold notice will cover all categories of potentially relevant documents, including but not limited to email communications, personnel files, timekeeping records, payroll data, policy manuals, scheduling documents, and electronic communications through enterprise messaging platforms. We will follow up with each custodian to confirm receipt and compliance and will coordinate with AMA's Information Technology department to implement any necessary preservation measures for enterprise systems.

Preliminary Case Assessment Memoranda. We will prepare preliminary case assessment memoranda for both the class action and the anticipated Aldrich matter. These memoranda will set forth our initial evaluation of the factual and legal landscape, identify the principal risks and exposures, assess the strength of plaintiffs' claims and AMA's available defenses, and outline a recommended defensive strategy. The class action assessment memorandum will include a preliminary evaluation of the putative class definition, an assessment of the likelihood of certification, and a range of potential exposure based on the information available at that stage.

Policy and Systems Review. A critical component of the initial assessment will be a detailed review of AMA's meal and rest break policies as documented in the company's employee handbook (March 2021 revision), the configuration and functionality of AMA's TimeTrack Pro timekeeping system, and the company's actual practices with respect to meal period scheduling, rest break authorization, and auto-deduction policies. We understand that AMA utilizes an automatic meal period deduction for certain production employees, and we will conduct a risk assessment of this practice in light of current California law, including the California Supreme Court's decision in Donohue v. AMN Services, LLC (2021) 11 Cal.5th 58, and applicable Industrial Welfare Commission ("IWC") Wage Orders.

Key Personnel Interviews. We will conduct initial interviews with the following key AMA personnel to gather factual background information essential to shaping our defense strategy: Lorraine Okafor (SVP, Human Resources) regarding AMA's employment policies, onboarding practices, and the development and implementation of meal and rest break policies across AMA's California operations; Celine Arroyo (Director of Production Operations) regarding production scheduling practices, staffing models, and the operational realities of meal and rest period compliance on active production sets; Karen Fong (Payroll Manager) regarding payroll processing, timekeeping data integrity, and the configuration and administration of the TimeTrack Pro system and NovaPay Solutions payroll platform; and Gregory Tanaka (VP, Legal & Compliance) regarding AMA's compliance framework, prior regulatory interactions, and the factual circumstances surrounding the Aldrich termination.

Auto-Deduction Policy Risk Assessment. We will conduct a focused risk assessment of AMA's auto-deduction policy for meal periods, analyzing the policy's compliance with California Labor Code sections 226.7 and 512, applicable IWC Wage Orders, and the evolving case law in this area. This assessment will inform both our defensive strategy and any recommendations we may make regarding prospective changes to AMA's timekeeping practices.

Wage Order Identification. We will identify and analyze the applicable IWC Wage Orders governing AMA's California workforce. Based on our preliminary understanding of AMA's operations, the primary applicable order is IWC Wage Order 12 (Motion Picture Industry), though certain employees may fall under other Wage Orders depending on their job functions and classifications. Proper identification of the applicable Wage Order is critical both to the substantive defense and to the class certification analysis, as differences in applicable Wage Orders among putative class members may support arguments against certification.

PAGA Standing and Procedural Analysis. We will analyze the adequacy of the named plaintiff's standing to bring PAGA claims, including whether the LWDA notice satisfies the requirements of Labor Code section 2699.3, whether the 65-day waiting period has been observed, and whether there are any grounds to challenge PAGA standing based on the scope of the notice or the named plaintiff's individual claims. This analysis will also address the impact of the United States Supreme Court's decision in Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639, and any applicable arbitration agreements that may bear on the PAGA claims.

Insurance Tender. We will prepare and submit tender letters to AMA's employment practices liability ("EPL") carrier, Pemberton Mutual Assurance Co. (Policy No. PMA-EPL-2022-00837), and directors and officers ("D&O") carrier, Redcliffe Specialty Insurance Ltd. (Policy No. RSI-DO-2022-04419), providing notice of the Fuentes action and the anticipated Halloran and Aldrich matters, and requesting acknowledgment of coverage and defense cost reimbursement. We will coordinate with AMA's insurance broker, Kestrel Risk Advisors Ltd. (Samuel Okonkwo, Managing Director), in connection with these tenders.

Engagement Administration. Phase 1 also includes completion of the firm's conflict check, execution of the engagement letter, confirmation of compliance with the OCG (including rate schedules, staffing approvals, billing format requirements, and expense protocols), and establishment of the matter file and internal tracking systems necessary for ongoing budget monitoring and reporting.

Phase 2 — Pleadings & Initial Motions (December 2022–February 2023) — $243,000

Phase 2 encompasses all initial responsive pleadings and motions in both the Fuentes class action (including the anticipated consolidated complaint following the Halloran filing) and the Aldrich individual action.

Answer to Fuentes Complaint. We will prepare and file AMA's Answer to the Fuentes Complaint, asserting the following thirteen affirmative defenses: (1) failure to state facts sufficient to constitute a cause of action; (2) statute of limitations bar as to claims accruing prior to the applicable limitations periods; (3) compliance with applicable laws, regulations, and Wage Orders; (4) good faith belief in the legality and propriety of AMA's employment practices; (5) waiver and/or estoppel; (6) offset and/or recoupment; (7) de minimis doctrine; (8) lack of standing to assert claims under the Unfair Competition Law, California Business & Professions Code section 17200 et seq.; (9) failure to satisfy prerequisites for class certification under California Code of Civil Procedure section 382; (10) individual variation among putative class members defeating predominance and superiority; (11) lack of PAGA standing; (12) reduction of PAGA penalties under Labor Code section 2699(e)(2) based on AMA's good faith efforts to comply; and (13) reservation of all rights, including the right to assert additional affirmative defenses as discovery progresses. We anticipate that the Halloran action (Case No. 22STCV39501) will be filed on or about November 18, 2022, and that plaintiffs will file a consolidated complaint following consolidation. We will prepare and file an Answer to the consolidated complaint as necessary.

Notice of Related Case and Consolidation. Upon the filing of the Halloran action, we will prepare and file a Notice of Related Case and will prepare a Stipulation and/or Motion for Consolidation of the Fuentes and Halloran actions before the assigned judicial officer. Consolidation will promote efficiency and avoid the risk of inconsistent rulings.

Demurrer to UCL Cause of Action. We will prepare and file a Demurrer to the Unfair Competition Law cause of action (California Business & Professions Code section 17200 et seq.), arguing that plaintiffs have failed to allege facts sufficient to establish an independent basis for UCL liability beyond the underlying Labor Code claims, and that the UCL claim is duplicative and should be dismissed. The demurrer will be supported by a Memorandum of Points and Authorities, a Declaration of Gregory Tanaka, and a proposed order. While we recognize that the likelihood of sustaining a demurrer to a UCL claim predicated on alleged Labor Code violations is modest, filing the demurrer will preserve the issue for later proceedings and may narrow the scope of the UCL claim.

Opposition to Expedited discovery. We will monitor for and oppose any ex parte applications by plaintiffs for expedited or pre-certification discovery. Such applications are common in wage-and-hour class actions and, if granted, could impose significant discovery burdens before the contours of the case are fully defined.

Case Management Statement. We will prepare AMA's Case Management Statement in advance of the Initial Case Management Conference, which we anticipate will be scheduled for approximately March 10, 2023. The Case Management Statement will set forth AMA's proposed discovery schedule, preferred ADR process (mediation), anticipated motions, and estimated trial date.

Stipulated Protective Order. We will negotiate with plaintiffs' counsel and prepare a Stipulated Protective Order governing the treatment of confidential information produced in discovery. We anticipate a two-tier protective order designating documents as either CONFIDENTIAL or HIGHLY CONFIDENTIAL — ATTORNEYS' EYES ONLY, with appropriate provisions for challenges to designations and for the handling of confidential information at depositions, in expert reports, and in court filings.

Aldrich Pleadings. For the Aldrich matter (Case No. 22STCV41087, anticipated filing December 9, 2022), we will prepare and file AMA's Answer to the Aldrich Complaint and a Cross-Complaint against Mr. Aldrich. The Cross-Complaint will assert claims for breach of the Employment Agreement dated September 5, 2017, as amended August 1, 2020, specifically sections 9.1 (Confidentiality), 9.2 (Non-Solicitation), 9.3 (Non-Competition), and 9.4 (Intellectual Property Assignment); misappropriation of trade secrets under the California Uniform Trade Secrets Act ("CUTSA"), Civil Code sections 3426 et seq.; breach of fiduciary duty; and conversion. The Cross-Complaint will be supported by declarations from Jonathan Mercer (President, AMA) and Dwayne Prescott (VP, Unscripted Programming), attesting to the factual circumstances surrounding Aldrich's unauthorized transmission of confidential information to his personal email account and to Halcyon Creek Productions LLC, and his refusal to comply with the restructuring directive.

Restrictive Covenant and Choice-of-Law Analysis. Phase 2 will also include a comprehensive analysis of the enforceability of the restrictive covenants contained in Aldrich's Employment Agreement under California Business & Professions Code section 16600, which broadly prohibits non-compete agreements, and an analysis of the choice-of-law provision in section 14.3 of the Employment Agreement, which specifies New York law as the governing law. This choice-of-law analysis will evaluate whether a California court will enforce the New York choice-of-law clause with respect to the restrictive covenants, given California's strong public policy against enforcement of non-compete agreements, as articulated in Edwards v. Kraft Quill CPAs LLP (2008) 44 Cal.4th 937, and in Senate Bill 699 (effective January 1, 2024). This analysis is critical to the viability of AMA's Cross-Complaint and to the overall strategy in the Aldrich matter.

"For Cause" Termination Analysis. We will prepare a detailed analysis of whether AMA's termination of Aldrich's employment satisfied the "for cause" requirements of section 7.2(b) of the Employment Agreement, focusing on the two principal grounds for termination: (a) Aldrich's unauthorized transmission of confidential and proprietary information, including development slates, talent deal memoranda, and financial projections, to his personal email address and to Halcyon Creek Productions LLC; and (b) Aldrich's insubordination in connection with the restructuring directive issued by Jonathan Mercer. This analysis will address whether the procedural requirements of the "for cause" provision (including any notice and cure period) were satisfied, and will evaluate the strength of AMA's position should Aldrich contest the characterization of his termination.

Phase 3 — Discovery (Written & ESI) (January–May 2023) — $755,000

Phase 3 encompasses the most resource-intensive period of the litigation and includes all written discovery, ESI collection and production, and discovery-related motion practice in both the class action and the Aldrich matter.

Responding to Plaintiffs' Written discovery. We anticipate receiving from plaintiffs' counsel an extensive set of written discovery requests, including Form Interrogatories (Employment), Special Interrogatories (estimated 78 in number), and Requests for Production of Documents (estimated 62 in number). We will prepare timely, substantive responses and objections to each discovery request, coordinate the collection and production of responsive documents from AMA's custodians and enterprise systems, and prepare privilege logs as necessary. We anticipate that supplemental responses will be required following meet-and-confer discussions with plaintiffs' counsel regarding the adequacy of initial responses and the scope of objections asserted.

Propounding AMA's Written discovery. We will propound AMA's affirmative written discovery to all three named plaintiffs — Marisol Fuentes, Derek Halloran, and Yesenia Padilla — including Form Interrogatories, Special Interrogatories (Nos. 1-35 per plaintiff), and Requests for Production of Documents (Nos. 1-20 per plaintiff). Discovery to named plaintiffs will focus on the individual circumstances of their employment, their understanding and compliance with AMA's meal and rest break policies, the specific instances of alleged violations underlying their individual claims, any communications with other putative class members regarding the litigation, and their damages calculations.

Meet-and-Confer. We anticipate significant meet-and-confer activity throughout the discovery phase, including correspondence and telephonic conferences with plaintiffs' counsel regarding deficient responses, overbroad or unduly burdensome requests, privilege disputes, and the scope of ESI production obligations. We will endeavor to resolve discovery disputes informally to the extent practicable, but will prepare and file discovery motions as necessary to enforce AMA's discovery rights and to resist overreaching by plaintiffs.

ESI Protocol and E-discovery. We anticipate negotiating and entering into a stipulated ESI Protocol with plaintiffs' counsel, which we expect to be finalized on or about January 13, 2023. The ESI Protocol will address search terms, date ranges, custodians, file formats for production, de-duplication methodology, privilege review protocols, and clawback provisions under Federal Rule of Evidence 502(d) (or its state-law equivalent). We will also conduct a proportionality analysis under Code of Civil Procedure section 2017.010 and the Calcor Space Facility factors to evaluate the appropriate scope and cost allocation of ESI discovery.

ESI collection, processing, hosting, review, and production will be managed in coordination with our e-discovery vendor, Marlowe Asset Management Litigation Technology Inc. (600 Anton Boulevard, Suite 900, Costa Mesa, CA 92626). Based on preliminary estimates, we anticipate that AMA's document production will encompass approximately 150,000 documents (approximately 1.2 million pages) drawn from email accounts, shared drives, the TimeTrack Pro timekeeping system, the NovaPay Solutions payroll platform, and other enterprise systems. The estimated cost for e-discovery services through Marlowe Asset Management, including collection, processing, hosting, technology-assisted review ("TAR"), quality control, and production, is $200,000–$275,000. We will provide a detailed e-discovery budget for pre-approval pursuant to OCG section 5.1 prior to the commencement of collection activities.

Third-Party Subpoena. We will prepare and serve a third-party subpoena (or, if the parties stipulate, a letter request) to NovaPay Solutions Inc. (2200 Powell Street, Suite 600, Emeryville, CA 94608) for payroll records, timekeeping data, system configuration records, and audit logs relevant to the class period. We will coordinate with Marcus Yee (Director, Client Data Services) at NovaPay regarding the scope of data extraction, the format of data production, and any technical limitations or costs associated with the extraction.

Aldrich discovery. For the Aldrich matter, we will respond to Aldrich's discovery requests (Requests for Production Nos. 1-30, Special Interrogatories Nos. 1-25), propound AMA's discovery to Aldrich (Requests for Production Nos. 1-28, Special Interrogatories Nos. 1-30), and prepare and file a Motion to Compel further responses from Aldrich regarding his communications with Halcyon Creek Productions LLC (Requests for Production Nos. 8, 11-14). Discovery in the Aldrich matter will focus on the nature and extent of Aldrich's transmissions of confidential information, the identity and business activities of Halcyon Creek Productions LLC, the existence and terms of any agreements between Aldrich and Halcyon Creek, and the calculation of Aldrich's claimed damages.

Expense Breakdown (Phase 3):

• E-discovery vendor (Marlowe Asset Management Litigation Technology Inc.): approximately $225,000–$275,000

• Process service, filing fees, reproduction, and miscellaneous costs: approximately $25,000–$50,000

Phase 4 — Depositions (April–June 2023) — $405,000

Phase 4 encompasses all deposition activity in both the class action and the Aldrich matter. We anticipate a total of approximately eighteen depositions (eleven by plaintiffs and seven by the defense), spanning the period from April through June 2023.

Defense Depositions of Named Plaintiffs. We will take the depositions of each of the three named plaintiffs: Marisol Fuentes, Derek Halloran, and Yesenia Padilla. These depositions will focus on each plaintiff's individual employment history with AMA, their understanding of and compliance with AMA's meal and rest break policies, the specific factual basis for their individual claims, their damages calculations, their communications with class counsel and with other putative class members, and any factors that may bear on their adequacy and typicality as class representatives.

Defense Deposition of Gavin Aldrich. We will take the deposition of Gavin Aldrich, with a focus on the following areas: (a) the circumstances and content of Aldrich's transmissions of confidential information to his personal email account and to Halcyon Creek Productions LLC; (b) Aldrich's explanation that the transmissions were related to a proposed "co-production" arrangement and the factual basis for that explanation; (c) Aldrich's compliance with the restrictive covenants in his Employment Agreement; (d) the nature, formation, and business activities of Halcyon Creek Productions LLC; and (e) the calculation and basis for Aldrich's claimed damages of $4,150,000. This deposition is anticipated to require a full day and may extend into a second day depending on the complexity of the document examination.

Preparation and Defense of AMA Witness Depositions. We anticipate that plaintiffs will notice the depositions of the following AMA personnel, and we will prepare each witness thoroughly for their testimony:

• Lorraine Okafor (SVP, Human Resources) — designated as AMA's Person Most Knowledgeable ("PMK") regarding timekeeping policies, meal and rest break policies, the development and implementation of those policies, and any modifications to policies during the class period.

• Celine Arroyo (Director of Production Operations) — designated as AMA's PMK regarding production scheduling, staffing models, and the operational practices governing meal and rest period compliance on active production sets across AMA's California facilities and show units.

• Karen Fong (Payroll Manager) — regarding payroll processing, the configuration and administration of the TimeTrack Pro timekeeping system, auto-deduction practices, and the reconciliation of timekeeping data with payroll records.

• Jonathan Mercer (President, AMA) — limited scope, primarily relevant to the Aldrich matter, including the restructuring directive, the decision to terminate Aldrich's employment, and the factual basis for the "for cause" determination.

• Dwayne Prescott (VP, Unscripted Programming) — primarily relevant to the Aldrich cross-claims, including Prescott's knowledge of Aldrich's conduct, the chain of events leading to the discovery of the unauthorized transmissions, and the competitive implications of Aldrich's activities.

Third-Party Deposition. We anticipate taking the deposition of Marcus Yee (Director, Client Data Services, NovaPay Solutions Inc.) regarding the configuration, functionality, and data integrity of the NovaPay payroll and timekeeping platform as implemented for AMA's California operations. Mr. Yee's testimony will be relevant to both the merits of the meal and rest break claims and the class certification analysis.

Plaintiffs' Depositions of Additional Witnesses. We anticipate that plaintiffs will seek to depose additional AMA witnesses beyond the PMK designees, including show unit production managers (estimated three) and former AMA employees (estimated four). We will prepare any current AMA employee witnesses for deposition and will attend and defend those depositions as necessary.

Deposition Preparation and Analysis. For each AMA witness deposition, we will prepare a detailed deposition preparation memorandum outlining the anticipated areas of questioning, key documents to be reviewed, potential problem areas, and recommended responses. Following the completion of the deposition phase, we will prepare a comprehensive deposition summary and analysis memorandum synthesizing the testimony obtained, identifying key admissions and areas of vulnerability, and assessing the implications for class certification, summary judgment, and settlement strategy.

Expense Breakdown (Phase 4):

• Court reporters and transcripts (18 depositions, including expedited delivery where warranted): approximately $65,000–$70,000

• Videography (for key depositions, including all PMK depositions and the Aldrich deposition): approximately $25,000–$35,000

Phase 5 — Expert Engagement & Reports (March–June 2023) — $515,000

Phase 5 encompasses the retention, management, and coordination of AMA's testifying experts, the review and analysis of plaintiffs' expert report, and the preparation of rebuttal expert reports. Expert fees and costs represent the largest single expense item in the overall budget.

Defense Expert No. 1 — Dr. Rajesh Makhija. We recommend retaining Dr. Rajesh Makhija of Workforce Dynamics Consulting LLC (444 Castro Street, Suite 800, Mountain View, CA 94041) as AMA's expert in industrial and organizational analysis. Dr. Makhija holds a Ph.D. in Industrial-Organizational Psychology from Stanford University and has served as a testifying expert in over forty wage-and-hour class actions in California, with particular expertise in the entertainment and media production industries.

• Scope of engagement: Dr. Makhija will conduct an analysis of the variability of workplace conditions, supervisory practices, scheduling protocols, and meal and rest break compliance across AMA's seven California facilities and fourteen show units. His opinions will address whether common proof can establish class-wide liability or whether individual inquiries predominate, supporting AMA's defense at the class certification stage on issues of commonality, typicality, and predominance.

• Hourly rates: $650/hour (expert); $350/hour (senior analyst); $225/hour (analyst).

• Estimated fees: approximately $160,000.

• Report due date: May 19, 2023.

Defense Expert No. 2 — Dr. Catherine Lindstrom. We recommend retaining Dr. Catherine Lindstrom of Hargrove Analytics Inc. (515 S. Figueroa Street, Suite 1100, Los Angeles, CA 90071) as AMA's expert in economics and damages. Dr. Lindstrom holds a Ph.D. in Economics from the University of Chicago and has extensive experience preparing damages analyses and rebuttal reports in wage-and-hour class actions.

• Scope of engagement: Dr. Lindstrom will prepare a rebuttal to the damages model presented by plaintiffs' expert, Dr. Howard Rennick of Pinnacle Economic Consulting Group LLC, and will construct an alternative damages calculation based on AMA's actual payroll and timekeeping data. Her analysis will critique the assumptions, methodology, and data inputs underlying Dr. Rennick's model and will quantify the impact of correcting for identified errors and unsupported assumptions.

• Hourly rates: $700/hour (expert); $375/hour (senior analyst).

• Estimated fees: approximately $180,000.

• Report due date: June 9, 2023.

Review and Analysis of Plaintiffs' Expert Report. Plaintiffs' expert, Dr. Howard Rennick of Pinnacle Economic Consulting Group LLC, is expected to submit his expert report on or about April 28, 2023. Based on the allegations in the Complaint and the scope of the PAGA notice, we anticipate that Dr. Rennick's report will present an aggregate damages opinion of approximately $38.6 million, including approximately $12.2 million in PAGA penalties. We will conduct a thorough review and analysis of Dr. Rennick's report, identify methodological weaknesses and unsupported assumptions, and assess the viability of a Daubert/Sargon challenge to exclude or limit Dr. Rennick's testimony. See Sargon Enterprises, Inc. v. University of Southern California (2012) 55 Cal.4th 747.

Expert Report Review and Coordination. We will review and comment on draft expert reports from both Dr. Makhija and Dr. Lindstrom, ensuring that the reports are consistent with AMA's overall defense strategy, are supported by the evidentiary record, and are presented in a manner that will be effective before the Court. We will coordinate the exchange of data and information between our experts and will manage the expert discovery process, including the production of expert files and the preparation of experts for deposition.

Daubert/Sargon Challenge Assessment. We will assess the feasibility and strategic value of filing a motion to exclude or limit Dr. Rennick's expert testimony under Sargon and Evidence Code section 801. If warranted, a motion challenging Dr. Rennick's methodology will be prepared in connection with the class certification opposition (Phase 6) or as a standalone motion in limine.

Phase 6 — Class Certification Opposition (April–August 2023) — $345,000

Phase 6 encompasses all work related to opposing plaintiffs' motion for class certification, which we anticipate will be the most significant substantive motion in the class action.

Analysis of Plaintiffs' Motion. We anticipate that plaintiffs will file their motion for class certification on or about April 14, 2023. We will conduct a thorough analysis of plaintiffs' motion, supporting declarations, and evidence, and will identify the factual and legal bases for opposition.

Opposition Brief and Supporting Materials. We will prepare a comprehensive Opposition to Motion for Class Certification, supported by a detailed Memorandum of Points and Authorities addressing each element of the certification analysis under Code of Civil Procedure section 382 and the factors set forth in Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, and Duran v. Brightwater Securities (2014) 59 Cal.4th 1. The Opposition will be accompanied by the following supporting declarations:

• Lorraine Okafor — attesting to the variability of AMA's meal and rest break practices across facilities and show units, the decentralized nature of production scheduling, and the individualized circumstances affecting compliance.

• Celine Arroyo — attesting to the operational realities of production scheduling, the diversity of show formats and production environments, and the manner in which meal and rest break compliance is managed on a unit-by-unit and day-by-day basis.

• Karen Fong — attesting to the configuration and operation of the TimeTrack Pro timekeeping system, the circumstances under which auto-deductions are applied and overridden, and the payroll processes relevant to the claims.

• Dr. Rajesh Makhija — presenting expert opinions regarding the variability of conditions across AMA's operations and the predominance of individual over common issues.

• Dr. Catherine Lindstrom — presenting expert opinions regarding the infeasibility of calculating damages on a class-wide basis using common proof and the necessity of individualized damages inquiries.

• Devon Archer — authentication of exhibits and declarations regarding the discovery record.

We will also prepare a compendium of exhibits and file evidentiary objections to plaintiffs' expert declaration (Dr. Rennick) and named plaintiff declarations, challenging the admissibility of improper opinion testimony, hearsay, and unsupported factual assertions.

Key Defense Arguments. The principal arguments in opposition to class certification will include:

• Predominance: Individual variation across AMA's fourteen show units and seven California facilities defeats the predominance requirement. Meal and rest break compliance is governed by the specific production schedule, staffing model, supervisory personnel, and operational demands of each show unit, resulting in material variation in the factual circumstances of each putative class member's claims.

• Typicality: The three named plaintiffs — Fuentes, Halloran, and Padilla — work in three different divisions at three different facilities, and their individual experiences are not representative of the putative class as a whole. Each plaintiff's claims arise from circumstances unique to their particular show unit and supervisory chain.

• Adequacy: There are potential conflicts between current and former employees within the putative class, particularly with respect to the desirability and terms of prospective injunctive relief and the allocation of any recovery between current and former employees.

• Superiority: Individual actions or limited-issue adjudication would be a superior method of resolving the claims, given the predominance of individual issues and the availability of PAGA as an alternative enforcement mechanism.

Putative Class. The putative class consists of approximately 1,850 non-exempt, hourly employees employed by AMA at its California facilities during the class period, which is expected to run from November 1, 2018, through the date of preliminary approval of any settlement.

Reply Brief and Oral Argument. We will analyze plaintiffs' reply brief and prepare for oral argument at the class certification hearing, which we anticipate will be scheduled for approximately July 28, 2023. Following the hearing, we will prepare a post-hearing analysis of the Court's certification order for the client team, including an assessment of the implications for settlement strategy and, if appropriate, the advisability of seeking interlocutory review by writ of mandate.

Opposing Counsel. Plaintiffs are represented by Castellano Byrne & Salas LLP (Marco Castellano, Diane Salas, and Trevor Kim) as class counsel, and by Veltrano Employment Law Group PC (Sandra Higuera) as PAGA co-counsel. Based on our experience with this plaintiffs' firm, we anticipate aggressive and thorough briefing on the certification motion.

Phase 7 — Mediation & Settlement (August–September 2023) — $245,000

Phase 7 encompasses the mediation and settlement negotiation process for the class action and, potentially, a combined mediation session addressing both the class action and the Aldrich matter.

Mediator Selection and Retention. We recommend retaining the Honorable Patricia Okoro (Ret.) of Westpark Dispute Resolution Inc. (1925 Century Park East, Suite 1700, Los Angeles, CA 90067) as the mediator for the class action. Judge Okoro has extensive experience mediating complex employment class actions in the entertainment industry and is well-regarded by both plaintiffs' and defense counsel.

Mediation Briefing. We will prepare confidential mediation briefs for each mediation session. We anticipate that the first session will address the class action only, and a second session will address the class action and the Aldrich matter on a combined basis, if settlement of the class action has not been achieved in the first session. The mediation briefs will present AMA's factual and legal positions, analyze the risks and potential outcomes of continued litigation, and set forth AMA's assessment of the reasonable settlement range. We will also prepare detailed damages analyses and position summaries for submission to the mediator on a confidential basis.

Settlement Authority. Prior to each mediation session, we will prepare settlement authority memoranda and recommendations for AMA's review and approval. Consistent with OCG section 7.4, settlement authority must be approved by Mr. Tanaka (VP, Legal & Compliance) and Ms. Cartwright (General Counsel, AGMG). For settlement amounts exceeding $5,000,000, approval from Jonathan Mercer (President, AMA) and the AGMG Board's Audit and Risk Committee is also required. We will ensure that the necessary approvals are obtained in advance of each mediation session so that AMA's representatives have full settlement authority during the proceedings.

Mediation Sessions. We anticipate attending two full-day mediation sessions for the class action, with the possibility of a separate mediation session for the Aldrich matter if it is not resolved on a combined basis. We will attend the mediation sessions with a full team, including the lead partner, the senior associate responsible for day-to-day case management, and the designated AMA client representative.

Post-Mediation Reporting. Following each mediation session, we will provide prompt report-back communications to the client team, summarizing the proceedings, assessing the prospects for continued negotiations, and recommending next steps.

Settlement Agreement. If a settlement in principle is reached, we will negotiate and draft the class settlement agreement, including all exhibits, attachments, and ancillary documents. The settlement agreement will address the settlement amount, the allocation of the settlement fund between wage claims, PAGA penalties, and other components, the release of claims, the claims administration process, attorneys' fees and costs provisions, service awards for named plaintiffs, and the process for obtaining Court approval.

Target Settlement Range. Based on our preliminary assessment of the case, including our evaluation of the strength of plaintiffs' claims, the scope of potential liability, the likely range of damages, and the risks and costs of continued litigation, we currently estimate a target settlement range of $10,000,000–$15,000,000 as the gross settlement amount ("GSA") for the class action. This range is subject to revision as discovery progresses, as the Court rules on class certification, and as additional information becomes available regarding AMA's actual practices and the strength of the defense.

Expense Breakdown (Phase 7):

• Mediation fees (Westpark Dispute Resolution Inc. — estimated 2 sessions): approximately $30,000–$35,000

Phase 8 — Settlement Approval Process (September 2023–February 2024) — $200,000

Phase 8 encompasses all work required to obtain judicial approval of the class settlement, from the filing of the motion for preliminary approval through entry of the final approval order and judgment.

Motion for Preliminary Approval. We will prepare and file AMA's Motion for Preliminary Approval of Class Settlement, supported by a detailed memorandum of points and authorities demonstrating that the settlement falls within the range of reasonableness and satisfies the requirements of California Rule of Court 3.769. The motion will be accompanied by declarations from counsel and the proposed class notice documents.

Class Notice. We will prepare the proposed class notice in both long-form and summary/postcard form, consistent with applicable due process requirements and California Rule of Court 3.769(f). The notice documents will describe the terms of the settlement, the rights of class members to participate, opt out, or object, and the procedures and deadlines for exercising those rights.

Claims Administration Coordination. We will coordinate with the retained claims administrator, Meridian Settlement Services LLC (Angela Truong; 1600 E. Fourth Street, Suite 240, Santa Ana, CA 92701), regarding the administration of the settlement, including the preparation of the class list, mailing of notice, processing of claims, opt-outs, and objections, and distribution of settlement payments. The estimated claims administration budget is $385,000, which will be funded from the settlement fund and is not included in this outside counsel budget.

Objections and Opt-Outs. We will monitor and analyze any objections and opt-out requests received during the notice period, and will prepare responses to class member objections as necessary for submission to the Court in connection with the final approval hearing.

Motion for Final Approval. We will prepare and file a Motion for Final Approval of Class Settlement, supported by a memorandum of points and authorities, declarations from Renata Vasquez, Devon Archer, and Angela Truong (claims administrator), and any supplemental exhibits. The motion will address any objections received, report on the claims rate and opt-out rate, and demonstrate that the settlement is fair, reasonable, and adequate under the governing legal standards.

Final Approval Hearing. We will prepare an oral argument outline and attend the final approval hearing. Following the hearing, we will prepare a proposed Final Approval Order and Judgment for the Court's consideration.

Post-Hearing Reporting. We will provide prompt reporting to the client team following the final approval hearing, including an analysis of the Court's ruling, the timeline for distribution of settlement funds, and any post-judgment obligations.

Key Settlement Approval Timeline Milestones:

• Preliminary Approval Motion: target September 2023

• Preliminary Approval Order: target October 2023

• Class Notice Mailing: approximately 30 days after preliminary approval

• Opt-Out/Objection Deadline: approximately 60 days after notice

• Final Approval Hearing: approximately 90 days after preliminary approval

• Final Approval Order: target early 2024

Phase 9 — Aldrich Individual Action (December 2022–January 2024) — $465,000

Phase 9 encompasses all work specific to the Aldrich executive dispute that is not already captured in other phases (i.e., work that is distinct from the overlapping discovery and deposition work allocated in Phases 3 and 4). The Aldrich action, Case No. 22STCV41087, has been assigned to the Honorable Catherine Villanueva, Department 52, and we anticipate it will be filed on or about December 9, 2022.

Restrictive Covenant Enforceability Analysis. A central issue in the Aldrich matter is the enforceability of the restrictive covenants contained in sections 9.1 through 9.4 of Aldrich's Employment Agreement, dated September 5, 2017, as amended August 1, 2020. California Business & Professions Code section 16600 broadly voids non-competition agreements, and the recent enactment of Senate Bill 699 reinforces California's hostility to such provisions. We will prepare a comprehensive enforceability analysis addressing the scope and enforceability of each restrictive covenant — confidentiality (§ 9.1), non-solicitation (§ 9.2), non-competition (§ 9.3), and intellectual property assignment (§ 9.4) — under both California and New York law.

Choice-of-Law Analysis. Section 14.3 of the Employment Agreement designates New York law as the governing law. We will analyze whether a California court will enforce this choice-of-law provision, particularly with respect to the restrictive covenants, in light of California's strong public policy against non-competition agreements. This analysis will apply the governmental interest analysis framework used by California courts and will evaluate whether New York's more permissive approach to non-compete enforcement will be given effect. The outcome of this analysis will significantly affect the viability of AMA's Cross-Complaint and the overall settlement strategy.

"For Cause" Termination Analysis. We will prepare a detailed analysis of whether Aldrich's termination satisfies the "for cause" standard set forth in section 7.2(b) of the Employment Agreement. The two principal grounds for termination are: (a) Aldrich's unauthorized transmission of confidential information — including development slates, talent deal memoranda, and multi-year financial projections — to his personal email address and to Halcyon Creek Productions LLC; and (b) Aldrich's insubordination in refusing to comply with the restructuring directive issued by Jonathan Mercer. If the termination is sustained as "for cause," AMA's severance obligations are eliminated, and AMA's position in the litigation is substantially strengthened.

Cross-Complaint Strategy. We will prepare a cross-complaint strategy memorandum and conduct supporting factual investigation, including forensic analysis of Aldrich's email transmissions, interviews with relevant AMA personnel, and review of the Halcyon Creek Productions LLC formation documents and business records.

Motion Practice. We anticipate that Aldrich will file a Motion to Strike the non-compete allegations from AMA's Cross-Complaint under Code of Civil Procedure section 425.16 (the anti-SLAPP statute) or under section 435. We will prepare an opposition to any such motion, arguing that the non-compete allegations are properly pled and that, to the extent the non-compete clause may be unenforceable under California law, the confidentiality and non-solicitation provisions remain independently enforceable.

Aldrich Deposition. The deposition of Gavin Aldrich is anticipated for May 22, 2023. We will prepare comprehensive deposition outlines and exhibits and conduct the deposition with a focus on the critical factual issues identified above.

Aldrich Mediation and Settlement. We anticipate a standalone Aldrich mediation session in late 2023. We will prepare a mediation brief, a settlement authority memorandum, and, if settlement is achieved, will negotiate and draft the settlement agreement. Settlement terms are expected to include consideration of RSU acceleration valuation scenarios, tax treatment analysis (including potential Section 409A implications), and the scope and duration of any modified restrictive covenant obligations post-settlement. Upon resolution, we will prepare a Stipulation for Dismissal with Prejudice and file a Request for Dismissal (form CIV-110).

Aldrich Settlement Parameters. The following financial parameters frame the settlement analysis for the Aldrich matter:

• Aldrich base salary at termination: $485,000/year

• Severance entitlement if termination without cause: $970,000 (24 months' base salary)

• Last annual bonus (FY 2021): $225,000

• Unvested RSUs at termination: 15,300 shares (of 42,500 total grant), estimated current value approximately $332,200

• Aldrich's aggregate demand (inclusive of all claims): $4,150,000

• AMA target settlement range: $1,500,000–$3,000,000

Opposing Counsel. Aldrich is represented by Cameron Whitfield and Julia Nazarian of Whitfield & Associates (9465 Wilshire Boulevard, Suite 320, Beverly Hills, CA 90212). Based on our familiarity with Mr. Whitfield's practice, we anticipate aggressive advocacy but a willingness to engage in meaningful settlement discussions once the discovery record is developed.

Insurance Coverage. AMA's EPL carrier, Pemberton Mutual Assurance Co., has denied coverage for the Aldrich dispute based on the Insured v. Insured Exclusion (Policy § IV.C) and the scope of the "Employment Practices" definition. Accordingly, the defense and any settlement of the Aldrich matter will be entirely self-funded by AMA. This coverage denial is addressed further in Phase 10.

Phase 10 — Insurance Coordination & Administration ($80,000)

Phase 10 encompasses all work related to the coordination of AMA's insurance coverage for the Fuentes class action and the Aldrich matter, including tender, coverage analysis, carrier correspondence, and settlement allocation.

EPL Policy Coordination. We will coordinate with AMA's EPL carrier, Pemberton Mutual Assurance Co. (Policy No. PMA-EPL-2022-00837), regarding all aspects of coverage for the Fuentes class action. The EPL policy provides a $5,000,000 self-insured retention ("SIR") per claim and a $15,000,000 aggregate limit. We will analyze Pemberton's reservation of rights letter (anticipated December 2022), prepare coverage analysis memoranda addressing the scope of coverage, and track and report SIR erosion to Pemberton on a monthly basis. We will also submit monthly invoices to Pemberton for audit purposes, consistent with the carrier's defense counsel approval terms, and will coordinate consent-to-settlement correspondence and demand for policy contribution if and when a class settlement is reached.

D&O Policy Coordination. We will coordinate with AMA's D&O carrier, Redcliffe Specialty Insurance Ltd. (Policy No. RSI-DO-2022-04419; $10,000,000 primary tower) and excess carrier Ashford Re Ltd. (Policy No. ARL-EX-2022-01102; $25,000,000 excess tower). A precautionary notice was submitted to Redcliffe on November 8, 2022. D&O coverage is relevant only if individual directors or officers are named as defendants. No individual officers have been named to date, but we will continue to monitor for potential D&O implications, particularly in the Aldrich action if Aldrich amends his complaint to add individual officer defendants such as Jonathan Mercer or Dwayne Prescott.

Broker Coordination. We will coordinate with AMA's insurance broker, Kestrel Risk Advisors Ltd. (Samuel Okonkwo, Managing Director; One Broadgate, London EC2M 2QS), regarding all insurance-related matters, including tender correspondence, reservation of rights analysis, and settlement allocation strategy.

Coverage Analysis. We will prepare coverage analysis memoranda for both the EPL and D&O policies, addressing the scope of covered claims, the applicability of policy exclusions, the treatment of defense costs under the SIR, and the carrier's obligations with respect to settlement contributions. Key coverage issues include the potential application of the Penalty Exclusion (Policy § IV.F) to PAGA penalties, the Intentional Acts Exclusion (Policy § IV.A) to any findings of willful violations, and the Insured v. Insured Exclusion (Policy § IV.C) to the Aldrich matter.

Aldrich Coverage Denial. We will prepare a response to Pemberton's denial of coverage for the Aldrich executive dispute, preserving AMA's rights to challenge the denial if warranted. Based on our preliminary analysis, we anticipate that the denial is likely to be sustained given the Insured v. Insured Exclusion and the narrow definition of covered "Employment Practices" under the policy, but we will conduct a thorough analysis and advise AMA of its options.

Settlement Allocation. If a class settlement is reached, we will advise AMA regarding the allocation of settlement funds between insured and self-funded portions, with the objective of maximizing the carrier's contribution for covered claims while accounting for potentially excluded components such as PAGA penalties.

IV. Key Assumptions

The budget set forth in this memorandum is based on the following key assumptions. Material changes in any of these assumptions may require revision of the budget, and we will promptly notify AMA of any such changes.

1. Halloran Consolidation. We assume that the Halloran action (Case No. 22STCV39501), which has not yet been filed as of the date of this memorandum but is anticipated imminently, will be consolidated with the Fuentes action and will not require a separately budgeted defense. All work related to the Halloran action is included within the phase-based budget set forth above. If consolidation is denied or if the Halloran action proceeds on a separate track, a supplemental budget for the Halloran defense will be prepared.

2. Settlement Assumption. This budget assumes that the class action will proceed through class certification briefing and, if certified, to mediation and settlement. The budget does not include trial costs. If the class action does not settle and proceeds to trial, a supplemental trial budget will be prepared. Estimated trial costs (not included in this budget): $1,200,000–$1,800,000 in additional fees and expenses for an estimated fifteen to twenty court-day trial, including trial preparation, witness preparation, exhibit preparation, daily trial attendance, and post-trial motions.

3. Aldrich Settlement Assumption. This budget assumes that the Aldrich individual action will be resolved through mediation and settlement, as contemplated in Phase 9 above. If the Aldrich matter proceeds to trial, an additional $300,000–$500,000 in fees and expenses should be anticipated, covering trial preparation, a five to seven court-day bench trial, and post-trial proceedings.

4. Expert Expenses (Phase 5). Expert expenses represent the largest single expense item in the budget and include the estimated fees for Dr. Rajesh Makhija (approximately $160,000) and Dr. Catherine Lindstrom (approximately $180,000). The remaining expert expense allocation covers ancillary costs, including data analysis, report production, hearing preparation, and expert deposition defense. Actual expert costs may vary depending on the scope of work ultimately required, the volume of data to be analyzed, and the extent of supplemental work necessitated by plaintiffs' expert opinions.

5. E-discovery Expenses (Phase 3). E-discovery expenses are estimated based on the processing of approximately 150,000 documents through our e-discovery vendor, Marlowe Asset Management Litigation Technology Inc. (600 Anton Boulevard, Suite 900, Costa Mesa, CA 92626). Actual costs will depend on the volume of data collected from AMA's custodians and enterprise systems, the number of search terms applied during the culling and review process, the extent to which technology-assisted review is utilized, and the scope of any supplemental productions required by the Court or agreed to in connection with meet-and-confer discussions.

6. No Interlocutory Appeal. This budget does not include the potential costs of an interlocutory appeal by writ of mandate from a class certification order. If the Court grants class certification and an appeal is warranted, a supplemental budget of $150,000–$250,000 should be anticipated for the preparation and prosecution of a petition for writ of mandate in the California Court of Appeal.

7. Staffing. The budget is based on the engagement team identified in the Staffing Plan Memorandum provided separately, with the following personnel and approximate allocation percentages:

• Renata Vasquez (Partner) — $1,125/hour — approximately 25–30% allocation. Ms. Vasquez will serve as lead relationship partner and will be responsible for overall case strategy, class certification opposition, mediation, and client reporting.

• Bernard Crawford (Partner) — $1,075/hour — approximately 10–15% allocation. Mr. Crawford will focus on the Aldrich individual action, cross-complaint strategy, and insurance coordination.

• Devon Archer (Senior Associate) — $785/hour — approximately 60–70% allocation. Mr. Archer will serve as the day-to-day case manager and will be responsible for discovery management, deposition preparation, motion drafting, and expert coordination.

• Nadia Petrov (Associate) — $625/hour — approximately 80–90% allocation. Ms. Petrov will be responsible for discovery responses, document review coordination, legal research, and drafting of supporting declarations and exhibits.

• Sophia Meng (Paralegal) — $375/hour — as needed. Ms. Meng will provide paralegal support for document management, filing, deposition logistics, and trial preparation.

Consistent with OCG section 4.3, additional attorneys or support staff will be assigned to the engagement only with prior notice to and approval from AMA's designated contact (Gregory Tanaka). We do not anticipate the need for additional staffing under the current budget assumptions, but will advise AMA promptly if circumstances warrant additional resources.

V. Comparison to Insurance Coverage

The following analysis compares the estimated budget to AMA's available insurance coverage and provides recommendations regarding coverage strategy.

EPL Policy (Pemberton Mutual Assurance Co.)

• Policy Number: PMA-EPL-2022-00837

• Self-Insured Retention (SIR): $5,000,000 per claim

• Aggregate Limit: $15,000,000

• Tender Status: Tender letter submitted November 8, 2022; acknowledgment of coverage anticipated by late December 2022, subject to reservation of rights

Defense Cost Treatment. Based on this preliminary budget, total defense costs (fees plus expenses) are estimated at $3,450,000, which falls within the $5,000,000 SIR. Under the terms of the EPL policy, defense costs erode the SIR. AMA's combined defense costs and any indemnity payments (including self-funded settlement contributions) will count toward exhaustion of the SIR. If AMA's total expenditu

CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 777 South Flower Street, Suite 4200 Los Angeles, California 90017 Telephone: (213) 555-7800 Facsimile: (213) 555-7801
MEMORANDUM
TO: Gregory Tanaka, Vice President, Legal & Compliance, Aurelius Media Americas Inc. Philippa Cartwright, General Counsel, Aurelius Global Media Group
FROM: Renata Vasquez, Partner, and Bernard Crawford, Partner
DATE: November 10, 2022
RE: Preliminary Budget — Fuentes v. Aurelius Media Americas Inc. and Related Matters (C&H Matter No. 1017-00004)
I. Purpose
This memorandum sets forth a preliminary phase-based litigation budget for the defense of Fuentes v. Aurelius Media Americas Inc., Case No. 22STCV38214, filed in the Superior Court of the State of California for the County of Los Angeles on November 1, 2022. The budget encompasses the full scope of defensive work anticipated in connection with the Fuentes class action and Private Attorneys General Act ("PAGA") representative claims, the anticipated related action to be filed by plaintiffs' co-counsel on behalf of Derek Halloran and other similarly situated employees (the "Halloran action," expected imminently), and the anticipated individual wrongful termination and breach of contract action to be brought by Gavin Aldrich, former Senior Vice President of Scripted Development at Aurelius Media Americas Inc. ("AMA").
The budget presented herein is based on our initial assessment of the scope, complexity, and anticipated trajectory of these matters, drawing on the factual information and documentation that AMA has provided to date, as well as our experience in comparable wage-and-hour class actions in the entertainment and media production industries. The estimates set forth in this memorandum are necessarily preliminary in nature and are subject to revision as the litigation develops, as additional facts come to light, as the Court issues scheduling and substantive rulings, and as the parties' respective litigation strategies crystallize.
This budget has been prepared in compliance with AMA's Outside Counsel Guidelines, dated March 15, 2021 (the "OCG"), and specifically Section 6.2 thereof, which requires that outside counsel submit a preliminary budget within ten business days of engagement and thereafter report actual expenditures against budget on a monthly basis in connection with monthly invoice submissions. All budgeted amounts and staffing allocations are consistent with the rate schedule, staffing requirements, and expense protocols set forth in the OCG.
We welcome the opportunity to discuss this budget with you at your convenience and to refine the estimates as additional information becomes available.
II. Phase-Based Budget Summary
The following table presents our estimated fees, estimated expenses, and combined totals for each of the ten phases of work we anticipate in connection with the defense of the Fuentes class action, the related Halloran action, the PAGA claims, and the Aldrich individual action. A detailed description of the scope of work encompassed by each phase follows in Section III below.
The fee estimates above are based on the staffing model and hourly rates described in Section IV below and in the Staffing Plan Memorandum provided separately. Expense estimates include e-discovery vendor costs, expert witness fees, court reporter and videography charges, mediation fees, filing fees, process service costs, travel expenses, and other disbursements customarily incurred in litigation of this nature. Certain expense categories — particularly expert witness fees and e-discovery vendor costs — are subject to significant variability depending on the volume and complexity of the work ultimately required.
III. Phase Descriptions
The following sections describe the anticipated scope of work for each phase, identify the principal tasks and deliverables, and provide additional detail regarding expense estimates where applicable.
Phase 1 — Case Assessment & Engagement Setup (November–December 2022) — $197,000
Phase 1 encompasses the initial assessment, fact-gathering, and administrative work necessary to establish the foundation for AMA's defense across all pending and anticipated matters.
Complaint and Regulatory Notice Review. We will conduct a thorough initial review of the Fuentes Complaint, filed November 1, 2022, bearing Case No. 22STCV38214, in the Superior Court of California for the County of Los Angeles. The Complaint alleges nine causes of action on behalf of a putative class of approximately 1,850 non-exempt, hourly employees, asserting claims for failure to provide compliant meal periods, failure to authorize and permit rest periods, failure to pay overtime wages, failure to pay minimum wages, failure to provide accurate wage statements, failure to timely pay wages at separation, unfair business practices under the California Business & Professions Code section 17200 et seq., and civil penalties under the Private Attorneys General Act, Labor Code section 2698 et seq. We will also review the PAGA Notice submitted to the Labor and Workforce Development Agency ("LWDA") by plaintiffs' counsel, Castellano Byrne & Salas LLP, dated September 15, 2022, to assess the adequacy and scope of the administrative exhaustion and to identify any procedural defenses available to AMA.
Litigation Hold. We will prepare and issue a comprehensive litigation hold notice to all AMA custodians identified as potentially possessing relevant documents and electronically stored information ("ESI"). Based on our initial discussions with Mr. Tanaka and Ms. Okafor, we have identified seven custodians whose document preservation obligations will be triggered: Lorraine Okafor (Senior Vice President, Human Resources), Gregory Tanaka (Vice President, Legal & Compliance), Jonathan Mercer (President, AMA), Celine Arroyo (Director of Production Operations), Dwayne Prescott (Vice President, Unscripted Programming), Karen Fong (Payroll Manager), and the direct supervisors of each of the three named plaintiffs. The litigation hold notice will cover all categories of potentially relevant documents, including but not limited to email communications, personnel files, timekeeping records, payroll data, policy manuals, scheduling documents, and electronic communications through enterprise messaging platforms. We will follow up with each custodian to confirm receipt and compliance and will coordinate with AMA's Information Technology department to implement any necessary preservation measures for enterprise systems.
Preliminary Case Assessment Memoranda. We will prepare preliminary case assessment memoranda for both the class action and the anticipated Aldrich matter. These memoranda will set forth our initial evaluation of the factual and legal landscape, identify the principal risks and exposures, assess the strength of plaintiffs' claims and AMA's available defenses, and outline a recommended defensive strategy. The class action assessment memorandum will include a preliminary evaluation of the putative class definition, an assessment of the likelihood of certification, and a range of potential exposure based on the information available at that stage.
Policy and Systems Review. A critical component of the initial assessment will be a detailed review of AMA's meal and rest break policies as documented in the company's employee handbook (March 2021 revision), the configuration and functionality of AMA's TimeTrack Pro timekeeping system, and the company's actual practices with respect to meal period scheduling, rest break authorization, and auto-deduction policies. We understand that AMA utilizes an automatic meal period deduction for certain production employees, and we will conduct a risk assessment of this practice in light of current California law, including the California Supreme Court's decision in Donohue v. AMN Services, LLC (2021) 11 Cal.5th 58, and applicable Industrial Welfare Commission ("IWC") Wage Orders.
Key Personnel Interviews. We will conduct initial interviews with the following key AMA personnel to gather factual background information essential to shaping our defense strategy: Lorraine Okafor (SVP, Human Resources) regarding AMA's employment policies, onboarding practices, and the development and implementation of meal and rest break policies across AMA's California operations; Celine Arroyo (Director of Production Operations) regarding production scheduling practices, staffing models, and the operational realities of meal and rest period compliance on active production sets; Karen Fong (Payroll Manager) regarding payroll processing, timekeeping data integrity, and the configuration and administration of the TimeTrack Pro system and NovaPay Solutions payroll platform; and Gregory Tanaka (VP, Legal & Compliance) regarding AMA's compliance framework, prior regulatory interactions, and the factual circumstances surrounding the Aldrich termination.
Auto-Deduction Policy Risk Assessment. We will conduct a focused risk assessment of AMA's auto-deduction policy for meal periods, analyzing the policy's compliance with California Labor Code sections 226.7 and 512, applicable IWC Wage Orders, and the evolving case law in this area. This assessment will inform both our defensive strategy and any recommendations we may make regarding prospective changes to AMA's timekeeping practices.
Wage Order Identification. We will identify and analyze the applicable IWC Wage Orders governing AMA's California workforce. Based on our preliminary understanding of AMA's operations, the primary applicable order is IWC Wage Order 12 (Motion Picture Industry), though certain employees may fall under other Wage Orders depending on their job functions and classifications. Proper identification of the applicable Wage Order is critical both to the substantive defense and to the class certification analysis, as differences in applicable Wage Orders among putative class members may support arguments against certification.
PAGA Standing and Procedural Analysis. We will analyze the adequacy of the named plaintiff's standing to bring PAGA claims, including whether the LWDA notice satisfies the requirements of Labor Code section 2699.3, whether the 65-day waiting period has been observed, and whether there are any grounds to challenge PAGA standing based on the scope of the notice or the named plaintiff's individual claims. This analysis will also address the impact of the United States Supreme Court's decision in Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639, and any applicable arbitration agreements that may bear on the PAGA claims.
Insurance Tender. We will prepare and submit tender letters to AMA's employment practices liability ("EPL") carrier, Pemberton Mutual Assurance Co. (Policy No. PMA-EPL-2022-00837), and directors and officers ("D&O") carrier, Redcliffe Specialty Insurance Ltd. (Policy No. RSI-DO-2022-04419), providing notice of the Fuentes action and the anticipated Halloran and Aldrich matters, and requesting acknowledgment of coverage and defense cost reimbursement. We will coordinate with AMA's insurance broker, Kestrel Risk Advisors Ltd. (Samuel Okonkwo, Managing Director), in connection with these tenders.
Engagement Administration. Phase 1 also includes completion of the firm's conflict check, execution of the engagement letter, confirmation of compliance with the OCG (including rate schedules, staffing approvals, billing format requirements, and expense protocols), and establishment of the matter file and internal tracking systems necessary for ongoing budget monitoring and reporting.
Phase 2 — Pleadings & Initial Motions (December 2022–February 2023) — $243,000
Phase 2 encompasses all initial responsive pleadings and motions in both the Fuentes class action (including the anticipated consolidated complaint following the Halloran filing) and the Aldrich individual action.
Answer to Fuentes Complaint. We will prepare and file AMA's Answer to the Fuentes Complaint, asserting the following thirteen affirmative defenses: (1) failure to state facts sufficient to constitute a cause of action; (2) statute of limitations bar as to claims accruing prior to the applicable limitations periods; (3) compliance with applicable laws, regulations, and Wage Orders; (4) good faith belief in the legality and propriety of AMA's employment practices; (5) waiver and/or estoppel; (6) offset and/or recoupment; (7) de minimis doctrine; (8) lack of standing to assert claims under the Unfair Competition Law, California Business & Professions Code section 17200 et seq.; (9) failure to satisfy prerequisites for class certification under California Code of Civil Procedure section 382; (10) individual variation among putative class members defeating predominance and superiority; (11) lack of PAGA standing; (12) reduction of PAGA penalties under Labor Code section 2699(e)(2) based on AMA's good faith efforts to comply; and (13) reservation of all rights, including the right to assert additional affirmative defenses as discovery progresses. We anticipate that the Halloran action (Case No. 22STCV39501) will be filed on or about November 18, 2022, and that plaintiffs will file a consolidated complaint following consolidation. We will prepare and file an Answer to the consolidated complaint as necessary.
Notice of Related Case and Consolidation. Upon the filing of the Halloran action, we will prepare and file a Notice of Related Case and will prepare a Stipulation and/or Motion for Consolidation of the Fuentes and Halloran actions before the assigned judicial officer. Consolidation will promote efficiency and avoid the risk of inconsistent rulings.
Demurrer to UCL Cause of Action. We will prepare and file a Demurrer to the Unfair Competition Law cause of action (California Business & Professions Code section 17200 et seq.), arguing that plaintiffs have failed to allege facts sufficient to establish an independent basis for UCL liability beyond the underlying Labor Code claims, and that the UCL claim is duplicative and should be dismissed. The demurrer will be supported by a Memorandum of Points and Authorities, a Declaration of Gregory Tanaka, and a proposed order. While we recognize that the likelihood of sustaining a demurrer to a UCL claim predicated on alleged Labor Code violations is modest, filing the demurrer will preserve the issue for later proceedings and may narrow the scope of the UCL claim.
Opposition to Expedited discovery. We will monitor for and oppose any ex parte applications by plaintiffs for expedited or pre-certification discovery. Such applications are common in wage-and-hour class actions and, if granted, could impose significant discovery burdens before the contours of the case are fully defined.
Case Management Statement. We will prepare AMA's Case Management Statement in advance of the Initial Case Management Conference, which we anticipate will be scheduled for approximately March 10, 2023. The Case Management Statement will set forth AMA's proposed discovery schedule, preferred ADR process (mediation), anticipated motions, and estimated trial date.
Stipulated Protective Order. We will negotiate with plaintiffs' counsel and prepare a Stipulated Protective Order governing the treatment of confidential information produced in discovery. We anticipate a two-tier protective order designating documents as either CONFIDENTIAL or HIGHLY CONFIDENTIAL — ATTORNEYS' EYES ONLY, with appropriate provisions for challenges to designations and for the handling of confidential information at depositions, in expert reports, and in court filings.
Aldrich Pleadings. For the Aldrich matter (Case No. 22STCV41087, anticipated filing December 9, 2022), we will prepare and file AMA's Answer to the Aldrich Complaint and a Cross-Complaint against Mr. Aldrich. The Cross-Complaint will assert claims for breach of the Employment Agreement dated September 5, 2017, as amended August 1, 2020, specifically sections 9.1 (Confidentiality), 9.2 (Non-Solicitation), 9.3 (Non-Competition), and 9.4 (Intellectual Property Assignment); misappropriation of trade secrets under the California Uniform Trade Secrets Act ("CUTSA"), Civil Code sections 3426 et seq.; breach of fiduciary duty; and conversion. The Cross-Complaint will be supported by declarations from Jonathan Mercer (President, AMA) and Dwayne Prescott (VP, Unscripted Programming), attesting to the factual circumstances surrounding Aldrich's unauthorized transmission of confidential information to his personal email account and to Halcyon Creek Productions LLC, and his refusal to comply with the restructuring directive.
Restrictive Covenant and Choice-of-Law Analysis. Phase 2 will also include a comprehensive analysis of the enforceability of the restrictive covenants contained in Aldrich's Employment Agreement under California Business & Professions Code section 16600, which broadly prohibits non-compete agreements, and an analysis of the choice-of-law provision in section 14.3 of the Employment Agreement, which specifies New York law as the governing law. This choice-of-law analysis will evaluate whether a California court will enforce the New York choice-of-law clause with respect to the restrictive covenants, given California's strong public policy against enforcement of non-compete agreements, as articulated in Edwards v. Kraft Quill CPAs LLP (2008) 44 Cal.4th 937, and in Senate Bill 699 (effective January 1, 2024). This analysis is critical to the viability of AMA's Cross-Complaint and to the overall strategy in the Aldrich matter.
"For Cause" Termination Analysis. We will prepare a detailed analysis of whether AMA's termination of Aldrich's employment satisfied the "for cause" requirements of section 7.2(b) of the Employment Agreement, focusing on the two principal grounds for termination: (a) Aldrich's unauthorized transmission of confidential and proprietary information, including development slates, talent deal memoranda, and financial projections, to his personal email address and to Halcyon Creek Productions LLC; and (b) Aldrich's insubordination in connection with the restructuring directive issued by Jonathan Mercer. This analysis will address whether the procedural requirements of the "for cause" provision (including any notice and cure period) were satisfied, and will evaluate the strength of AMA's position should Aldrich contest the characterization of his termination.
Phase 3 — Discovery (Written & ESI) (January–May 2023) — $755,000
Phase 3 encompasses the most resource-intensive period of the litigation and includes all written discovery, ESI collection and production, and discovery-related motion practice in both the class action and the Aldrich matter.
Responding to Plaintiffs' Written discovery. We anticipate receiving from plaintiffs' counsel an extensive set of written discovery requests, including Form Interrogatories (Employment), Special Interrogatories (estimated 78 in number), and Requests for Production of Documents (estimated 62 in number). We will prepare timely, substantive responses and objections to each discovery request, coordinate the collection and production of responsive documents from AMA's custodians and enterprise systems, and prepare privilege logs as necessary. We anticipate that supplemental responses will be required following meet-and-confer discussions with plaintiffs' counsel regarding the adequacy of initial responses and the scope of objections asserted.
Propounding AMA's Written discovery. We will propound AMA's affirmative written discovery to all three named plaintiffs — Marisol Fuentes, Derek Halloran, and Yesenia Padilla — including Form Interrogatories, Special Interrogatories (Nos. 1-35 per plaintiff), and Requests for Production of Documents (Nos. 1-20 per plaintiff). Discovery to named plaintiffs will focus on the individual circumstances of their employment, their understanding and compliance with AMA's meal and rest break policies, the specific instances of alleged violations underlying their individual claims, any communications with other putative class members regarding the litigation, and their damages calculations.
Meet-and-Confer. We anticipate significant meet-and-confer activity throughout the discovery phase, including correspondence and telephonic conferences with plaintiffs' counsel regarding deficient responses, overbroad or unduly burdensome requests, privilege disputes, and the scope of ESI production obligations. We will endeavor to resolve discovery disputes informally to the extent practicable, but will prepare and file discovery motions as necessary to enforce AMA's discovery rights and to resist overreaching by plaintiffs.
ESI Protocol and E-discovery. We anticipate negotiating and entering into a stipulated ESI Protocol with plaintiffs' counsel, which we expect to be finalized on or about January 13, 2023. The ESI Protocol will address search terms, date ranges, custodians, file formats for production, de-duplication methodology, privilege review protocols, and clawback provisions under Federal Rule of Evidence 502(d) (or its state-law equivalent). We will also conduct a proportionality analysis under Code of Civil Procedure section 2017.010 and the Calcor Space Facility factors to evaluate the appropriate scope and cost allocation of ESI discovery.
ESI collection, processing, hosting, review, and production will be managed in coordination with our e-discovery vendor, Marlowe Asset Management Litigation Technology Inc. (600 Anton Boulevard, Suite 900, Costa Mesa, CA 92626). Based on preliminary estimates, we anticipate that AMA's document production will encompass approximately 150,000 documents (approximately 1.2 million pages) drawn from email accounts, shared drives, the TimeTrack Pro timekeeping system, the NovaPay Solutions payroll platform, and other enterprise systems. The estimated cost for e-discovery services through Marlowe Asset Management, including collection, processing, hosting, technology-assisted review ("TAR"), quality control, and production, is $200,000–$275,000. We will provide a detailed e-discovery budget for pre-approval pursuant to OCG section 5.1 prior to the commencement of collection activities.
Third-Party Subpoena. We will prepare and serve a third-party subpoena (or, if the parties stipulate, a letter request) to NovaPay Solutions Inc. (2200 Powell Street, Suite 600, Emeryville, CA 94608) for payroll records, timekeeping data, system configuration records, and audit logs relevant to the class period. We will coordinate with Marcus Yee (Director, Client Data Services) at NovaPay regarding the scope of data extraction, the format of data production, and any technical limitations or costs associated with the extraction.
Aldrich discovery. For the Aldrich matter, we will respond to Aldrich's discovery requests (Requests for Production Nos. 1-30, Special Interrogatories Nos. 1-25), propound AMA's discovery to Aldrich (Requests for Production Nos. 1-28, Special Interrogatories Nos. 1-30), and prepare and file a Motion to Compel further responses from Aldrich regarding his communications with Halcyon Creek Productions LLC (Requests for Production Nos. 8, 11-14). Discovery in the Aldrich matter will focus on the nature and extent of Aldrich's transmissions of confidential information, the identity and business activities of Halcyon Creek Productions LLC, the existence and terms of any agreements between Aldrich and Halcyon Creek, and the calculation of Aldrich's claimed damages.
Expense Breakdown (Phase 3):
•  E-discovery vendor (Marlowe Asset Management Litigation Technology Inc.): approximately $225,000–$275,000
•  Process service, filing fees, reproduction, and miscellaneous costs: approximately $25,000–$50,000
Phase 4 — Depositions (April–June 2023) — $405,000
Phase 4 encompasses all deposition activity in both the class action and the Aldrich matter. We anticipate a total of approximately eighteen depositions (eleven by plaintiffs and seven by the defense), spanning the period from April through June 2023.
Defense Depositions of Named Plaintiffs. We will take the depositions of each of the three named plaintiffs: Marisol Fuentes, Derek Halloran, and Yesenia Padilla. These depositions will focus on each plaintiff's individual employment history with AMA, their understanding of and compliance with AMA's meal and rest break policies, the specific factual basis for their individual claims, their damages calculations, their communications with class counsel and with other putative class members, and any factors that may bear on their adequacy and typicality as class representatives.
Defense Deposition of Gavin Aldrich. We will take the deposition of Gavin Aldrich, with a focus on the following areas: (a) the circumstances and content of Aldrich's transmissions of confidential information to his personal email account and to Halcyon Creek Productions LLC; (b) Aldrich's explanation that the transmissions were related to a proposed "co-production" arrangement and the factual basis for that explanation; (c) Aldrich's compliance with the restrictive covenants in his Employment Agreement; (d) the nature, formation, and business activities of Halcyon Creek Productions LLC; and (e) the calculation and basis for Aldrich's claimed damages of $4,150,000. This deposition is anticipated to require a full day and may extend into a second day depending on the complexity of the document examination.
Preparation and Defense of AMA Witness Depositions. We anticipate that plaintiffs will notice the depositions of the following AMA personnel, and we will prepare each witness thoroughly for their testimony:
•  Lorraine Okafor (SVP, Human Resources) — designated as AMA's Person Most Knowledgeable ("PMK") regarding timekeeping policies, meal and rest break policies, the development and implementation of those policies, and any modifications to policies during the class period.
•  Celine Arroyo (Director of Production Operations) — designated as AMA's PMK regarding production scheduling, staffing models, and the operational practices governing meal and rest period compliance on active production sets across AMA's California facilities and show units.
•  Karen Fong (Payroll Manager) — regarding payroll processing, the configuration and administration of the TimeTrack Pro timekeeping system, auto-deduction practices, and the reconciliation of timekeeping data with payroll records.
•  Jonathan Mercer (President, AMA) — limited scope, primarily relevant to the Aldrich matter, including the restructuring directive, the decision to terminate Aldrich's employment, and the factual basis for the "for cause" determination.
•  Dwayne Prescott (VP, Unscripted Programming) — primarily relevant to the Aldrich cross-claims, including Prescott's knowledge of Aldrich's conduct, the chain of events leading to the discovery of the unauthorized transmissions, and the competitive implications of Aldrich's activities.
Third-Party Deposition. We anticipate taking the deposition of Marcus Yee (Director, Client Data Services, NovaPay Solutions Inc.) regarding the configuration, functionality, and data integrity of the NovaPay payroll and timekeeping platform as implemented for AMA's California operations. Mr. Yee's testimony will be relevant to both the merits of the meal and rest break claims and the class certification analysis.
Plaintiffs' Depositions of Additional Witnesses. We anticipate that plaintiffs will seek to depose additional AMA witnesses beyond the PMK designees, including show unit production managers (estimated three) and former AMA employees (estimated four). We will prepare any current AMA employee witnesses for deposition and will attend and defend those depositions as necessary.
Deposition Preparation and Analysis. For each AMA witness deposition, we will prepare a detailed deposition preparation memorandum outlining the anticipated areas of questioning, key documents to be reviewed, potential problem areas, and recommended responses. Following the completion of the deposition phase, we will prepare a comprehensive deposition summary and analysis memorandum synthesizing the testimony obtained, identifying key admissions and areas of vulnerability, and assessing the implications for class certification, summary judgment, and settlement strategy.
Expense Breakdown (Phase 4):
•  Court reporters and transcripts (18 depositions, including expedited delivery where warranted): approximately $65,000–$70,000
•  Videography (for key depositions, including all PMK depositions and the Aldrich deposition): approximately $25,000–$35,000
Phase 5 — Expert Engagement & Reports (March–June 2023) — $515,000
Phase 5 encompasses the retention, management, and coordination of AMA's testifying experts, the review and analysis of plaintiffs' expert report, and the preparation of rebuttal expert reports. Expert fees and costs represent the largest single expense item in the overall budget.
Defense Expert No. 1 — Dr. Rajesh Makhija. We recommend retaining Dr. Rajesh Makhija of Workforce Dynamics Consulting LLC (444 Castro Street, Suite 800, Mountain View, CA 94041) as AMA's expert in industrial and organizational analysis. Dr. Makhija holds a Ph.D. in Industrial-Organizational Psychology from Stanford University and has served as a testifying expert in over forty wage-and-hour class actions in California, with particular expertise in the entertainment and media production industries.
•  Scope of engagement: Dr. Makhija will conduct an analysis of the variability of workplace conditions, supervisory practices, scheduling protocols, and meal and rest break compliance across AMA's seven California facilities and fourteen show units. His opinions will address whether common proof can establish class-wide liability or whether individual inquiries predominate, supporting AMA's defense at the class certification stage on issues of commonality, typicality, and predominance.
•  Hourly rates: $650/hour (expert); $350/hour (senior analyst); $225/hour (analyst).
•  Estimated fees: approximately $160,000.
•  Report due date: May 19, 2023.
Defense Expert No. 2 — Dr. Catherine Lindstrom. We recommend retaining Dr. Catherine Lindstrom of Hargrove Analytics Inc. (515 S. Figueroa Street, Suite 1100, Los Angeles, CA 90071) as AMA's expert in economics and damages. Dr. Lindstrom holds a Ph.D. in Economics from the University of Chicago and has extensive experience preparing damages analyses and rebuttal reports in wage-and-hour class actions.
•  Scope of engagement: Dr. Lindstrom will prepare a rebuttal to the damages model presented by plaintiffs' expert, Dr. Howard Rennick of Pinnacle Economic Consulting Group LLC, and will construct an alternative damages calculation based on AMA's actual payroll and timekeeping data. Her analysis will critique the assumptions, methodology, and data inputs underlying Dr. Rennick's model and will quantify the impact of correcting for identified errors and unsupported assumptions.
•  Hourly rates: $700/hour (expert); $375/hour (senior analyst).
•  Estimated fees: approximately $180,000.
•  Report due date: June 9, 2023.
Review and Analysis of Plaintiffs' Expert Report. Plaintiffs' expert, Dr. Howard Rennick of Pinnacle Economic Consulting Group LLC, is expected to submit his expert report on or about April 28, 2023. Based on the allegations in the Complaint and the scope of the PAGA notice, we anticipate that Dr. Rennick's report will present an aggregate damages opinion of approximately $38.6 million, including approximately $12.2 million in PAGA penalties. We will conduct a thorough review and analysis of Dr. Rennick's report, identify methodological weaknesses and unsupported assumptions, and assess the viability of a Daubert/Sargon challenge to exclude or limit Dr. Rennick's testimony. See Sargon Enterprises, Inc. v. University of Southern California (2012) 55 Cal.4th 747.
Expert Report Review and Coordination. We will review and comment on draft expert reports from both Dr. Makhija and Dr. Lindstrom, ensuring that the reports are consistent with AMA's overall defense strategy, are supported by the evidentiary record, and are presented in a manner that will be effective before the Court. We will coordinate the exchange of data and information between our experts and will manage the expert discovery process, including the production of expert files and the preparation of experts for deposition.
Daubert/Sargon Challenge Assessment. We will assess the feasibility and strategic value of filing a motion to exclude or limit Dr. Rennick's expert testimony under Sargon and Evidence Code section 801. If warranted, a motion challenging Dr. Rennick's methodology will be prepared in connection with the class certification opposition (Phase 6) or as a standalone motion in limine.
Phase 6 — Class Certification Opposition (April–August 2023) — $345,000
Phase 6 encompasses all work related to opposing plaintiffs' motion for class certification, which we anticipate will be the most significant substantive motion in the class action.
Analysis of Plaintiffs' Motion. We anticipate that plaintiffs will file their motion for class certification on or about April 14, 2023. We will conduct a thorough analysis of plaintiffs' motion, supporting declarations, and evidence, and will identify the factual and legal bases for opposition.
Opposition Brief and Supporting Materials. We will prepare a comprehensive Opposition to Motion for Class Certification, supported by a detailed Memorandum of Points and Authorities addressing each element of the certification analysis under Code of Civil Procedure section 382 and the factors set forth in Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, and Duran v. Brightwater Securities (2014) 59 Cal.4th 1. The Opposition will be accompanied by the following supporting declarations:
•  Lorraine Okafor — attesting to the variability of AMA's meal and rest break practices across facilities and show units, the decentralized nature of production scheduling, and the individualized circumstances affecting compliance.
•  Celine Arroyo — attesting to the operational realities of production scheduling, the diversity of show formats and production environments, and the manner in which meal and rest break compliance is managed on a unit-by-unit and day-by-day basis.
•  Karen Fong — attesting to the configuration and operation of the TimeTrack Pro timekeeping system, the circumstances under which auto-deductions are applied and overridden, and the payroll processes relevant to the claims.
•  Dr. Rajesh Makhija — presenting expert opinions regarding the variability of conditions across AMA's operations and the predominance of individual over common issues.
•  Dr. Catherine Lindstrom — presenting expert opinions regarding the infeasibility of calculating damages on a class-wide basis using common proof and the necessity of individualized damages inquiries.
•  Devon Archer — authentication of exhibits and declarations regarding the discovery record.
We will also prepare a compendium of exhibits and file evidentiary objections to plaintiffs' expert declaration (Dr. Rennick) and named plaintiff declarations, challenging the admissibility of improper opinion testimony, hearsay, and unsupported factual assertions.
Key Defense Arguments. The principal arguments in opposition to class certification will include:
•  Predominance: Individual variation across AMA's fourteen show units and seven California facilities defeats the predominance requirement. Meal and rest break compliance is governed by the specific production schedule, staffing model, supervisory personnel, and operational demands of each show unit, resulting in material variation in the factual circumstances of each putative class member's claims.
•  Typicality: The three named plaintiffs — Fuentes, Halloran, and Padilla — work in three different divisions at three different facilities, and their individual experiences are not representative of the putative class as a whole. Each plaintiff's claims arise from circumstances unique to their particular show unit and supervisory chain.
•  Adequacy: There are potential conflicts between current and former employees within the putative class, particularly with respect to the desirability and terms of prospective injunctive relief and the allocation of any recovery between current and former employees.
•  Superiority: Individual actions or limited-issue adjudication would be a superior method of resolving the claims, given the predominance of individual issues and the availability of PAGA as an alternative enforcement mechanism.
Putative Class. The putative class consists of approximately 1,850 non-exempt, hourly employees employed by AMA at its California facilities during the class period, which is expected to run from November 1, 2018, through the date of preliminary approval of any settlement.
Reply Brief and Oral Argument. We will analyze plaintiffs' reply brief and prepare for oral argument at the class certification hearing, which we anticipate will be scheduled for approximately July 28, 2023. Following the hearing, we will prepare a post-hearing analysis of the Court's certification order for the client team, including an assessment of the implications for settlement strategy and, if appropriate, the advisability of seeking interlocutory review by writ of mandate.
Opposing Counsel. Plaintiffs are represented by Castellano Byrne & Salas LLP (Marco Castellano, Diane Salas, and Trevor Kim) as class counsel, and by Veltrano Employment Law Group PC (Sandra Higuera) as PAGA co-counsel. Based on our experience with this plaintiffs' firm, we anticipate aggressive and thorough briefing on the certification motion.
Phase 7 — Mediation & Settlement (August–September 2023) — $245,000
Phase 7 encompasses the mediation and settlement negotiation process for the class action and, potentially, a combined mediation session addressing both the class action and the Aldrich matter.
Mediator Selection and Retention. We recommend retaining the Honorable Patricia Okoro (Ret.) of Westpark Dispute Resolution Inc. (1925 Century Park East, Suite 1700, Los Angeles, CA 90067) as the mediator for the class action. Judge Okoro has extensive experience mediating complex employment class actions in the entertainment industry and is well-regarded by both plaintiffs' and defense counsel.
Mediation Briefing. We will prepare confidential mediation briefs for each mediation session. We anticipate that the first session will address the class action only, and a second session will address the class action and the Aldrich matter on a combined basis, if settlement of the class action has not been achieved in the first session. The mediation briefs will present AMA's factual and legal positions, analyze the risks and potential outcomes of continued litigation, and set forth AMA's assessment of the reasonable settlement range. We will also prepare detailed damages analyses and position summaries for submission to the mediator on a confidential basis.
Settlement Authority. Prior to each mediation session, we will prepare settlement authority memoranda and recommendations for AMA's review and approval. Consistent with OCG section 7.4, settlement authority must be approved by Mr. Tanaka (VP, Legal & Compliance) and Ms. Cartwright (General Counsel, AGMG). For settlement amounts exceeding $5,000,000, approval from Jonathan Mercer (President, AMA) and the AGMG Board's Audit and Risk Committee is also required. We will ensure that the necessary approvals are obtained in advance of each mediation session so that AMA's representatives have full settlement authority during the proceedings.
Mediation Sessions. We anticipate attending two full-day mediation sessions for the class action, with the possibility of a separate mediation session for the Aldrich matter if it is not resolved on a combined basis. We will attend the mediation sessions with a full team, including the lead partner, the senior associate responsible for day-to-day case management, and the designated AMA client representative.
Post-Mediation Reporting. Following each mediation session, we will provide prompt report-back communications to the client team, summarizing the proceedings, assessing the prospects for continued negotiations, and recommending next steps.
Settlement Agreement. If a settlement in principle is reached, we will negotiate and draft the class settlement agreement, including all exhibits, attachments, and ancillary documents. The settlement agreement will address the settlement amount, the allocation of the settlement fund between wage claims, PAGA penalties, and other components, the release of claims, the claims administration process, attorneys' fees and costs provisions, service awards for named plaintiffs, and the process for obtaining Court approval.
Target Settlement Range. Based on our preliminary assessment of the case, including our evaluation of the strength of plaintiffs' claims, the scope of potential liability, the likely range of damages, and the risks and costs of continued litigation, we currently estimate a target settlement range of $10,000,000–$15,000,000 as the gross settlement amount ("GSA") for the class action. This range is subject to revision as discovery progresses, as the Court rules on class certification, and as additional information becomes available regarding AMA's actual practices and the strength of the defense.
Expense Breakdown (Phase 7):
•  Mediation fees (Westpark Dispute Resolution Inc. — estimated 2 sessions): approximately $30,000–$35,000
Phase 8 — Settlement Approval Process (September 2023–February 2024) — $200,000
Phase 8 encompasses all work required to obtain judicial approval of the class settlement, from the filing of the motion for preliminary approval through entry of the final approval order and judgment.
Motion for Preliminary Approval. We will prepare and file AMA's Motion for Preliminary Approval of Class Settlement, supported by a detailed memorandum of points and authorities demonstrating that the settlement falls within the range of reasonableness and satisfies the requirements of California Rule of Court 3.769. The motion will be accompanied by declarations from counsel and the proposed class notice documents.
Class Notice. We will prepare the proposed class notice in both long-form and summary/postcard form, consistent with applicable due process requirements and California Rule of Court 3.769(f). The notice documents will describe the terms of the settlement, the rights of class members to participate, opt out, or object, and the procedures and deadlines for exercising those rights.
Claims Administration Coordination. We will coordinate with the retained claims administrator, Meridian Settlement Services LLC (Angela Truong; 1600 E. Fourth Street, Suite 240, Santa Ana, CA 92701), regarding the administration of the settlement, including the preparation of the class list, mailing of notice, processing of claims, opt-outs, and objections, and distribution of settlement payments. The estimated claims administration budget is $385,000, which will be funded from the settlement fund and is not included in this outside counsel budget.
Objections and Opt-Outs. We will monitor and analyze any objections and opt-out requests received during the notice period, and will prepare responses to class member objections as necessary for submission to the Court in connection with the final approval hearing.
Motion for Final Approval. We will prepare and file a Motion for Final Approval of Class Settlement, supported by a memorandum of points and authorities, declarations from Renata Vasquez, Devon Archer, and Angela Truong (claims administrator), and any supplemental exhibits. The motion will address any objections received, report on the claims rate and opt-out rate, and demonstrate that the settlement is fair, reasonable, and adequate under the governing legal standards.
Final Approval Hearing. We will prepare an oral argument outline and attend the final approval hearing. Following the hearing, we will prepare a proposed Final Approval Order and Judgment for the Court's consideration.
Post-Hearing Reporting. We will provide prompt reporting to the client team following the final approval hearing, including an analysis of the Court's ruling, the timeline for distribution of settlement funds, and any post-judgment obligations.
Key Settlement Approval Timeline Milestones:
•  Preliminary Approval Motion: target September 2023
•  Preliminary Approval Order: target October 2023
•  Class Notice Mailing: approximately 30 days after preliminary approval
•  Opt-Out/Objection Deadline: approximately 60 days after notice
•  Final Approval Hearing: approximately 90 days after preliminary approval
•  Final Approval Order: target early 2024
Phase 9 — Aldrich Individual Action (December 2022–January 2024) — $465,000
Phase 9 encompasses all work specific to the Aldrich executive dispute that is not already captured in other phases (i.e., work that is distinct from the overlapping discovery and deposition work allocated in Phases 3 and 4). The Aldrich action, Case No. 22STCV41087, has been assigned to the Honorable Catherine Villanueva, Department 52, and we anticipate it will be filed on or about December 9, 2022.
Restrictive Covenant Enforceability Analysis. A central issue in the Aldrich matter is the enforceability of the restrictive covenants contained in sections 9.1 through 9.4 of Aldrich's Employment Agreement, dated September 5, 2017, as amended August 1, 2020. California Business & Professions Code section 16600 broadly voids non-competition agreements, and the recent enactment of Senate Bill 699 reinforces California's hostility to such provisions. We will prepare a comprehensive enforceability analysis addressing the scope and enforceability of each restrictive covenant — confidentiality (§ 9.1), non-solicitation (§ 9.2), non-competition (§ 9.3), and intellectual property assignment (§ 9.4) — under both California and New York law.
Choice-of-Law Analysis. Section 14.3 of the Employment Agreement designates New York law as the governing law. We will analyze whether a California court will enforce this choice-of-law provision, particularly with respect to the restrictive covenants, in light of California's strong public policy against non-competition agreements. This analysis will apply the governmental interest analysis framework used by California courts and will evaluate whether New York's more permissive approach to non-compete enforcement will be given effect. The outcome of this analysis will significantly affect the viability of AMA's Cross-Complaint and the overall settlement strategy.
"For Cause" Termination Analysis. We will prepare a detailed analysis of whether Aldrich's termination satisfies the "for cause" standard set forth in section 7.2(b) of the Employment Agreement. The two principal grounds for termination are: (a) Aldrich's unauthorized transmission of confidential information — including development slates, talent deal memoranda, and multi-year financial projections — to his personal email address and to Halcyon Creek Productions LLC; and (b) Aldrich's insubordination in refusing to comply with the restructuring directive issued by Jonathan Mercer. If the termination is sustained as "for cause," AMA's severance obligations are eliminated, and AMA's position in the litigation is substantially strengthened.
Cross-Complaint Strategy. We will prepare a cross-complaint strategy memorandum and conduct supporting factual investigation, including forensic analysis of Aldrich's email transmissions, interviews with relevant AMA personnel, and review of the Halcyon Creek Productions LLC formation documents and business records.
Motion Practice. We anticipate that Aldrich will file a Motion to Strike the non-compete allegations from AMA's Cross-Complaint under Code of Civil Procedure section 425.16 (the anti-SLAPP statute) or under section 435. We will prepare an opposition to any such motion, arguing that the non-compete allegations are properly pled and that, to the extent the non-compete clause may be unenforceable under California law, the confidentiality and non-solicitation provisions remain independently enforceable.
Aldrich Deposition. The deposition of Gavin Aldrich is anticipated for May 22, 2023. We will prepare comprehensive deposition outlines and exhibits and conduct the deposition with a focus on the critical factual issues identified above.
Aldrich Mediation and Settlement. We anticipate a standalone Aldrich mediation session in late 2023. We will prepare a mediation brief, a settlement authority memorandum, and, if settlement is achieved, will negotiate and draft the settlement agreement. Settlement terms are expected to include consideration of RSU acceleration valuation scenarios, tax treatment analysis (including potential Section 409A implications), and the scope and duration of any modified restrictive covenant obligations post-settlement. Upon resolution, we will prepare a Stipulation for Dismissal with Prejudice and file a Request for Dismissal (form CIV-110).
Aldrich Settlement Parameters. The following financial parameters frame the settlement analysis for the Aldrich matter:
•  Aldrich base salary at termination: $485,000/year
•  Severance entitlement if termination without cause: $970,000 (24 months' base salary)
•  Last annual bonus (FY 2021): $225,000
•  Unvested RSUs at termination: 15,300 shares (of 42,500 total grant), estimated current value approximately $332,200
•  Aldrich's aggregate demand (inclusive of all claims): $4,150,000
•  AMA target settlement range: $1,500,000–$3,000,000
Opposing Counsel. Aldrich is represented by Cameron Whitfield and Julia Nazarian of Whitfield & Associates (9465 Wilshire Boulevard, Suite 320, Beverly Hills, CA 90212). Based on our familiarity with Mr. Whitfield's practice, we anticipate aggressive advocacy but a willingness to engage in meaningful settlement discussions once the discovery record is developed.
Insurance Coverage. AMA's EPL carrier, Pemberton Mutual Assurance Co., has denied coverage for the Aldrich dispute based on the Insured v. Insured Exclusion (Policy § IV.C) and the scope of the "Employment Practices" definition. Accordingly, the defense and any settlement of the Aldrich matter will be entirely self-funded by AMA. This coverage denial is addressed further in Phase 10.
Phase 10 — Insurance Coordination & Administration ($80,000)
Phase 10 encompasses all work related to the coordination of AMA's insurance coverage for the Fuentes class action and the Aldrich matter, including tender, coverage analysis, carrier correspondence, and settlement allocation.
EPL Policy Coordination. We will coordinate with AMA's EPL carrier, Pemberton Mutual Assurance Co. (Policy No. PMA-EPL-2022-00837), regarding all aspects of coverage for the Fuentes class action. The EPL policy provides a $5,000,000 self-insured retention ("SIR") per claim and a $15,000,000 aggregate limit. We will analyze Pemberton's reservation of rights letter (anticipated December 2022), prepare coverage analysis memoranda addressing the scope of coverage, and track and report SIR erosion to Pemberton on a monthly basis. We will also submit monthly invoices to Pemberton for audit purposes, consistent with the carrier's defense counsel approval terms, and will coordinate consent-to-settlement correspondence and demand for policy contribution if and when a class settlement is reached.
D&O Policy Coordination. We will coordinate with AMA's D&O carrier, Redcliffe Specialty Insurance Ltd. (Policy No. RSI-DO-2022-04419; $10,000,000 primary tower) and excess carrier Ashford Re Ltd. (Policy No. ARL-EX-2022-01102; $25,000,000 excess tower). A precautionary notice was submitted to Redcliffe on November 8, 2022. D&O coverage is relevant only if individual directors or officers are named as defendants. No individual officers have been named to date, but we will continue to monitor for potential D&O implications, particularly in the Aldrich action if Aldrich amends his complaint to add individual officer defendants such as Jonathan Mercer or Dwayne Prescott.
Broker Coordination. We will coordinate with AMA's insurance broker, Kestrel Risk Advisors Ltd. (Samuel Okonkwo, Managing Director; One Broadgate, London EC2M 2QS), regarding all insurance-related matters, including tender correspondence, reservation of rights analysis, and settlement allocation strategy.
Coverage Analysis. We will prepare coverage analysis memoranda for both the EPL and D&O policies, addressing the scope of covered claims, the applicability of policy exclusions, the treatment of defense costs under the SIR, and the carrier's obligations with respect to settlement contributions. Key coverage issues include the potential application of the Penalty Exclusion (Policy § IV.F) to PAGA penalties, the Intentional Acts Exclusion (Policy § IV.A) to any findings of willful violations, and the Insured v. Insured Exclusion (Policy § IV.C) to the Aldrich matter.
Aldrich Coverage Denial. We will prepare a response to Pemberton's denial of coverage for the Aldrich executive dispute, preserving AMA's rights to challenge the denial if warranted. Based on our preliminary analysis, we anticipate that the denial is likely to be sustained given the Insured v. Insured Exclusion and the narrow definition of covered "Employment Practices" under the policy, but we will conduct a thorough analysis and advise AMA of its options.
Settlement Allocation. If a class settlement is reached, we will advise AMA regarding the allocation of settlement funds between insured and self-funded portions, with the objective of maximizing the carrier's contribution for covered claims while accounting for potentially excluded components such as PAGA penalties.
IV. Key Assumptions
The budget set forth in this memorandum is based on the following key assumptions. Material changes in any of these assumptions may require revision of the budget, and we will promptly notify AMA of any such changes.
1. Halloran Consolidation. We assume that the Halloran action (Case No. 22STCV39501), which has not yet been filed as of the date of this memorandum but is anticipated imminently, will be consolidated with the Fuentes action and will not require a separately budgeted defense. All work related to the Halloran action is included within the phase-based budget set forth above. If consolidation is denied or if the Halloran action proceeds on a separate track, a supplemental budget for the Halloran defense will be prepared.
2. Settlement Assumption. This budget assumes that the class action will proceed through class certification briefing and, if certified, to mediation and settlement. The budget does not include trial costs. If the class action does not settle and proceeds to trial, a supplemental trial budget will be prepared. Estimated trial costs (not included in this budget): $1,200,000–$1,800,000 in additional fees and expenses for an estimated fifteen to twenty court-day trial, including trial preparation, witness preparation, exhibit preparation, daily trial attendance, and post-trial motions.
3. Aldrich Settlement Assumption. This budget assumes that the Aldrich individual action will be resolved through mediation and settlement, as contemplated in Phase 9 above. If the Aldrich matter proceeds to trial, an additional $300,000–$500,000 in fees and expenses should be anticipated, covering trial preparation, a five to seven court-day bench trial, and post-trial proceedings.
4. Expert Expenses (Phase 5). Expert expenses represent the largest single expense item in the budget and include the estimated fees for Dr. Rajesh Makhija (approximately $160,000) and Dr. Catherine Lindstrom (approximately $180,000). The remaining expert expense allocation covers ancillary costs, including data analysis, report production, hearing preparation, and expert deposition defense. Actual expert costs may vary depending on the scope of work ultimately required, the volume of data to be analyzed, and the extent of supplemental work necessitated by plaintiffs' expert opinions.
5. E-discovery Expenses (Phase 3). E-discovery expenses are estimated based on the processing of approximately 150,000 documents through our e-discovery vendor, Marlowe Asset Management Litigation Technology Inc. (600 Anton Boulevard, Suite 900, Costa Mesa, CA 92626). Actual costs will depend on the volume of data collected from AMA's custodians and enterprise systems, the number of search terms applied during the culling and review process, the extent to which technology-assisted review is utilized, and the scope of any supplemental productions required by the Court or agreed to in connection with meet-and-confer discussions.
6. No Interlocutory Appeal. This budget does not include the potential costs of an interlocutory appeal by writ of mandate from a class certification order. If the Court grants class certification and an appeal is warranted, a supplemental budget of $150,000–$250,000 should be anticipated for the preparation and prosecution of a petition for writ of mandate in the California Court of Appeal.
7. Staffing. The budget is based on the engagement team identified in the Staffing Plan Memorandum provided separately, with the following personnel and approximate allocation percentages:
•  Renata Vasquez (Partner) — $1,125/hour — approximately 25–30% allocation. Ms. Vasquez will serve as lead relationship partner and will be responsible for overall case strategy, class certification opposition, mediation, and client reporting.
•  Bernard Crawford (Partner) — $1,075/hour — approximately 10–15% allocation. Mr. Crawford will focus on the Aldrich individual action, cross-complaint strategy, and insurance coordination.
•  Devon Archer (Senior Associate) — $785/hour — approximately 60–70% allocation. Mr. Archer will serve as the day-to-day case manager and will be responsible for discovery management, deposition preparation, motion drafting, and expert coordination.
•  Nadia Petrov (Associate) — $625/hour — approximately 80–90% allocation. Ms. Petrov will be responsible for discovery responses, document review coordination, legal research, and drafting of supporting declarations and exhibits.
•  Sophia Meng (Paralegal) — $375/hour — as needed. Ms. Meng will provide paralegal support for document management, filing, deposition logistics, and trial preparation.
Consistent with OCG section 4.3, additional attorneys or support staff will be assigned to the engagement only with prior notice to and approval from AMA's designated contact (Gregory Tanaka). We do not anticipate the need for additional staffing under the current budget assumptions, but will advise AMA promptly if circumstances warrant additional resources.
V. Comparison to Insurance Coverage
The following analysis compares the estimated budget to AMA's available insurance coverage and provides recommendations regarding coverage strategy.
EPL Policy (Pemberton Mutual Assurance Co.)
•  Policy Number: PMA-EPL-2022-00837
•  Self-Insured Retention (SIR): $5,000,000 per claim
•  Aggregate Limit: $15,000,000
•  Tender Status: Tender letter submitted November 8, 2022; acknowledgment of coverage anticipated by late December 2022, subject to reservation of rights
Defense Cost Treatment. Based on this preliminary budget, total defense costs (fees plus expenses) are estimated at $3,450,000, which falls within the $5,000,000 SIR. Under the terms of the EPL policy, defense costs erode the SIR. AMA's combined defense costs and any indemnity payments (including self-funded settlement contributions) will count toward exhaustion of the SIR. If AMA's total expenditu

CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT

MEMORANDUM

Record

Parties

Dates

Amounts