1017-00004 · Entities. Aurelius Global Media Group · Mediation & Settlement/Class Action

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CALDERWOOD & HARKNESS LLP 777 South Flower Street, Suite 4200 Los Angeles, California 90017

CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT This memorandum is a privileged and confidential attorney-client communication and constitutes attorney work product. It is intended solely for the use of the individuals and entities to whom it is addressed. Any unauthorized review, use, disclosure, or distribution is strictly prohibited. If you have received this memorandum in error, please notify the sender immediately and destroy all copies.

MEMORANDUM

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

FROM: Devon Archer, Senior Associate, Calderwood & Harkness LLP

DATE: September 12, 2023

RE: Key Terms of Proposed Class Settlement — Fuentes v. Aurelius Media Americas Inc., LASC Case No. 22STCV38214 (Consolidated); C&H Matter No. 1017-00004

I. Purpose

This memorandum summarizes the material terms of the proposed Class Action Settlement Agreement and Release (the "Settlement Agreement") negotiated at Mediation Session #2 on September 8, 2023, before the Honorable Patricia Okoro (Ret.) of Westpark Dispute Resolution Inc. The purpose of this memorandum is to facilitate client review and approval of the Settlement Agreement's material terms prior to execution.

If approved by AMA and AGMG, the Settlement Agreement is expected to be executed by all parties no later than September 15, 2023. Following execution, Calderwood & Harkness will file the Motion for Preliminary Approval of Class Action Settlement (the "Preliminary Approval Motion") with the Los Angeles Superior Court by September 22, 2023.

By way of background, the parties reached the terms summarized below following two full-day mediation sessions — the first held on August 25, 2023, and the second held on September 8, 2023 — both conducted before Judge Okoro. These sessions were preceded by extensive formal discovery, which included the production of 147,832 documents by AMA (comprising approximately 1.2 million pages), the production of 3,412 documents by Plaintiffs, eighteen fact and expert depositions, and the submission of competing expert reports on damages and class certification. The settlement negotiations also took place against the backdrop of the Court's August 11, 2023 Order granting Plaintiffs' motion for class certification in part, issued by the Honorable Raymond Escobedo of Department 34 of the Los Angeles Superior Court (certifying the first meal period auto-deduction, wage statement, and UCL claims, while denying certification of the rest period, off-the-clock/overtime, minimum wage, second meal period, and waiting time penalty claims). The partial certification order materially shaped the parties' respective risk assessments and settlement postures, as discussed further in Section V below.

II. Material Terms

The material terms of the proposed Settlement Agreement are set forth below. Unless otherwise noted, all terms are subject to Court approval.

A. Gross Settlement Amount

The Gross Settlement Amount ("GSA") is $14,750,000.00 (Fourteen Million Seven Hundred Fifty Thousand Dollars). The GSA is non-reversionary, meaning that no portion of the fund reverts to AMA in the event that any class member fails to negotiate a settlement check or otherwise does not participate in the claims process. The entire GSA will be distributed, applied to settlement costs, or donated to the designated cy pres recipient as described in Section II.N below.

B. Class Definition

The proposed settlement class (the "Settlement Class") is defined as follows:

All current and former non-exempt, hourly employees of Aurelius Media Americas Inc. who worked in the State of California at any time during the period from November 1, 2018 through October 31, 2023, and who were subject to AMA's automatic meal period deduction policy as implemented through the NovaPay Solutions TimeTrack Pro timekeeping system.

The estimated size of the Settlement Class is approximately 1,850 individuals, based on data extracted from AMA's payroll and timekeeping records and validated during discovery.

The class period as modified in the settlement runs from November 1, 2018 through October 31, 2023 (the "Class Period"). This class period reflects the applicable statute of limitations for the asserted claims, adjusted to account for the tolling effects of the COVID-19 emergency rules and the filing date of the original complaint.

C. Released Claims

The Settlement Agreement provides for a broad release of claims (the "Released Claims") encompassing all wage-and-hour claims arising from the operative facts alleged in the Consolidated Complaint and discovered during litigation, including both the claims that were certified by the Court and those claims for which class certification was denied. Specifically, the Released Claims include the following:

Certified Claims:

• First meal period auto-deduction claims under California Labor Code Sections 226.7 and 512 (premium pay for missed, late, or shortened first meal periods resulting from AMA's automatic thirty-minute deduction policy);

• Wage statement claims under California Labor Code Section 226 (derivative inaccurate wage statement claims arising from the alleged meal period violations); and

• Unfair Competition Law ("UCL") claims under California Business and Professions Code Section 17200 (unlawful, unfair, and fraudulent business practices predicated on the underlying Labor Code violations).

Non-Certified Claims Included in Release:

• Rest period claims under California Labor Code Section 226.7 (premium pay for missed, late, or shortened rest periods);

• Off-the-clock and overtime claims under California Labor Code Sections 510 and 1194 (unpaid overtime compensation for alleged off-the-clock work);

• Minimum wage claims under California Labor Code Sections 1197 and 1197.1 (alleged minimum wage violations arising from unpaid time);

• Second meal period claims (premium pay for missed, late, or shortened second meal periods for shifts exceeding ten hours); and

• Waiting time penalty claims under California Labor Code Sections 201 through 203 (penalties for failure to timely pay all wages due upon separation of employment).

PAGA Claims:

All representative claims asserted under the California Private Attorneys General Act ("PAGA"), California Labor Code Sections 2698 through 2699.8, encompassing civil penalties for all of the above-referenced Labor Code violations.

Individual Claims:

All individual claims that could have been asserted by any Settlement Class member based on the facts alleged in the Consolidated Complaint, including but not limited to claims for statutory penalties, interest, and attorneys' fees arising from the same operative facts.

The breadth of the release is a significant strategic advantage of the settlement, as discussed further in Section VI below.

D. PAGA Payment

The Settlement Agreement allocates $750,000.00 from the GSA for the settlement of PAGA claims. Consistent with the statutory allocation formula prescribed by California Labor Code Section 2699(i), this amount will be distributed as follows:

The PAGA settlement is subject to LWDA approval. Class counsel will submit the required notice to the LWDA in accordance with Labor Code Section 2699(l)(2).

E. Attorneys' Fees (Class Counsel)

Class counsel will petition the Court for attorneys' fees in the amount of 33.33% of the GSA, calculated as follows:

$14,750,000.00 × 0.3333 = $4,916,175.00

This fee request is subject to Court approval and will be evaluated by the Court under both the percentage-of-the-fund and lodestar-crosscheck methods. A fee percentage of one-third of a common fund is well within the range routinely approved by California courts in wage-and-hour class action settlements.

Class counsel consists of the following firms:

• Lead Counsel: Castellano Byrne & Salas LLP (Marco Castellano and Diane Salas), Los Angeles, California; and

• PAGA Co-Counsel: Veltrano Employment Law Group PC (Sandra Higuera), San Diego, California.

F. Litigation Costs Reimbursement

Class counsel will seek reimbursement of litigation costs and expenses in an amount not to exceed $412,300.00. All costs must be documented and itemized and are subject to Court approval. Based on our review of class counsel's informal cost disclosures during mediation, anticipated costs include expert witness fees, deposition transcript costs, document review and production costs, mediation fees, and court filing fees.

G. Service Awards (Class Representatives)

The Settlement Agreement provides for the following service awards (also referred to as incentive awards or enhancement payments) to the three named Plaintiffs who served as class representatives:

These amounts are subject to Court approval and are intended to compensate the named Plaintiffs for their time, effort, and risk undertaken in prosecuting the action on behalf of the class. The amounts are consistent with service awards routinely approved in comparable California employment class actions.

H. Settlement Administration

The parties have agreed to retain Meridian Settlement Services LLC as the Claims Administrator. The principal contact at Meridian is Angela Truong, who has extensive experience administering wage-and-hour class action settlements in California courts.

Meridian Settlement Services LLC 1600 E. Fourth Street, Suite 240 Santa Ana, CA 92701

The administration budget is $385,000.00, to be paid from the GSA. This amount covers all costs associated with notice distribution (including mailed notice, reminder notices, and any required re-mailing to updated addresses obtained through skip-tracing), claims processing, settlement fund administration, tax reporting, and check issuance. Meridian's proposed administration costs were evaluated against competing bids from two other settlement administration firms and were determined to be reasonable in light of the class size and distribution requirements.

I. Net Settlement Fund

After deducting the amounts described above from the GSA, the Net Settlement Fund ("NSF") — the amount available for distribution to Settlement Class members — is calculated as follows:

The NSF represents approximately 55.9% of the GSA. This ratio is consistent with the typical range observed in California wage-and-hour class settlements, where attorneys' fees and costs commonly consume 35–45% of the gross fund.

J. Distribution Formula

The NSF will be distributed on a pro rata basis to all Settlement Class members who do not timely submit a valid opt-out request. No claim form will be required; all eligible class members who do not opt out will automatically receive a payment. The allocation formula for individual payments is as follows:

• 60% of each class member's individual share will be calculated based on the number of weeks worked by that class member during the Class Period, relative to the total number of weeks worked by all participating class members; and

• 40% of each class member's individual share will be calculated based on the number of recorded overtime hours worked by that class member during the Class Period, relative to the total number of recorded overtime hours worked by all participating class members.

This blended formula was negotiated to reflect the dual nature of the underlying claims — the meal period and wage statement claims (which affect all hours worked) and the off-the-clock and overtime claims (which disproportionately affect class members with higher overtime exposure).

Based on the estimated class size of approximately 1,850 individuals and assuming no opt-outs, the estimated average individual payment is:

$8,251,525.00 ÷ 1,850 = approximately $4,460.00 per class member

Actual individual payments will vary depending on each class member's tenure and overtime history during the Class Period. Based on preliminary modeling using AMA's payroll data, we estimate that individual payments will range from approximately $800 (for short-tenure employees with minimal overtime) to approximately $14,200 (for long-tenure employees with significant overtime exposure).

K. Tax Treatment

Settlement payments to individual class members will be allocated for tax purposes as follows:

AMA's employer-side payroll tax obligations on the wage portion of the settlement payments will be paid from the GSA and are included in the settlement administration budget. Settlement Class members will be responsible for their own individual income tax obligations. The Claims Administrator will issue all required tax forms (Forms W-2 and 1099) to class members and to the appropriate taxing authorities.

We note that the 50% wage allocation is a negotiated term that represents a compromise between the parties. AMA's position during negotiations was that a higher wage allocation (closer to 60–65%) was appropriate, while Plaintiffs sought a lower allocation (approximately 40%) to minimize the tax burden on class members. The agreed-upon 50% allocation is consistent with allocations approved by California courts in comparable settlements and should withstand judicial scrutiny.

L. Opt-Out Provisions

Settlement Class members may exclude themselves from the settlement by submitting a timely written opt-out request to the Claims Administrator by the opt-out deadline (as set by the Court in the Preliminary Approval Order).

The Settlement Agreement includes a "blow" provision (walkaway right) in favor of AMA: if the number of valid opt-outs exceeds 5% of the Settlement Class (i.e., 93 or more individuals), AMA has the unilateral right to void the Settlement Agreement in its entirety. This provision protects AMA against a scenario in which a significant number of class members elect to opt out — potentially to pursue higher-value individual claims — while AMA remains obligated to fund the full GSA for the remaining class.

If AMA exercises the blow provision, the Settlement Agreement is deemed void, the settlement funds are returned, and the litigation resumes. Based on our experience with comparable settlements, opt-out rates in California wage-and-hour class actions typically fall in the range of 0.5–2.0%, and we do not anticipate that the 5% threshold will be triggered.

M. Objection Process

Any Settlement Class member who does not opt out may object to the settlement by filing a written objection with the Court and serving a copy on both class counsel and defense counsel by the objection deadline. Written objections must include the objecting class member's name, contact information, last four digits of their Social Security number, a statement of the grounds for the objection, and any supporting documentation.

AMA and class counsel will have the opportunity to respond to any objections filed, both in writing and at the Final Approval Hearing. The Court will consider all objections in determining whether to grant final approval of the settlement as fair, reasonable, and adequate under California Rules of Court, Rule 3.769.

N. Cy Pres

Any settlement funds attributable to checks that remain uncashed after 180 days from the date of issuance will be donated to the Legal Aid Foundation of Los Angeles ("LAFLA") as the designated cy pres recipient. LAFLA is a well-established legal services organization that provides free civil legal assistance to low-income residents of Los Angeles County, with a particular focus on employment law matters. The selection of LAFLA as the cy pres recipient is consistent with prevailing judicial preferences for organizations that serve the interests of the affected class.

O. No Admission of Liability

The Settlement Agreement includes a standard provision confirming that AMA denies all allegations asserted in the Consolidated Complaint and in the PAGA notice, and that the settlement does not constitute and shall not be construed as an admission of liability, wrongdoing, or fault by AMA or any of its affiliates, officers, directors, employees, or agents. The settlement is entered into solely for the purpose of avoiding the burden, expense, and uncertainty of continued litigation.

P. Injunctive and Prospective Relief

The Settlement Agreement does not require AMA to implement any injunctive or prospective relief, including any court-mandated changes to its employment policies, timekeeping systems, or meal and rest period practices.

We note, however, that AMA has already voluntarily implemented the following corrective measures, which were completed prior to the commencement of settlement negotiations:

• December 2022: AMA corrected the automatic meal period deduction threshold in the NovaPay Solutions TimeTrack Pro system from 6.0 hours to 5.0 hours at all seven California facilities, thereby aligning the system configuration with the requirements of California Labor Code Section 512(a); and

• December 2022: AMA activated the "Missed Meal Attestation" feature within the TimeTrack Pro system at all seven California facilities, which requires non-exempt employees to affirmatively confirm whether they received a compliant meal period before the system applies the automatic deduction.

These voluntary corrective measures address the core factual basis of Plaintiffs' meal period auto-deduction claims. Because these changes were implemented voluntarily, they cannot be characterized by Plaintiffs or the Court as court-ordered injunctive relief, and they are not subject to ongoing judicial monitoring or enforcement.

III. Funding

The $14,750,000.00 GSA will be funded from the following sources:

EPL Coverage. Pemberton Mutual Assurance Co. ("Pemberton") acknowledged coverage under AMA's Employment Practices Liability ("EPL") insurance policy (Policy No. PMA-EPL-2022-00837) on December 22, 2022, subject to a reservation of rights. Pemberton's reservation of rights specifically reserved its position with respect to PAGA penalties (which Pemberton contends may constitute uninsurable penalties under California public policy) and claims arising from alleged willful violations of the Labor Code. Notwithstanding these reservations, Pemberton has authorized a contribution of $9,250,000.00 toward the settlement. This authorized contribution is subject to Pemberton's issuance of a formal carrier authorization letter (also referred to as a consent-to-settle letter). Calderwood & Harkness submitted the formal consent request to Pemberton's coverage counsel at Whitfield Gallagher LLP on September 10, 2023, and we anticipate receiving the carrier authorization letter within the next several business days. We will notify the client team immediately upon receipt.

Self-Insured Retention. AMA's EPL policy carries a self-insured retention ("SIR") of $5,000,000.00. As of September 2023, AMA has incurred approximately $3,100,000.00 in defense costs (including Calderwood & Harkness's fees and expenses, expert fees, e-discovery vendor costs, and related litigation expenses), which have been applied against the SIR. The SIR has been substantially exhausted, and Pemberton's coverage obligations have been triggered with respect to eligible settlement amounts above the remaining SIR balance.

Aldrich Matter. We note for the record that the related executive dispute captioned Aldrich v. Aurelius Media Americas Inc., LASC Case No. 22STCV41087, is not resolved under this Settlement Agreement and was not the subject of negotiations at Mediation Session #2. Pemberton has denied coverage for the Aldrich matter on the grounds that it falls outside the scope of the EPL policy's class/collective action coverage provisions. Any future settlement of the Aldrich matter will be entirely self-funded by AMA. We will address the Aldrich matter separately in a forthcoming memorandum.

IV. Settlement Approval Timeline

The anticipated timeline for the settlement approval process is as follows:

This timeline is consistent with the procedural framework established by California Rules of Court, Rule 3.769, and is subject to adjustment based on the Court's scheduling preferences and docket availability in Department 34.

Funding Coordination. AMA must be prepared to deposit its $5,500,000.00 self-funded share into the settlement fund escrow account administered by Meridian Settlement Services within fourteen (14) calendar days of the Court's entry of the Final Approval Order. AMA should also coordinate with Pemberton in advance of the funding deadline to ensure that Pemberton's $9,250,000.00 carrier contribution is wired to the escrow account within the same timeframe. We recommend that Gregory Tanaka engage AMA's treasury and finance teams promptly to ensure that the necessary funding mechanisms are in place well in advance of the anticipated Final Approval Hearing.

V. Comparison to Claimed Exposure and Defense Valuation

The following table compares the GSA to the parties' respective damages estimates as presented in competing expert reports:

The GSA of $14,750,000.00 falls within the range that California courts have consistently recognized as appropriate for class action settlements of this nature. Empirical studies of California wage-and-hour class action settlements indicate that settlements typically resolve in the range of approximately 15–40% of the plaintiffs' aggregate claimed exposure. At 38.2% of Plaintiffs' claimed exposure, the GSA falls at the upper end of this range, reflecting several case-specific factors:

• The strength of Plaintiffs' first meal period auto-deduction claim, which was bolstered by the Court's August 11, 2023 partial certification order granting certification on the meal period, wage statement, and UCL claims;

• The systemic nature of the auto-deduction issue, which was implemented uniformly through AMA's NovaPay Solutions TimeTrack Pro system across all seven California facilities;

• The large volume of supporting documentary evidence produced during discovery, including system configuration logs, payroll records, and employee declarations; and

• The risks associated with proceeding to trial on the certified claims, including the possibility of an adverse verdict and potential PAGA penalties.

Conversely, the settlement is favorable to AMA when viewed against the full scope of Plaintiffs' demands, which included $38,600,000.00 in aggregate damages. The GSA is also within a reasonable range when measured against the defense damages estimate of $5,800,000.00, representing a multiple of 2.54× — a premium that reflects the litigation risk inherent in the certified claims and the value of the broad release of non-certified claims.

VI. Key Strategic Advantages of the Settlement

Based on our assessment of the litigation posture, the proposed settlement offers the following strategic advantages to AMA:

1. Broad Release Extinguishes All Claims. The release provisions of the Settlement Agreement are unusually comprehensive. The release covers not only the three certified claims (first meal period auto-deduction, wage statement, and UCL) but also the five categories of non-certified claims (rest period, off-the-clock/overtime, minimum wage, second meal period, and waiting time penalties), as well as all PAGA representative claims and all individual claims that could have been asserted based on the same operative facts. This eliminates the substantial risk that individual Settlement Class members could pursue the non-certified claims through separate individual lawsuits, subsequent class actions, or additional PAGA actions predicated on the same factual allegations. Absent the settlement, AMA would face ongoing exposure to these non-certified claims, which Plaintiffs could pursue through alternative procedural vehicles.

2. EPL Carrier Participation Reduces AMA's Out-of-Pocket Cost. Pemberton's $9,250,000.00 contribution covers 62.7% of the GSA, reducing AMA's self-funded class settlement cost to $5,500,000.00. Notably, AMA's self-funded settlement contribution of $5,500,000.00 is below the defense expert's aggregate damages estimate of $5,800,000.00. In other words, through the carrier's participation, AMA is resolving the entire action — including both certified and non-certified claims — for less than the amount that AMA's own damages expert estimated the certified claims alone to be worth at trial.

3. Avoids Significant Trial Costs and Attendant Risk. Proceeding to trial on the certified claims would have required an estimated $1,200,000 to $1,800,000 in additional attorneys' fees and litigation expenses, including trial preparation, expert witness testimony, jury consultant fees, and post-trial briefing. Trial on the meal period auto-deduction claim presented meaningful risk: the Court's certification order expressly found that Plaintiffs had established predominance on the common question of whether AMA's automatic meal period deduction policy, as implemented through the TimeTrack Pro system, resulted in a systematic failure to provide compliant meal periods. This finding, while not dispositive of the merits, was a strong signal regarding the viability of Plaintiffs' common-question theory and would have been difficult to overcome at trial.

4. Certainty and Finality. The settlement provides AMA and AGMG with a definitive resolution of the Fuentes litigation that can be factored into AGMG's financial planning, quarterly and annual financial reporting, and public company disclosures. A settlement of this magnitude will likely require disclosure in AGMG's SEC filings. The certainty of a negotiated settlement — as opposed to the unpredictable range of outcomes associated with trial and potential appeal — permits AGMG's finance and investor relations teams to present a clear and definitive picture to shareholders, auditors, and regulators.

5. No Injunctive or Prospective Relief. The settlement does not require AMA to implement any court-mandated changes to its employment policies, practices, or timekeeping systems. This is a significant advantage, as court-ordered injunctive relief in employment class actions frequently involves ongoing judicial monitoring, compliance reporting obligations, and the risk of contempt proceedings for alleged non-compliance. The corrective measures that AMA voluntarily implemented in December 2022 — the correction of the auto-deduction threshold and the activation of the Missed Meal Attestation feature — were undertaken proactively and are not subject to any judicial oversight or enforcement mechanism under the settlement.

6. No Admission of Liability. AMA admits no liability under the Settlement Agreement. This preserves AMA's position in any future unrelated employment litigation, prevents the use of the settlement as evidence of wrongdoing in other proceedings, and avoids any reputational harm that could result from a formal admission or adverse verdict.

VII. Recommendation

Based on our analysis of the litigation risks, the terms of the proposed settlement, the comparison to the parties' respective damages estimates, and the strategic advantages outlined above, we recommend that AMA execute the Settlement Agreement.

The GSA of $14,750,000.00 is within the range of settlement authority previously authorized by the following memoranda:

• Settlement Authority Memorandum dated August 15, 2023 (issued prior to Mediation Session #1), approved by Gregory Tanaka, Philippa Cartwright, Jonathan Mercer (CFO, AGMG), and the AGMG Board's Audit and Risk Committee; and

• Revised Settlement Authority Memorandum dated September 4, 2023 (issued prior to Mediation Session #2), similarly approved by the foregoing individuals and committee.

The settlement represents a favorable outcome that appropriately balances AMA's litigation risk on the certified claims with the significant cost savings achieved through partial certification (which narrowed the scope of certified claims), the aggressive defense posture maintained throughout discovery and expert proceedings, and the substantial carrier contribution negotiated with Pemberton.

Upon receipt of client approval, Calderwood & Harkness will take the following immediate steps:

1. Prepare the final execution version of the Settlement Agreement for signature by all parties by September 15, 2023;

2. Coordinate with class counsel at Castellano Byrne & Salas LLP and Veltrano Employment Law Group PC to finalize any remaining drafting issues;

3. Submit the Settlement Agreement and the required PAGA settlement notice to the LWDA;

4. Prepare and file the Preliminary Approval Motion, including all supporting declarations and exhibits, by September 22, 2023; and

5. Coordinate with Meridian Settlement Services to commence the class notice preparation process.

We respectfully request that Gregory Tanaka confirm client approval at his earliest convenience and coordinate with AMA's finance team regarding the funding timeline described in Sections III and IV above. We further recommend that Gregory Tanaka engage Graystone & Parr LLP, AGMG's external auditors, regarding the appropriate financial statement presentation and disclosure of the settlement, including any required adjustments to litigation reserves and contingent liability disclosures in AGMG's upcoming quarterly filings.

We are available to discuss any questions regarding the settlement terms or our recommendation at your convenience.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Devon Archer Senior Associate 777 South Flower Street, Suite 4200 Los Angeles, California 90017 Direct: (213) 555-7238

Email: darcher@calderwoodharkness.com

cc: Renata Vasquez, Partner, Calderwood & Harkness LLP Bernard Crawford, Partner, Calderwood & Harkness LLP

CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT

PAGA Allocation	Amount
75% to the California Labor and Workforce Development Agency ("LWDA")	$562,500.00
25% to aggrieved employees	$187,500.00
Total PAGA Payment	$750,000.00
Class Representative	Service Award
Marisol Fuentes (Lead Plaintiff)	$15,000.00
Derek Halloran	$10,000.00
Yesenia Padilla	$10,000.00
Total Service Awards	$35,000.00
Component	Amount
Gross Settlement Amount	$14,750,000.00
Less: Attorneys' Fees (33.33%)	($4,916,175.00)
Less: Litigation Costs (cap)	($412,300.00)
Less: Service Awards	($35,000.00)
Less: Settlement Administration	($385,000.00)
Less: PAGA Payment	($750,000.00)
Net Settlement Fund	$8,251,525.00
Allocation Category	Percentage	Tax Treatment
Wages	50.00%	Subject to federal and state income tax withholding, FICA (employee and employer shares), FUTA, and California SDI/SUI
Interest and Penalties	33.33%	Reported on IRS Form 1099-MISC; not subject to employment tax withholding
Non-Wage Damages	16.67%	Reported on IRS Form 1099-MISC; not subject to employment tax withholding
Funding Source	Amount	Percentage of GSA
Pemberton Mutual Assurance Co. (EPL Policy No. PMA-EPL-2022-00837)	$9,250,000.00	62.7%
AMA Self-Funded	$5,500,000.00	37.3%
Total GSA	$14,750,000.00	100.0%

Event	Anticipated Date
Settlement Agreement execution (all parties)	September 15, 2023
Preliminary Approval Motion filed	September 22, 2023
Preliminary Approval Order (Court ruling)	Mid-October 2023 (est.)
Class Notice mailing (by Claims Administrator)	Approximately 30 days after entry of Preliminary Approval Order
Opt-Out and Objection Deadline	Approximately 60 days after mailing of Class Notice
Final Approval Hearing	Approximately 90 days after entry of Preliminary Approval Order
AMA funding obligation (payment into escrow)	Within 14 calendar days of entry of Final Approval Order
Metric	Amount
Plaintiffs' aggregate damages claim (Dr. Howard Rennick, Pinnacle Economic Consulting Group; expert report dated April 28, 2023)	$38,600,000.00 (including $12,200,000 in PAGA civil penalties)
Defense aggregate damages estimate (Dr. Catherine Lindstrom, Hargrove Analytics Inc.; rebuttal expert report dated June 9, 2023)	$5,800,000.00
Gross Settlement Amount	$14,750,000.00
GSA as percentage of Plaintiffs' aggregate damages claim	38.2%
GSA as multiple of Defense aggregate damages estimate	2.54× ($14,750,000 ÷ $5,800,000)

CALDERWOOD & HARKNESS LLP 777 South Flower Street, Suite 4200 Los Angeles, California 90017
CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT This memorandum is a privileged and confidential attorney-client communication and constitutes attorney work product. It is intended solely for the use of the individuals and entities to whom it is addressed. Any unauthorized review, use, disclosure, or distribution is strictly prohibited. If you have received this memorandum in error, please notify the sender immediately and destroy all copies.
MEMORANDUM
TO: Gregory Tanaka, Vice President, Legal & Compliance, Aurelius Media Americas Inc. Philippa Cartwright, General Counsel, Aurelius Global Media Group
FROM: Devon Archer, Senior Associate, Calderwood & Harkness LLP
DATE: September 12, 2023
RE: Key Terms of Proposed Class Settlement — Fuentes v. Aurelius Media Americas Inc., LASC Case No. 22STCV38214 (Consolidated); C&H Matter No. 1017-00004
I. Purpose
This memorandum summarizes the material terms of the proposed Class Action Settlement Agreement and Release (the "Settlement Agreement") negotiated at Mediation Session #2 on September 8, 2023, before the Honorable Patricia Okoro (Ret.) of Westpark Dispute Resolution Inc. The purpose of this memorandum is to facilitate client review and approval of the Settlement Agreement's material terms prior to execution.
If approved by AMA and AGMG, the Settlement Agreement is expected to be executed by all parties no later than September 15, 2023. Following execution, Calderwood & Harkness will file the Motion for Preliminary Approval of Class Action Settlement (the "Preliminary Approval Motion") with the Los Angeles Superior Court by September 22, 2023.
By way of background, the parties reached the terms summarized below following two full-day mediation sessions — the first held on August 25, 2023, and the second held on September 8, 2023 — both conducted before Judge Okoro. These sessions were preceded by extensive formal discovery, which included the production of 147,832 documents by AMA (comprising approximately 1.2 million pages), the production of 3,412 documents by Plaintiffs, eighteen fact and expert depositions, and the submission of competing expert reports on damages and class certification. The settlement negotiations also took place against the backdrop of the Court's August 11, 2023 Order granting Plaintiffs' motion for class certification in part, issued by the Honorable Raymond Escobedo of Department 34 of the Los Angeles Superior Court (certifying the first meal period auto-deduction, wage statement, and UCL claims, while denying certification of the rest period, off-the-clock/overtime, minimum wage, second meal period, and waiting time penalty claims). The partial certification order materially shaped the parties' respective risk assessments and settlement postures, as discussed further in Section V below.
II. Material Terms
The material terms of the proposed Settlement Agreement are set forth below. Unless otherwise noted, all terms are subject to Court approval.
A. Gross Settlement Amount
The Gross Settlement Amount ("GSA") is $14,750,000.00 (Fourteen Million Seven Hundred Fifty Thousand Dollars). The GSA is non-reversionary, meaning that no portion of the fund reverts to AMA in the event that any class member fails to negotiate a settlement check or otherwise does not participate in the claims process. The entire GSA will be distributed, applied to settlement costs, or donated to the designated cy pres recipient as described in Section II.N below.
B. Class Definition
The proposed settlement class (the "Settlement Class") is defined as follows:
All current and former non-exempt, hourly employees of Aurelius Media Americas Inc. who worked in the State of California at any time during the period from November 1, 2018 through October 31, 2023, and who were subject to AMA's automatic meal period deduction policy as implemented through the NovaPay Solutions TimeTrack Pro timekeeping system.
The estimated size of the Settlement Class is approximately 1,850 individuals, based on data extracted from AMA's payroll and timekeeping records and validated during discovery.
The class period as modified in the settlement runs from November 1, 2018 through October 31, 2023 (the "Class Period"). This class period reflects the applicable statute of limitations for the asserted claims, adjusted to account for the tolling effects of the COVID-19 emergency rules and the filing date of the original complaint.
C. Released Claims
The Settlement Agreement provides for a broad release of claims (the "Released Claims") encompassing all wage-and-hour claims arising from the operative facts alleged in the Consolidated Complaint and discovered during litigation, including both the claims that were certified by the Court and those claims for which class certification was denied. Specifically, the Released Claims include the following:
Certified Claims:
•  First meal period auto-deduction claims under California Labor Code Sections 226.7 and 512 (premium pay for missed, late, or shortened first meal periods resulting from AMA's automatic thirty-minute deduction policy);
•  Wage statement claims under California Labor Code Section 226 (derivative inaccurate wage statement claims arising from the alleged meal period violations); and
•  Unfair Competition Law ("UCL") claims under California Business and Professions Code Section 17200 (unlawful, unfair, and fraudulent business practices predicated on the underlying Labor Code violations).
Non-Certified Claims Included in Release:
•  Rest period claims under California Labor Code Section 226.7 (premium pay for missed, late, or shortened rest periods);
•  Off-the-clock and overtime claims under California Labor Code Sections 510 and 1194 (unpaid overtime compensation for alleged off-the-clock work);
•  Minimum wage claims under California Labor Code Sections 1197 and 1197.1 (alleged minimum wage violations arising from unpaid time);
•  Second meal period claims (premium pay for missed, late, or shortened second meal periods for shifts exceeding ten hours); and
•  Waiting time penalty claims under California Labor Code Sections 201 through 203 (penalties for failure to timely pay all wages due upon separation of employment).
PAGA Claims:
All representative claims asserted under the California Private Attorneys General Act ("PAGA"), California Labor Code Sections 2698 through 2699.8, encompassing civil penalties for all of the above-referenced Labor Code violations.
Individual Claims:
All individual claims that could have been asserted by any Settlement Class member based on the facts alleged in the Consolidated Complaint, including but not limited to claims for statutory penalties, interest, and attorneys' fees arising from the same operative facts.
The breadth of the release is a significant strategic advantage of the settlement, as discussed further in Section VI below.
D. PAGA Payment
The Settlement Agreement allocates $750,000.00 from the GSA for the settlement of PAGA claims. Consistent with the statutory allocation formula prescribed by California Labor Code Section 2699(i), this amount will be distributed as follows:
The PAGA settlement is subject to LWDA approval. Class counsel will submit the required notice to the LWDA in accordance with Labor Code Section 2699(l)(2).
E. Attorneys' Fees (Class Counsel)
Class counsel will petition the Court for attorneys' fees in the amount of 33.33% of the GSA, calculated as follows:
$14,750,000.00 × 0.3333 = $4,916,175.00
This fee request is subject to Court approval and will be evaluated by the Court under both the percentage-of-the-fund and lodestar-crosscheck methods. A fee percentage of one-third of a common fund is well within the range routinely approved by California courts in wage-and-hour class action settlements.
Class counsel consists of the following firms:
•  Lead Counsel: Castellano Byrne & Salas LLP (Marco Castellano and Diane Salas), Los Angeles, California; and
•  PAGA Co-Counsel: Veltrano Employment Law Group PC (Sandra Higuera), San Diego, California.
F. Litigation Costs Reimbursement
Class counsel will seek reimbursement of litigation costs and expenses in an amount not to exceed $412,300.00. All costs must be documented and itemized and are subject to Court approval. Based on our review of class counsel's informal cost disclosures during mediation, anticipated costs include expert witness fees, deposition transcript costs, document review and production costs, mediation fees, and court filing fees.
G. Service Awards (Class Representatives)
The Settlement Agreement provides for the following service awards (also referred to as incentive awards or enhancement payments) to the three named Plaintiffs who served as class representatives:
These amounts are subject to Court approval and are intended to compensate the named Plaintiffs for their time, effort, and risk undertaken in prosecuting the action on behalf of the class. The amounts are consistent with service awards routinely approved in comparable California employment class actions.
H. Settlement Administration
The parties have agreed to retain Meridian Settlement Services LLC as the Claims Administrator. The principal contact at Meridian is Angela Truong, who has extensive experience administering wage-and-hour class action settlements in California courts.
Meridian Settlement Services LLC 1600 E. Fourth Street, Suite 240 Santa Ana, CA 92701
The administration budget is $385,000.00, to be paid from the GSA. This amount covers all costs associated with notice distribution (including mailed notice, reminder notices, and any required re-mailing to updated addresses obtained through skip-tracing), claims processing, settlement fund administration, tax reporting, and check issuance. Meridian's proposed administration costs were evaluated against competing bids from two other settlement administration firms and were determined to be reasonable in light of the class size and distribution requirements.
I. Net Settlement Fund
After deducting the amounts described above from the GSA, the Net Settlement Fund ("NSF") — the amount available for distribution to Settlement Class members — is calculated as follows:
The NSF represents approximately 55.9% of the GSA. This ratio is consistent with the typical range observed in California wage-and-hour class settlements, where attorneys' fees and costs commonly consume 35–45% of the gross fund.
J. Distribution Formula
The NSF will be distributed on a pro rata basis to all Settlement Class members who do not timely submit a valid opt-out request. No claim form will be required; all eligible class members who do not opt out will automatically receive a payment. The allocation formula for individual payments is as follows:
•  60% of each class member's individual share will be calculated based on the number of weeks worked by that class member during the Class Period, relative to the total number of weeks worked by all participating class members; and
•  40% of each class member's individual share will be calculated based on the number of recorded overtime hours worked by that class member during the Class Period, relative to the total number of recorded overtime hours worked by all participating class members.
This blended formula was negotiated to reflect the dual nature of the underlying claims — the meal period and wage statement claims (which affect all hours worked) and the off-the-clock and overtime claims (which disproportionately affect class members with higher overtime exposure).
Based on the estimated class size of approximately 1,850 individuals and assuming no opt-outs, the estimated average individual payment is:
$8,251,525.00 ÷ 1,850 = approximately $4,460.00 per class member
Actual individual payments will vary depending on each class member's tenure and overtime history during the Class Period. Based on preliminary modeling using AMA's payroll data, we estimate that individual payments will range from approximately $800 (for short-tenure employees with minimal overtime) to approximately $14,200 (for long-tenure employees with significant overtime exposure).
K. Tax Treatment
Settlement payments to individual class members will be allocated for tax purposes as follows:
AMA's employer-side payroll tax obligations on the wage portion of the settlement payments will be paid from the GSA and are included in the settlement administration budget. Settlement Class members will be responsible for their own individual income tax obligations. The Claims Administrator will issue all required tax forms (Forms W-2 and 1099) to class members and to the appropriate taxing authorities.
We note that the 50% wage allocation is a negotiated term that represents a compromise between the parties. AMA's position during negotiations was that a higher wage allocation (closer to 60–65%) was appropriate, while Plaintiffs sought a lower allocation (approximately 40%) to minimize the tax burden on class members. The agreed-upon 50% allocation is consistent with allocations approved by California courts in comparable settlements and should withstand judicial scrutiny.
L. Opt-Out Provisions
Settlement Class members may exclude themselves from the settlement by submitting a timely written opt-out request to the Claims Administrator by the opt-out deadline (as set by the Court in the Preliminary Approval Order).
The Settlement Agreement includes a "blow" provision (walkaway right) in favor of AMA: if the number of valid opt-outs exceeds 5% of the Settlement Class (i.e., 93 or more individuals), AMA has the unilateral right to void the Settlement Agreement in its entirety. This provision protects AMA against a scenario in which a significant number of class members elect to opt out — potentially to pursue higher-value individual claims — while AMA remains obligated to fund the full GSA for the remaining class.
If AMA exercises the blow provision, the Settlement Agreement is deemed void, the settlement funds are returned, and the litigation resumes. Based on our experience with comparable settlements, opt-out rates in California wage-and-hour class actions typically fall in the range of 0.5–2.0%, and we do not anticipate that the 5% threshold will be triggered.
M. Objection Process
Any Settlement Class member who does not opt out may object to the settlement by filing a written objection with the Court and serving a copy on both class counsel and defense counsel by the objection deadline. Written objections must include the objecting class member's name, contact information, last four digits of their Social Security number, a statement of the grounds for the objection, and any supporting documentation.
AMA and class counsel will have the opportunity to respond to any objections filed, both in writing and at the Final Approval Hearing. The Court will consider all objections in determining whether to grant final approval of the settlement as fair, reasonable, and adequate under California Rules of Court, Rule 3.769.
N. Cy Pres
Any settlement funds attributable to checks that remain uncashed after 180 days from the date of issuance will be donated to the Legal Aid Foundation of Los Angeles ("LAFLA") as the designated cy pres recipient. LAFLA is a well-established legal services organization that provides free civil legal assistance to low-income residents of Los Angeles County, with a particular focus on employment law matters. The selection of LAFLA as the cy pres recipient is consistent with prevailing judicial preferences for organizations that serve the interests of the affected class.
O. No Admission of Liability
The Settlement Agreement includes a standard provision confirming that AMA denies all allegations asserted in the Consolidated Complaint and in the PAGA notice, and that the settlement does not constitute and shall not be construed as an admission of liability, wrongdoing, or fault by AMA or any of its affiliates, officers, directors, employees, or agents. The settlement is entered into solely for the purpose of avoiding the burden, expense, and uncertainty of continued litigation.
P. Injunctive and Prospective Relief
The Settlement Agreement does not require AMA to implement any injunctive or prospective relief, including any court-mandated changes to its employment policies, timekeeping systems, or meal and rest period practices.
We note, however, that AMA has already voluntarily implemented the following corrective measures, which were completed prior to the commencement of settlement negotiations:
•  December 2022: AMA corrected the automatic meal period deduction threshold in the NovaPay Solutions TimeTrack Pro system from 6.0 hours to 5.0 hours at all seven California facilities, thereby aligning the system configuration with the requirements of California Labor Code Section 512(a); and
•  December 2022: AMA activated the "Missed Meal Attestation" feature within the TimeTrack Pro system at all seven California facilities, which requires non-exempt employees to affirmatively confirm whether they received a compliant meal period before the system applies the automatic deduction.
These voluntary corrective measures address the core factual basis of Plaintiffs' meal period auto-deduction claims. Because these changes were implemented voluntarily, they cannot be characterized by Plaintiffs or the Court as court-ordered injunctive relief, and they are not subject to ongoing judicial monitoring or enforcement.
III. Funding
The $14,750,000.00 GSA will be funded from the following sources:
EPL Coverage. Pemberton Mutual Assurance Co. ("Pemberton") acknowledged coverage under AMA's Employment Practices Liability ("EPL") insurance policy (Policy No. PMA-EPL-2022-00837) on December 22, 2022, subject to a reservation of rights. Pemberton's reservation of rights specifically reserved its position with respect to PAGA penalties (which Pemberton contends may constitute uninsurable penalties under California public policy) and claims arising from alleged willful violations of the Labor Code. Notwithstanding these reservations, Pemberton has authorized a contribution of $9,250,000.00 toward the settlement. This authorized contribution is subject to Pemberton's issuance of a formal carrier authorization letter (also referred to as a consent-to-settle letter). Calderwood & Harkness submitted the formal consent request to Pemberton's coverage counsel at Whitfield Gallagher LLP on September 10, 2023, and we anticipate receiving the carrier authorization letter within the next several business days. We will notify the client team immediately upon receipt.
Self-Insured Retention. AMA's EPL policy carries a self-insured retention ("SIR") of $5,000,000.00. As of September 2023, AMA has incurred approximately $3,100,000.00 in defense costs (including Calderwood & Harkness's fees and expenses, expert fees, e-discovery vendor costs, and related litigation expenses), which have been applied against the SIR. The SIR has been substantially exhausted, and Pemberton's coverage obligations have been triggered with respect to eligible settlement amounts above the remaining SIR balance.
Aldrich Matter. We note for the record that the related executive dispute captioned Aldrich v. Aurelius Media Americas Inc., LASC Case No. 22STCV41087, is not resolved under this Settlement Agreement and was not the subject of negotiations at Mediation Session #2. Pemberton has denied coverage for the Aldrich matter on the grounds that it falls outside the scope of the EPL policy's class/collective action coverage provisions. Any future settlement of the Aldrich matter will be entirely self-funded by AMA. We will address the Aldrich matter separately in a forthcoming memorandum.
IV. Settlement Approval Timeline
The anticipated timeline for the settlement approval process is as follows:
This timeline is consistent with the procedural framework established by California Rules of Court, Rule 3.769, and is subject to adjustment based on the Court's scheduling preferences and docket availability in Department 34.
Funding Coordination. AMA must be prepared to deposit its $5,500,000.00 self-funded share into the settlement fund escrow account administered by Meridian Settlement Services within fourteen (14) calendar days of the Court's entry of the Final Approval Order. AMA should also coordinate with Pemberton in advance of the funding deadline to ensure that Pemberton's $9,250,000.00 carrier contribution is wired to the escrow account within the same timeframe. We recommend that Gregory Tanaka engage AMA's treasury and finance teams promptly to ensure that the necessary funding mechanisms are in place well in advance of the anticipated Final Approval Hearing.
V. Comparison to Claimed Exposure and Defense Valuation
The following table compares the GSA to the parties' respective damages estimates as presented in competing expert reports:
The GSA of $14,750,000.00 falls within the range that California courts have consistently recognized as appropriate for class action settlements of this nature. Empirical studies of California wage-and-hour class action settlements indicate that settlements typically resolve in the range of approximately 15–40% of the plaintiffs' aggregate claimed exposure. At 38.2% of Plaintiffs' claimed exposure, the GSA falls at the upper end of this range, reflecting several case-specific factors:
•  The strength of Plaintiffs' first meal period auto-deduction claim, which was bolstered by the Court's August 11, 2023 partial certification order granting certification on the meal period, wage statement, and UCL claims;
•  The systemic nature of the auto-deduction issue, which was implemented uniformly through AMA's NovaPay Solutions TimeTrack Pro system across all seven California facilities;
•  The large volume of supporting documentary evidence produced during discovery, including system configuration logs, payroll records, and employee declarations; and
•  The risks associated with proceeding to trial on the certified claims, including the possibility of an adverse verdict and potential PAGA penalties.
Conversely, the settlement is favorable to AMA when viewed against the full scope of Plaintiffs' demands, which included $38,600,000.00 in aggregate damages. The GSA is also within a reasonable range when measured against the defense damages estimate of $5,800,000.00, representing a multiple of 2.54× — a premium that reflects the litigation risk inherent in the certified claims and the value of the broad release of non-certified claims.
VI. Key Strategic Advantages of the Settlement
Based on our assessment of the litigation posture, the proposed settlement offers the following strategic advantages to AMA:
1. Broad Release Extinguishes All Claims. The release provisions of the Settlement Agreement are unusually comprehensive. The release covers not only the three certified claims (first meal period auto-deduction, wage statement, and UCL) but also the five categories of non-certified claims (rest period, off-the-clock/overtime, minimum wage, second meal period, and waiting time penalties), as well as all PAGA representative claims and all individual claims that could have been asserted based on the same operative facts. This eliminates the substantial risk that individual Settlement Class members could pursue the non-certified claims through separate individual lawsuits, subsequent class actions, or additional PAGA actions predicated on the same factual allegations. Absent the settlement, AMA would face ongoing exposure to these non-certified claims, which Plaintiffs could pursue through alternative procedural vehicles.
2. EPL Carrier Participation Reduces AMA's Out-of-Pocket Cost. Pemberton's $9,250,000.00 contribution covers 62.7% of the GSA, reducing AMA's self-funded class settlement cost to $5,500,000.00. Notably, AMA's self-funded settlement contribution of $5,500,000.00 is below the defense expert's aggregate damages estimate of $5,800,000.00. In other words, through the carrier's participation, AMA is resolving the entire action — including both certified and non-certified claims — for less than the amount that AMA's own damages expert estimated the certified claims alone to be worth at trial.
3. Avoids Significant Trial Costs and Attendant Risk. Proceeding to trial on the certified claims would have required an estimated $1,200,000 to $1,800,000 in additional attorneys' fees and litigation expenses, including trial preparation, expert witness testimony, jury consultant fees, and post-trial briefing. Trial on the meal period auto-deduction claim presented meaningful risk: the Court's certification order expressly found that Plaintiffs had established predominance on the common question of whether AMA's automatic meal period deduction policy, as implemented through the TimeTrack Pro system, resulted in a systematic failure to provide compliant meal periods. This finding, while not dispositive of the merits, was a strong signal regarding the viability of Plaintiffs' common-question theory and would have been difficult to overcome at trial.
4. Certainty and Finality. The settlement provides AMA and AGMG with a definitive resolution of the Fuentes litigation that can be factored into AGMG's financial planning, quarterly and annual financial reporting, and public company disclosures. A settlement of this magnitude will likely require disclosure in AGMG's SEC filings. The certainty of a negotiated settlement — as opposed to the unpredictable range of outcomes associated with trial and potential appeal — permits AGMG's finance and investor relations teams to present a clear and definitive picture to shareholders, auditors, and regulators.
5. No Injunctive or Prospective Relief. The settlement does not require AMA to implement any court-mandated changes to its employment policies, practices, or timekeeping systems. This is a significant advantage, as court-ordered injunctive relief in employment class actions frequently involves ongoing judicial monitoring, compliance reporting obligations, and the risk of contempt proceedings for alleged non-compliance. The corrective measures that AMA voluntarily implemented in December 2022 — the correction of the auto-deduction threshold and the activation of the Missed Meal Attestation feature — were undertaken proactively and are not subject to any judicial oversight or enforcement mechanism under the settlement.
6. No Admission of Liability. AMA admits no liability under the Settlement Agreement. This preserves AMA's position in any future unrelated employment litigation, prevents the use of the settlement as evidence of wrongdoing in other proceedings, and avoids any reputational harm that could result from a formal admission or adverse verdict.
VII. Recommendation
Based on our analysis of the litigation risks, the terms of the proposed settlement, the comparison to the parties' respective damages estimates, and the strategic advantages outlined above, we recommend that AMA execute the Settlement Agreement.
The GSA of $14,750,000.00 is within the range of settlement authority previously authorized by the following memoranda:
•  Settlement Authority Memorandum dated August 15, 2023 (issued prior to Mediation Session #1), approved by Gregory Tanaka, Philippa Cartwright, Jonathan Mercer (CFO, AGMG), and the AGMG Board's Audit and Risk Committee; and
•  Revised Settlement Authority Memorandum dated September 4, 2023 (issued prior to Mediation Session #2), similarly approved by the foregoing individuals and committee.
The settlement represents a favorable outcome that appropriately balances AMA's litigation risk on the certified claims with the significant cost savings achieved through partial certification (which narrowed the scope of certified claims), the aggressive defense posture maintained throughout discovery and expert proceedings, and the substantial carrier contribution negotiated with Pemberton.
Upon receipt of client approval, Calderwood & Harkness will take the following immediate steps:
1.  Prepare the final execution version of the Settlement Agreement for signature by all parties by September 15, 2023;
2.  Coordinate with class counsel at Castellano Byrne & Salas LLP and Veltrano Employment Law Group PC to finalize any remaining drafting issues;
3.  Submit the Settlement Agreement and the required PAGA settlement notice to the LWDA;
4.  Prepare and file the Preliminary Approval Motion, including all supporting declarations and exhibits, by September 22, 2023; and
5.  Coordinate with Meridian Settlement Services to commence the class notice preparation process.
We respectfully request that Gregory Tanaka confirm client approval at his earliest convenience and coordinate with AMA's finance team regarding the funding timeline described in Sections III and IV above. We further recommend that Gregory Tanaka engage Graystone & Parr LLP, AGMG's external auditors, regarding the appropriate financial statement presentation and disclosure of the settlement, including any required adjustments to litigation reserves and contingent liability disclosures in AGMG's upcoming quarterly filings.
We are available to discuss any questions regarding the settlement terms or our recommendation at your convenience.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Devon Archer Senior Associate 777 South Flower Street, Suite 4200 Los Angeles, California 90017 Direct: (213) 555-7238
Email: darcher@calderwoodharkness.com
cc: Renata Vasquez, Partner, Calderwood & Harkness LLP Bernard Crawford, Partner, Calderwood & Harkness LLP
CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT
PAGA Allocation | Amount
75% to the California Labor and Workforce Development Agency ("LWDA") | $562,500.00
25% to aggrieved employees | $187,500.00
Total PAGA Payment | $750,000.00
Class Representative | Service Award
Marisol Fuentes (Lead Plaintiff) | $15,000.00
Derek Halloran | $10,000.00
Yesenia Padilla | $10,000.00
Total Service Awards | $35,000.00
Component | Amount
Gross Settlement Amount | $14,750,000.00
Less: Attorneys' Fees (33.33%) | ($4,916,175.00)
Less: Litigation Costs (cap) | ($412,300.00)
Less: Service Awards | ($35,000.00)
Less: Settlement Administration | ($385,000.00)
Less: PAGA Payment | ($750,000.00)
Net Settlement Fund | $8,251,525.00
Allocation Category | Percentage | Tax Treatment
Wages | 50.00% | Subject to federal and state income tax withholding, FICA (employee and employer shares), FUTA, and California SDI/SUI
Interest and Penalties | 33.33% | Reported on IRS Form 1099-MISC; not subject to employment tax withholding
Non-Wage Damages | 16.67% | Reported on IRS Form 1099-MISC; not subject to employment tax withholding
Funding Source | Amount | Percentage of GSA
Pemberton Mutual Assurance Co. (EPL Policy No. PMA-EPL-2022-00837) | $9,250,000.00 | 62.7%
AMA Self-Funded | $5,500,000.00 | 37.3%
Total GSA | $14,750,000.00 | 100.0%
Event | Anticipated Date
Settlement Agreement execution (all parties) | September 15, 2023
Preliminary Approval Motion filed | September 22, 2023
Preliminary Approval Order (Court ruling) | Mid-October 2023 (est.)
Class Notice mailing (by Claims Administrator) | Approximately 30 days after entry of Preliminary Approval Order
Opt-Out and Objection Deadline | Approximately 60 days after mailing of Class Notice
Final Approval Hearing | Approximately 90 days after entry of Preliminary Approval Order
AMA funding obligation (payment into escrow) | Within 14 calendar days of entry of Final Approval Order
Metric | Amount
Plaintiffs' aggregate damages claim (Dr. Howard Rennick, Pinnacle Economic Consulting Group; expert report dated April 28, 2023) | $38,600,000.00 (including $12,200,000 in PAGA civil penalties)
Defense aggregate damages estimate (Dr. Catherine Lindstrom, Hargrove Analytics Inc.; rebuttal expert report dated June 9, 2023) | $5,800,000.00
Gross Settlement Amount | $14,750,000.00
GSA as percentage of Plaintiffs' aggregate damages claim | 38.2%
GSA as multiple of Defense aggregate damages estimate | 2.54× ($14,750,000 ÷ $5,800,000)

CALDERWOOD & HARKNESS LLP 777 South Flower Street, Suite 4200 Los Angeles, California 90017

MEMORANDUM

CALDERWOOD & HARKNESS LLP

Record

Parties

Dates

Amounts