CALDERWOOD & HARKNESS LLP 777 South Flower Street, Suite 4200 Los Angeles, California 90017
CONFIDENTIAL — FOR MEDIATION ONLY SUBJECT TO CAL. EVID. CODE § 1119
MEDIATION BRIEF — DEFENDANT AURELIUS MEDIA AMERICAS INC.
Fuentes v. Aurelius Media Americas Inc. Los Angeles Superior Court Case No. 22STCV38214 (Consolidated)
Aldrich v. Aurelius Media Americas Inc. Los Angeles Superior Court Case No. 22STCV41087
MEDIATION SESSION #2 — SEPTEMBER 8, 2023 (Combined Session — Class Action and Executive Dispute)
Mediator: Hon. Patricia Okoro (Ret.) Westpark Dispute Resolution Inc. 1925 Century Park East, Suite 1700 Los Angeles, California 90067
Submitted by: Calderwood & Harkness LLP 777 South Flower Street, Suite 4200 Los Angeles, California 90017
Renata Vasquez, Partner (Responsible Attorney) Devon Archer, Senior Associate
Date: September 1, 2023
C&H Matter No.: 1017-00004
CONFIDENTIALITY LEGEND: This brief is submitted for mediation purposes only and is subject to the mediation confidentiality protections of Cal. Evid. Code §§ 1115–1128. No portion of this brief, and no statement made during the course of mediation, may be disclosed to any person not a party or participant in the mediation or used, quoted, referenced, or offered as evidence in any subsequent judicial, arbitral, administrative, or other proceeding. This brief contains attorney work product, privileged attorney-client communications, and confidential settlement analysis. Receipt of this brief by the mediator or opposing counsel does not constitute a waiver of any privilege or protection. All parties and the mediator are bound by the executed Mediation Agreement dated August 18, 2023, and by the provisions of the California Evidence Code governing mediation confidentiality.
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I. INTRODUCTION AND PURPOSE
Defendant Aurelius Media Americas Inc. ("AMA") respectfully submits this combined mediation brief in advance of the September 8, 2023 mediation session before the Honorable Patricia Okoro (Ret.) of Westpark Dispute Resolution Inc. This session will address both the Fuentes v. Aurelius Media Americas Inc. wage-and-hour class action (LASC Case No. 22STCV38214) and the Aldrich v. Aurelius Media Americas Inc. individual executive dispute (LASC Case No. 22STCV41087). AMA submits this brief to update its positions, provide a comprehensive analysis of both matters, and present a unified settlement proposal that would achieve a global resolution of all pending employment litigation involving the company.
This brief updates AMA's positions following Mediation Session #1, held on August 25, 2023, at which the parties engaged in approximately seven hours of productive negotiation devoted exclusively to the class action. During that session, the parties significantly narrowed the gap on the class settlement from opening positions of $28 million (Plaintiffs) and $8 million (AMA) to closing positions of $16.5 million (Plaintiffs) and $13.5 million (AMA). The progress achieved during Session #1 demonstrated the parties' mutual commitment to reaching a resolution and established a strong foundation for the continued negotiations contemplated by this second session.
AMA approaches Session #2 with a genuine interest in achieving a global resolution of all pending employment litigation — both the class action and the Aldrich individual dispute — in a single, comprehensive mediation. AMA believes that a combined session offers the best opportunity to resolve both matters efficiently and in a manner that accounts for the interrelationships between the two disputes. While the class action and the Aldrich matter involve distinct legal theories and different classes of claimants, they share a common factual backdrop — AMA's employment practices, policies, and operations — and their simultaneous resolution would eliminate the uncertainty, expense, and organizational distraction of parallel litigation.
A joint resolution would provide finality for AMA, certainty for the approximately 1,850 class members, and a fair outcome for Mr. Aldrich, while avoiding the continued expense and distraction of parallel litigation that has consumed significant management attention and legal resources since late 2022. AMA's management team, including VP of Legal & Compliance Gregory Tanaka and its parent company Aurelius Global Media Group ("AGMG"), have authorized AMA's counsel to negotiate in good faith and to execute binding agreements at or promptly following Session #2, subject to the terms and parameters set forth in this brief.
AMA's combined proposal, which is described in detail in Sections III through V below, envisions a class settlement in the range of $14 million to $15 million as a Gross Settlement Amount ("GSA"), paired with an Aldrich individual settlement of $2 million to $2.5 million, plus modified restrictive covenant terms. AMA believes this combined package — totaling approximately $16.75 million to $17.25 million — represents a fair, reasonable, and good-faith resolution of all claims and cross-claims at issue in both proceedings.
II. STATUS OF PROCEEDINGS
A. Class Action — *Fuentes v. AMA* (Case No. 22STCV38214)
1. Partial Class Certification Order (August 11, 2023)
On August 11, 2023, the Honorable Raymond Escobedo, sitting in Department 34 of the Los Angeles Superior Court, issued a detailed, 28-page Order on Plaintiffs' Motion for Class Certification. The Court granted certification in part and denied certification in part, significantly narrowing the scope of the certified class and the claims eligible for class-wide adjudication.
Claims Certified for Class Treatment:
• First Meal Period Auto-Deduction Claim: The Court certified Plaintiffs' claim that AMA's use of an automatic meal period deduction in its NovaPay Solutions TimeTrack Pro timekeeping system resulted in systematic failure to compensate employees for missed, short, or late first meal periods, in violation of California Labor Code §§ 226.7 and 512 and IWC Wage Order 12-2001.
• Derivative Wage Statement Claim (Cal. Lab. Code § 226): The Court certified the derivative wage statement claim on the ground that, if the auto-deduction resulted in unpaid meal period premiums, the corresponding wage statements would necessarily be inaccurate.
• UCL Claim (Cal. Bus. & Prof. Code § 17200): The Court certified the UCL claim as derivative of the meal period auto-deduction claim.
• PAGA Claim: The Court confirmed that the PAGA representative claim proceeds alongside the certified class claims, consistent with the framework established in Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73.
Claims Denied for Class Treatment:
• Rest Period Claims: Denied. The Court found that rest period practices varied significantly across AMA's seven California facilities and fourteen active show units, and that individual issues predominated over common questions. The Court specifically noted the absence of any common policy or system analogous to the meal period auto-deduction that could generate class-wide liability.
• Off-the-Clock / Overtime Claims: Denied. The Court found that off-the-clock work was not the product of any uniform policy or systematic practice, but rather reflected individualized circumstances varying by position, show unit, and supervisor.
• Minimum Wage Claims: Denied. The Court found insufficient evidence of any systematic minimum wage violation and noted that Plaintiffs' evidence consisted of isolated incidents involving a small number of production assistants on two show units.
• Second Meal Period Claims: Denied. The Court found that second meal periods (for shifts exceeding ten hours) involved highly individualized inquiries regarding shift length, waiver elections, and production schedules.
• Waiting Time Penalty Claims (Cal. Lab. Code §§ 201–203): Denied. The Court found that waiting time penalty liability requires individualized determination of whether the employer "willfully" failed to pay wages due at separation, and that this inquiry could not be resolved on a class-wide basis.
2. Class Definition (as Certified)
The Court defined the certified class as follows:
"All current and former non-exempt, hourly employees of Aurelius Media Americas Inc. who worked in the State of California at any time from November 1, 2018 through the date of preliminary approval of any class settlement, who were subject to AMA's automatic meal period deduction in the NovaPay Solutions TimeTrack Pro timekeeping system."
3. Estimated Class Size
Based on AMA's payroll records and TimeTrack Pro system data, the estimated class size is approximately 1,850 individuals. This figure has been confirmed by Meridian Settlement Services LLC through a preliminary analysis of AMA's HRIS data provided in July 2023.
4. Class Counsel
Plaintiffs are represented by Castellano Byrne & Salas LLP (Marco Castellano, Diane Salas), serving as lead class counsel, and by Veltrano Employment Law Group PC (Sandra Higuera), serving as PAGA counsel. The three named Plaintiffs are Marisol Fuentes, Derek Halloran, and Yesenia Padilla.
5. Mediation Session #1 (August 25, 2023)
The parties participated in approximately seven hours of negotiation before the Honorable Patricia Okoro (Ret.) on August 25, 2023. The session was devoted exclusively to the class action. The parties exchanged opening statements in joint session and then engaged in extensive caucus negotiations throughout the day. The session concluded with the following closing positions:
• Plaintiffs: $16,500,000
• AMA: $13,500,000
The mediator assessed that a settlement was likely achievable in the $14 million to $16 million range and encouraged the parties to return for a second session with refined authority. AMA has obtained such authority and is prepared to negotiate within the parameters described in Section III.E below.
B. Aldrich Individual Action — *Aldrich v. AMA* (Case No. 22STCV41087)
1. Filing and Parties
The Aldrich action was filed on December 9, 2022, by Gavin Aldrich, AMA's former Senior Vice President of Original Content and Executive Producer. Mr. Aldrich is represented by Cameron Whitfield and Julia Nazarian of Whitfield & Associates, located at 9465 Wilshire Boulevard, Suite 320, Beverly Hills, California 90212. The action was assigned to the Honorable Catherine Villanueva, sitting in Department 52 of the Los Angeles Superior Court.
2. Responsive Pleadings and Cross-Complaint
AMA filed its Answer to the Aldrich Complaint on January 20, 2023, asserting eighteen affirmative defenses, including unclean hands, after-acquired evidence, justified termination, and failure to mitigate damages. On the same date, AMA filed a Cross-Complaint against Mr. Aldrich, asserting the following causes of action:
1. Breach of Employment Agreement (§ 9.4 — Confidentiality Obligations)
2. Misappropriation of Trade Secrets (Cal. Civ. Code § 3426 et seq. — California Uniform Trade Secrets Act ("CUTSA"))
3. Breach of Fiduciary Duty
4. Conversion
3. Motion Practice
On March 22, 2023, the Court ruled on Aldrich's Motion to Strike certain allegations in AMA's Cross-Complaint relating to the non-competition clause (§ 9.1 of the Employment Agreement). The motion was granted in part and denied in part. The Court struck allegations that could be construed as seeking enforcement of the non-competition clause, but denied the motion as to allegations relating to the confidentiality provisions (§ 9.4), the non-solicitation provisions (§§ 9.2, 9.3), and the CUTSA claim. AMA filed an Amended Cross-Complaint on April 5, 2023, removing § 9.1 from the caption of the First Cause of Action and clarifying that AMA does not seek to enforce the non-competition provision.
4. Discovery. Discovery in the Aldrich matter is substantially complete. Written discovery has been exchanged, and document production has been completed by both sides. AMA's Motion to Compel Further Responses from Aldrich regarding communications with Halcyon Creek Productions LLC was granted in part by Judge Villanueva, resulting in the production of an additional 47 documents comprising emails and text messages between Aldrich and Nina Castellanos (principal of Halcyon Creek). Mr. Aldrich's deposition was taken on May 22, 2023, and lasted the full seven hours permitted under the Code of Civil Procedure. Key deposition testimony is discussed in Section IV.D below.
5. Combined Mediation Format
This is Mr. Aldrich's first mediation session in the Aldrich matter. Class counsel (Castellano Byrne & Salas LLP) has confirmed that they have no objection to the combined mediation format, and indeed have expressed support for a process that may facilitate a global resolution of all AMA employment disputes. Mr. Whitfield, counsel for Aldrich, has similarly indicated a willingness to participate in a combined session, subject to appropriate separation of confidential caucus discussions.
III. CLASS ACTION — UPDATED ANALYSIS
A. Significance of the Partial Certification Order
The Court's August 11, 2023 Order on Class Certification is the single most significant development in the class action since its filing and fundamentally reshapes the litigation landscape for both parties. The denial of certification on five of seven causes of action — rest period, off-the-clock/overtime, minimum wage, second meal period, and waiting time penalties — substantially reduces AMA's aggregate litigation exposure and eliminates several of the most damages-intensive claims from class-wide adjudication.
The claims that were denied certification would have accounted for a significant portion of Plaintiffs' aggregate damages figure of $38.6 million, as calculated by Plaintiffs' damages expert, Dr. Elena Rennick of Greystone Economics LLC (report dated April 28, 2023). Specifically, the denied claims included rest period premiums of approximately $8.4 million, off-the-clock overtime of approximately $12.2 million, and waiting time penalties of approximately $5.0 million — together representing more than $25.6 million, or approximately 66%, of Plaintiffs' total claimed damages. While these claims remain available to individual class members on an individual basis and through the PAGA representative action, they can no longer be pursued as certified class claims, and the practical reality is that few, if any, individual class members will pursue these claims independently.
AMA recognizes, however, that the certification order on the first meal period auto-deduction claim is a meaningful and substantively significant finding. The Court's analysis of the commonality and predominance requirements under Code of Civil Procedure § 382 was thorough and well-reasoned, and it identified genuine systemic issues with AMA's implementation of the TimeTrack Pro timekeeping system that AMA cannot ignore. Specifically, the Court found that the auto-deduction system, combined with the inconsistent activation of the Missed Meal Attestation feature — which was active at only four of AMA's seven California facilities — presented a common question that predominated over individual issues. The Court's Order stated, in pertinent part:
"The evidence presented demonstrates that AMA's TimeTrack Pro system automatically deducted 30 minutes for a first meal period for all non-exempt employees working shifts of six hours or more. The system's Missed Meal Attestation feature — which would have allowed employees to report that they did not receive a compliant meal period — was activated at only four of AMA's seven California facilities. At the remaining three facilities, employees had no mechanism within the timekeeping system to report missed or non-compliant meal periods. This systemic gap raises common questions that predominate over individual issues."
The Court further noted that the attestation usage rates at the four facilities where the feature was activated were strikingly low, observing that rates of 2.3% at the West Hollywood headquarters, 4.1% at the Sherman Oaks facility, 1.8% at the Hollywood facility, and 3.7% at the Santa Monica facility "raise serious questions about whether the [Missed Meal Attestation] feature was effectively communicated to employees or whether employees understood how to use it." This language, while not a merits finding, indicates the Court's view that AMA faces meaningful exposure on this claim and that the attestation-related evidence will be challenging to defend at trial.
The PAGA representative claim also proceeds alongside the certified class claims, adding an additional layer of statutory penalty exposure. Although AMA believes the PAGA penalties can be managed through appropriate settlement allocation (as discussed below), the availability of PAGA penalties — which can be asserted even for claims that were not certified for class treatment — adds incremental risk and provides Plaintiffs with leverage in negotiations.
B. AMA's Merits Position
AMA has at all times maintained that it complied with its obligations under California meal period law, and the company's litigation position remains grounded in several strong legal and factual defenses.
First, AMA maintained a written meal period policy that facially complied with California Labor Code §§ 226.7 and 512 and IWC Wage Order 12-2001. The policy — contained in AMA's Employee Handbook (revised March 2019) and posted at all California facilities — clearly stated employees' entitlement to an uninterrupted 30-minute meal period for shifts exceeding five hours, described the process for reporting missed or interrupted meal periods, and identified supervisory contacts for meal period complaints.
Second, the TimeTrack Pro auto-deduction accurately reflected compliant meal periods for the substantial majority of employees. AMA's analysis of time records for the class period indicates that the vast majority of non-exempt employees took timely and compliant first meal periods, and the auto-deduction correctly accounted for these breaks. The auto-deduction was not, as Plaintiffs have characterized it, a mechanism for suppressing meal period premium payments; rather, it was a standard timekeeping function used by thousands of employers across the state.
Third, under the controlling authority of Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, AMA's obligation was to provide meal periods — that is, to make them available and not impede or discourage employees from taking them — not to ensure that meal periods were actually taken. AMA's written policies, posted notices, and supervisory training satisfied this standard.
AMA acknowledges, however, certain vulnerabilities in its position that have informed its settlement analysis and contributed to the company's willingness to engage in meaningful settlement negotiations:
• Missed Meal Attestation Feature Not Activated at Three Facilities: The Missed Meal Attestation feature in TimeTrack Pro was not activated at Facility 2 (Studio City, located at 4024 Penmark Strategy Partners Avenue), Facility 4 (Burbank, located at 3800 W. Alameda Avenue), or Facility 7 (El Segundo, located at 888 N. Sepulveda Boulevard) for the period from March 2019 through December 2022. Approximately 620 class members worked at these three facilities during the relevant period. The absence of the attestation feature at these locations deprived employees of a practical mechanism for reporting missed meal periods and creates a presumption — which AMA would need to rebut at trial — that at least some meal periods at these facilities were missed and uncompensated.
• Auto-Deduction Threshold Error: The auto-deduction threshold in TimeTrack Pro was set at six hours rather than the five-hour threshold required by Wage Order 12-2001. This configuration error meant that employees working shifts of between five and six hours were not auto-deducted a meal period — which, while arguably benefiting those employees by not deducting time, also meant the system did not flag these shifts for meal period compliance monitoring. This error was identified through the litigation discovery process and corrected in December 2022.
• Training Deficiency: Despite the existence of the Missed Meal Attestation feature at four facilities, AMA has been unable to identify any formal training materials, memoranda, or communications to employees explaining the feature or instructing employees on how to use it. The low attestation rates at the facilities where the feature was active (ranging from 1.8% to 4.1%) are consistent with the inference that employees were not effectively informed of the feature's existence.
• Production-Day Culture: The entertainment industry, particularly in unscripted and reality television production, presents well-documented practical challenges for meal period compliance. Extended production days of 12 to 16 hours are common, and the demands of live or semi-live production frequently create pressure — both explicit and implicit — to forgo or abbreviate meal periods in order to maintain production schedules. While AMA maintains that its policies prohibited such practices, the practical reality of production-day culture will resonate with a jury.
C. Updated Damages Analysis — Class Action
The following table summarizes the competing damages analyses in the class action:
Several critical observations about the competing expert analyses bear emphasis:
Dr. Rennick's Methodology (Plaintiffs' Expert). Dr. Rennick's $16.3 million first meal period premium figure rests on the assumption that every auto-deducted meal period was a "missed" meal period — that is, that no employee who was subject to the auto-deduction actually received a compliant 30-minute meal period. This assumption is demonstrably false and methodologically unsound. AMA's time records, supervisor declarations, and employee survey data all confirm that the substantial majority of employees took timely and compliant meal periods. The auto-deduction merely reflected what actually occurred in most cases. Dr. Rennick's approach treats the absence of the attestation feature as proof that every meal period was missed, when in fact the absence of the feature simply means that data regarding missed meal periods was not captured — it does not mean that meal periods were not provided. Additionally, Dr. Rennick's rest period violation rate of 50% is based on three declarations from named Plaintiffs and a handful of opt-in declarants, not on any empirical data or statistical analysis. This rate is unsupported and would be vigorously challenged through Daubert-equivalent proceedings under California Evidence Code § 801.
Dr. Lindstrom's Alternative Model (Defense Expert). Dr. Karen Lindstrom of Apex Analytics Group issued her rebuttal report on June 9, 2023. Dr. Lindstrom's model uses actual missed-meal attestation data from the four facilities where the feature was activated, combined with conservative extrapolation to the three facilities where the feature was not available, to reach a total first meal period premium exposure of $3.4 million. Dr. Lindstrom's model also accounts for meal period waivers (signed by approximately 11% of class members), voluntary meal period delays (common in production settings where crew members prefer to eat together), and shifts shorter than six hours (which would not trigger a meal period obligation). While AMA recognizes that Dr. Lindstrom's figure may understate the exposure — particularly given the very low attestation rates and the absence of training on the attestation feature — the model provides a credible lower bound for damages.
Dr. Makhija's Facility-Level Analysis. Dr. Priya Makhija of Empirica Consulting issued an independent statistical analysis on May 19, 2023, examining variation in scheduling, shift lengths, and meal period practices across AMA's fourteen active show units and seven California facilities. Dr. Makhija's analysis found statistically significant variation in missed-meal attestation rates, ranging from a low of 2.1% for the "Kitchen Clash" show unit to a high of 18.7% for the "Summit Challenge" show unit. This variation supports AMA's argument that meal period compliance was driven by show-specific and facility-specific factors rather than any uniform company-wide policy or practice, but it also identifies specific show units (most notably "Summit Challenge" and "Apex Endurance") where compliance failures appear to have been more pervasive.
D. Risk-Adjusted Settlement Valuation
AMA's settlement analysis takes into account the litigation risks, the partial certification order, the competing expert analyses, and the practical costs of continued litigation.
AMA's trial risk assessment on the certified first meal period auto-deduction claim is moderate. As the mediator observed during Session #1, the auto-deduction and attestation-feature issues "present poorly" — the combination of a system that automatically deducted meal period time without a reliable mechanism for employees to report missed meals creates an optic that will be difficult to overcome before a jury, regardless of the underlying merits. At the same time, AMA has strong defenses on the merits, including the Brinker "provide" standard, written policies, and evidence that the majority of employees took compliant meal periods.
Taking these factors into account, AMA's risk-adjusted expected trial value — calculated by weighting each claim component by the probability of an adverse outcome and the likely damages range — is approximately $7.2 million. This figure accounts for the probability of prevailing on various issues, including the likelihood that a jury would find class-wide liability on the meal period claim (assessed at approximately 65%), the likely damages range per class member, and the probability of an adverse PAGA penalty determination.
By comparison, Plaintiffs' assessed trial value — based on Dr. Rennick's figures and Plaintiffs' own probability assessments — is approximately $24.5 million. The arithmetic midpoint of the two assessments is approximately $15.8 million.
Settlement at or near the midpoint eliminates estimated trial costs of $1.2 million to $1.8 million for AMA (inclusive of expert fees, trial preparation, and trial time), as well as the risk of an adverse appellate outcome. Additionally, a comprehensive settlement provides AMA with a release of the non-certified claims (rest period, off-the-clock, overtime, waiting time, minimum wage, and second meal period), which remain available to individual class members and through the PAGA representative action unless released in a global settlement. This comprehensive release provides significant additional value to AMA, as it eliminates the risk of follow-on individual actions or a renewed PAGA claim based on the non-certified claims.
E. AMA's Updated Class Settlement Proposal
Based on the foregoing analysis, AMA proposes the following class settlement terms:
Gross Settlement Amount: $14,750,000. This figure represents AMA's firm target for the class settlement and falls squarely within the $14 million to $16 million range identified by the mediator as the likely settlement zone following Session #1. The GSA reflects AMA's revised authority and has been approved by AMA's VP of Legal & Compliance, Gregory Tanaka, AMA's President, Jonathan Mercer, and AGMG's General Counsel, Philippa Cartwright.
PAGA Payment (from GSA): $750,000, representing 5.1% of the GSA. Under Labor Code § 2699(i), 75% of the PAGA payment ($562,500) would be remitted to the California Labor and Workforce Development Agency ("LWDA"), and 25% ($187,500) would be distributed to aggrieved employees. AMA believes this allocation is appropriate given the modest scope of the PAGA claim as it relates to the certified meal period issues and the denial of certification on the remaining claims.
Attorneys' Fees (Class Counsel): 33.33% of the GSA, or approximately $4,916,175, subject to Court approval. This percentage is within the range commonly approved in California wage-and-hour class settlements and is consistent with the fee agreements between class counsel and the named Plaintiffs.
Litigation Costs: Up to $412,300, representing documented out-of-pocket costs incurred by class counsel, including expert fees, deposition costs, court reporting, electronic discovery, and travel expenses.
Service Awards: Marisol Fuentes, $15,000; Derek Halloran, $10,000; Yesenia Padilla, $10,000. Total service awards: $35,000.
Settlement Administration: $385,000, to be paid to Meridian Settlement Services LLC (Angela Truong, Settlement Administrator), located at 1600 E. Fourth Street, Suite 240, Santa Ana, California 92701. This estimate covers notice preparation and mailing, claims processing, tax reporting, distribution, and all administrative functions associated with the settlement.
Net Settlement Fund: After deducting the foregoing amounts from the GSA, the Net Settlement Fund available for distribution to class members would be approximately $8,251,525, calculated as follows:
$14,750,000 (GSA) – $4,916,175 (fees) – $412,300 (costs) – $35,000 (service awards) – $385,000 (administration) – $750,000 (PAGA) = $8,251,525
Estimated Average Per-Member Payment: Based on an estimated class of 1,850 individuals, the average per-member payment from the Net Settlement Fund would be approximately $4,460. Actual payments will vary based on individual factors, including weeks worked during the class period and recorded overtime hours.
Distribution Formula: AMA proposes a distribution formula weighted 60% based on the number of weeks worked during the class period and 40% based on recorded overtime hours during the class period. This formula reflects the fact that meal period violations are more likely to occur during extended shifts and that employees who worked more overtime hours were disproportionately affected by the auto-deduction issue.
Release: The settlement would include a broad release of all class, PAGA, and individual claims arising from the operative facts alleged in the Consolidated Complaint, including the non-certified claims (rest period, off-the-clock, overtime, waiting time, minimum wage, and second meal period). The release would cover all claims that were or could have been asserted based on the facts alleged, and would extend to all Released Parties, including AMA, its parent company AGMG, their respective officers, directors, employees, agents, and affiliates.
No Admission of Liability: The settlement would not constitute an admission of liability, wrongdoing, or violation of any law by AMA.
Class Period (as Modified): November 1, 2018 through October 31, 2023. The extension of the class period to October 31, 2023 (from the original November 1, 2022 end date) reflects the correction of the TimeTrack Pro configuration issues in December 2022 and the implementation of updated meal period policies and training in early 2023.
F. Insurance Coverage and Funding
AMA's employment practices liability ("EPL") insurance is provided by Pemberton Mutual Assurance Co., under Policy No. PMA-EPL-2022-00837. The policy carries a $5 million self-insured retention ("SIR") and a $15 million aggregate policy limit. Pemberton has been on notice of the Fuentes class action since December 2022 and has been actively participating in the defense and settlement discussions.
Pemberton has authorized participation in a class settlement within the proposed range and has indicated a willingness to contribute to a settlement at the $14,750,000 level. The anticipated Pemberton contribution is $9,250,000, with AMA funding the remaining $5,500,000 from its own resources.
As of September 2023, AMA has incurred approximately $3.1 million in defense costs in the Fuentes class action, substantially exhausting the $5 million SIR. Accordingly, Pemberton's coverage obligations have been triggered, and the carrier is actively engaged in settlement discussions through its coverage counsel, Margaret Hollingsworth of Pemberton's in-house legal department.
Pemberton has reserved rights with respect to PAGA penalties under the Penalty Exclusion provision at Section IV.F of the policy, which excludes coverage for "fines, penalties, or punitive damages assessed against any insured." However, given the modest PAGA allocation in the proposed settlement ($750,000, representing only 5.1% of the GSA), AMA anticipates that Pemberton will participate in the full GSA without carving out the PAGA component. AMA is continuing discussions with Pemberton on this point and expects to have confirmation prior to the September 8 session.
IV. ALDRICH EXECUTIVE DISPUTE — FULL ANALYSIS
A. Background
Gavin Aldrich served as AMA's Senior Vice President of Original Content and Executive Producer from September 5, 2017 through October 14, 2022 — a tenure of approximately five years. In this role, Mr. Aldrich was one of AMA's most senior creative executives, reporting directly to AMA President Jonathan Mercer and responsible for overseeing the development, production, and delivery of all original unscripted and reality television content produced by AMA's Los Angeles operation. During his tenure, Mr. Aldrich oversaw the development and production of numerous programs, including "Summit Challenge" (AMA's highest-rated franchise, generating approximately $42 million in annual revenue), "Apex Endurance," "The Remix," "Kitchen Clash," and "Untamed West."
Mr. Aldrich's compensation at the time of his termination consisted of the following components:
• Base Salary: $485,000 per year
• Last Annual Bonus (FY 2021): $225,000
• Equity: 42,500 restricted stock units ("RSUs") of Aurelius Global Media Group (AGMG), the parent company of AMA, of which 15,300 remained unvested at the time of Mr. Aldrich's termination
Mr. Aldrich's employment was governed by an Employment Agreement dated September 5, 2017, which was amended on August 1, 2020 (the "Employment Agreement"). The Employment Agreement contained, among other provisions, a "for cause" termination provision (§ 7.2), restrictive covenants (§§ 9.1–9.4), and a New York choice-of-law clause (§ 14.3).
AMA terminated Mr. Aldrich's employment effective October 14, 2022, designating the termination as "for cause" under Section 7.2(b) of the Employment Agreement. The termination was based on two grounds:
(i) Unauthorized Transmission of Confidential Information. An internal investigation, initiated through AMA's Data Loss Prevention ("DLP") audit system, identified approximately 340 emails forwarded by Mr. Aldrich from his AMA corporate email account to his personal email account (galdrich.private@Northgate Software.com) between July 2021 and September 2022. More significantly, the DLP audit identified seven (7) emails transmitted by Mr. Aldrich to Halcyon Creek Productions LLC (info@halcyoncreekprod.com) containing highly sensitive proprietary materials, including three complete show format bibles (for "Apex Endurance," "The Remix," and "Untamed West"), two pilot sizzle reels, and the revenue model for the "Summit Challenge" franchise (documenting approximately $42 million in annual revenue, including network licensing fees, international distribution revenues, and ancillary revenue streams).
(ii) Insubordination. On October 10, 2022, Mr. Aldrich refused to comply with a restructuring directive issued by AMA President Jonathan Mercer, which would have reorganized AMA's Los Angeles content division and eliminated two department head positions reporting to Mr. Aldrich. On October 11, 2022, Mr. Aldrich forwarded his written refusal to multiple subordinates, accompanied by a disparaging comment regarding AMA's London-based parent company: "London suits are gutting our operation." This email was received by at least 14 AMA employees and further disseminated within the company.
Halcyon Creek Productions LLC is a California limited liability company formed on February 14, 2022, by Nina Castellanos, a former AMA Director of Development who departed AMA in January 2022. Halcyon Creek operates as a competitor to AMA in the unscripted and reality television production space, and Ms. Castellanos has publicly announced several development deals with streaming platforms since Halcyon Creek's formation. AMA's investigation revealed that Mr. Aldrich and Ms. Castellanos maintained a close professional and personal relationship during their concurrent employment at AMA, and that the seven transmissions to Halcyon Creek occurred between March 2022 and September 2022 — beginning shortly after Halcyon Creek's formation.
B. Aldrich's Claims
Mr. Aldrich's Complaint, filed December 9, 2022, asserts the following causes of action against AMA:
1. Wrongful Termination in Violation of Public Policy (*Tameny* Doctrine). Mr. Aldrich alleges that his termination was retaliatory, asserting that the true reason for his discharge was his objection to Mr. Mercer's restructuring plan, which Mr. Aldrich characterizes as an effort to misclassify certain employees from exempt to non-exempt status in order to reduce labor costs. Under the Tameny v. Tarrant Holdings (1980) 27 Cal.3d 167 framework, Mr. Aldrich contends that his objection to the alleged misclassification scheme constituted protected activity — specifically, resistance to an employer's violation of California Labor Code provisions governing employee classification — and that his termination in retaliation for this objection violates California public policy.
2. Breach of Contract. Mr. Aldrich contests the "for cause" designation as pretextual and contends that his termination was, in substance, a termination without cause, entitling him to the severance and benefits provided under Section 7.3 of the Employment Agreement:
• Severance: $970,000 (24 months of base salary at $485,000 per year)
• Pro-rata annual bonus for FY 2022: $168,750 ($225,000 × 9.5/12 months)
• Accelerated vesting of all unvested RSUs: 15,300 RSUs at approximately $21.71 per share = approximately $332,200
• COBRA subsidy: approximately $50,400 (18 months at approximately $2,800 per month)
3. Breach of Implied Covenant of Good Faith and Fair Dealing. Mr. Aldrich alleges that AMA manufactured the "for cause" designation in bad faith in order to avoid its severance obligations under Section 7.3 and to trigger the RSU forfeiture provision under the AGMG Restricted Stock Unit Agreement (which provides for automatic forfeiture of unvested RSUs upon a "for cause" termination).
4. Declaratory Relief. Mr. Aldrich seeks a judicial declaration that the non-competition clause (§ 9.1, imposing an 18-month post-termination non-competition restriction) and the non-solicitation clauses (§§ 9.2 and 9.3, imposing 24-month post-termination restrictions on solicitation of employees and business relationships, respectively) are void and unenforceable under California Business & Professions Code § 16600.
5. California Labor Code § 2802 — Failure to Reimburse Business Expenses. Mr. Aldrich seeks reimbursement of approximately $28,400 in unreimbursed business expenses, consisting primarily of travel expenses, entertainment costs, and mobile phone charges incurred during the last four months of his employment.
C. AMA's Cross-Claims
AMA's Amended Cross-Complaint, filed April 5, 2023, asserts the following causes of action against Mr. Aldrich:
1. Breach of Employment Agreement (§ 9.4 — Confidentiality). AMA alleges that Mr. Aldrich's unauthorized transmission of proprietary materials to his personal email account and to Halcyon Creek Productions LLC breached the confidentiality obligations set forth in Section 9.4 of the Employment Agreement, which requires Mr. Aldrich to maintain the confidentiality of all proprietary information during and after employment and prohibits the disclosure of such information to any third party without AMA's prior written consent.
2. Misappropriation of Trade Secrets (Cal. Civ. Code § 3426 et seq. — CUTSA). AMA alleges that the show format bibles (for "Apex Endurance," "The Remix," and "Untamed West"), the pilot sizzle reels, and the Summit Challenge revenue model constitute trade secrets under CUTSA, and that Mr. Aldrich's unauthorized acquisition and disclosure of these materials to Halcyon Creek constitutes misappropriation as defined in Civil Code § 3426.1(b).
3. Breach of Fiduciary Duty. AMA alleges that Mr. Aldrich, as a senior executive officer of AMA, owed duties of loyalty and care to the company, and that his unauthorized disclosure of proprietary materials to a competitor breached those duties.
4. Conversion. AMA alleges that Mr. Aldrich's unauthorized appropriation and transmission of AMA's proprietary digital files — including the show format bibles, sizzle reels, and revenue model — constitutes conversion of AMA's property.
D. AMA's Assessment of the Merits
1. AMA's Strengths
Confidentiality Violation (Ground 1 of "For Cause" Termination). AMA's strongest position in the Aldrich matter is the documentary evidence of Mr. Aldrich's unauthorized transmission of confidential and proprietary materials. The IT forensic review conducted by AMA's Information Security team identified 340 emails forwarded by Mr. Aldrich from his corporate email account to his personal Northgate Software account between July 2021 and September 2022, and — most critically — seven emails transmitted to Halcyon Creek Productions LLC containing three complete show format bibles, two pilot sizzle reels, and the Summit Challenge revenue model. This evidence is unambiguous and undisputed: Mr. Aldrich has not denied sending these materials.
Mr. Aldrich signed an acknowledgment of AMA's Acceptable Use and Confidentiality Policy on April 12, 2021, confirming his understanding that AMA proprietary materials may not be transmitted outside AMA's systems without prior written authorization. The transmitted materials fall squarely within the definition of "Confidential Information" under Section 9.4 of the Employment Agreement and the "Proprietary Materials" definition in the Acceptable Use Policy. Mr. Aldrich did not obtain written authorization — or, by his own admission, any form of authorization — for any of the transmissions.
The evidence satisfies the "Cause" definition at Section 7.2(b)(i) (material breach of the Employment Agreement) and Section 7.2(b)(vi) (violation of AMA policies), providing a strong contractual basis for the "for cause" termination.
Aldrich's Deposition (May 22, 2023). Mr. Aldrich's deposition testimony significantly undermined his defense. When questioned about the seven transmissions to Halcyon Creek, Mr. Aldrich offered the explanation that he was exploring a potential "co-production opportunity" between AMA and Halcyon Creek and that the materials were shared in furtherance of this exploration. However, under sustained cross-examination, Mr. Aldrich was unable to identify any AMA authorization for such an exploration, confirmed that he did not inform Mr. Mercer, AMA's Chief Operating Officer Lisa Prescott, or AMA's Business Affairs department of the purported co-production discussions, and acknowledged that no co-production agreement, term sheet, proposal, or even a written communication memorializing the supposed co-production concept exists. Mr. Aldrich further admitted that the materials he transmitted were proprietary and confidential and that he understood them to be so at the time of transmission. This testimony effectively forecloses any legitimate business purpose defense and will be devastating at trial.
CUTSA Claim. AMA's CUTSA claim is well-supported. The show format bibles represent significant development investment — AMA's records indicate development costs of approximately $85,000 to $120,000 per format bible, reflecting months of creative development, market research, casting analysis, and network pitch preparation. The Summit Challenge revenue model is among AMA's most competitively sensitive documents, detailing the financial architecture of a franchise generating approximately $42 million in annual revenue. All of these materials were stored on AMA's secure Vault Content Management System, were watermarked with "AMA CONFIDENTIAL — INTERNAL USE ONLY," and were subject to both contractual protections (§ 9.4 of the Employment Agreement) and policy protections (the Acceptable Use and Confidentiality Policy). AMA has a strong case for trade secret status and misappropriation under the six-factor test of ABBA Rubber Co. v. Seaquist (1991) 235 Cal.App.3d 1.
Restrictive Covenant — Confidentiality (§ 9.4). The confidentiality obligation under Section 9.4 of the Employment Agreement is enforceable under California law. Unlike non-competition and certain non-solicitation restrictions, confidentiality obligations are not subject to the prohibition of Business & Professions Code § 16600 and are routinely enforced by California courts. See Retirement Group v. Galante (2009) 176 Cal.App.4th 1226, 1237–38.
2. AMA's Vulnerabilities
Insubordination (Ground 2 of "For Cause" Termination) — Cure-Period Deficiency. AMA's most significant vulnerability in the Aldrich matter is the cure-period deficiency associated with the insubordination ground. Section 7.2(b)(iv) of the Employment Agreement provides that "Cause" based on insubordination requires that AMA provide the employee with written notice of the conduct constituting insubordination and a 15-business-day cure period in which to remedy the conduct before termination may be effected. In Mr. Aldrich's case, the written warning was issued on October 11, 2022, and the termination was effected on October 14, 2022 — only three calendar days later and far short of the contractually required 15-business-day cure period. This is a significant procedural defect that Mr. Aldrich will exploit to argue that the insubordination ground was invalid and that AMA terminated him in haste in order to prevent him from curing the alleged insubordination.
AMA's response is that the cure-period deficiency applies only to the insubordination ground and does not affect the validity of the confidentiality-violation ground, which is independently sufficient to support "for cause" termination under Section 7.2(b)(i) (material breach) without a cure period. However, Mr. Aldrich's counsel will argue that AMA's failure to comply with the cure-period requirement demonstrates bad faith and is consistent with a retaliatory motive, particularly given the temporal proximity between the insubordination and the termination.
Timeline / Pretext Narrative. The chronology of events surrounding Mr. Aldrich's termination creates a narrative vulnerability for AMA. The DLP audit preliminary findings — identifying the suspicious email transmissions — were reported to AMA's VP of Legal & Compliance, Gregory Tanaka, on September 6, 2022, more than five weeks before Mr. Aldrich's termination. Critically, however, AMA did not act on these findings until after the conflict between Mr. Aldrich and Mr. Mercer on October 10, 2022. Mr. Mercer admitted at his deposition on May 23, 2023, that he did not review the DLP findings in detail until October 13, 2022 — three days after the insubordination incident and only one day before Mr. Aldrich's termination. Mr. Aldrich testified at his deposition that the DLP findings were never mentioned to him before the October 14 termination meeting.
This timeline supports Mr. Aldrich's narrative that AMA was sitting on the DLP findings and retroactively used them as a pretext to justify a termination that was actually motivated by Mr. Aldrich's resistance to the restructuring directive. While AMA has explanations for the delay — including that the DLP audit required further investigation and that Mr. Tanaka was managing multiple compliance matters during this period — the optics are unfavorable and will be difficult to overcome before a jury.
Non-Competition Clause (§ 9.1). AMA has conceded that the non-competition clause in Section 9.1 of the Employment Agreement — which imposes an 18-month post-termination restriction on competitive employment — is void and unenforceable under California Business & Professions Code § 16600. AMA is not seeking to enforce this provision and has so stated in its Amended Cross-Complaint. The Employment Agreement's New York choice-of-law clause (§ 14.3) does not save the non-competition clause, as a California court will not enforce a contractual choice-of-law provision that would result in the application of a law contrary to California's fundamental public policy. See Edwards v. Kraft Quill CPAs LLP (2008) 44 Cal.4th 937, 945–46; Application Group, Inc. v. Hunter Group, Inc. (1998) 61 Cal.App.4th 881, 904–06; Restatement (Second) of Conflict of Laws § 187(2).
Non-Solicitation of Business Relationships (§ 9.3). The non-solicitation of business relationships provision in Section 9.3, which restricts Mr. Aldrich from soliciting or doing business with AMA's clients, networks, and business partners for 24 months following termination, is vulnerable under California law. While employee non-solicitation provisions have been afforded somewhat greater latitude by California courts, see The Retirement Group v. Galante, supra, restrictions on solicitation of business relationships have been increasingly scrutinized and may be struck down as overly broad or as a de facto non-compete that operates to restrict the former employee's ability to practice his or her trade or profession. See Ashbury Partners LLC (2009) 179 Cal.App.4th 564.
3. Probability Assessment
Based on the foregoing analysis, AMA's assessed probabilities on the key issues in the Aldrich matter are as follows:
These assessments reflect AMA's view that the confidentiality violation provides a strong foundation for the "for cause" termination, but that the cure-period deficiency, the pretext narrative, and the timeline concerns introduce meaningful risk that a jury could reject the "for cause" designation. The wrongful termination claim, while factually weak (the misclassification allegation is poorly supported), carries some risk given the sympathetic narrative available to a terminated executive. AMA's cross-claims are supported by strong evidence but face the practical limitation that AMA has not yet been able to demonstrate that Halcyon Creek commercially exploited the transmitted materials.
E. Damages Analysis — Aldrich
Several observations inform AMA's assessment of the Aldrich damages exposure:
First, AMA's cross-claims provide meaningful settlement leverage but limited quantifiable damages. To date, AMA has not identified evidence that Halcyon Creek Productions commercially exploited the transmitted materials — no Halcyon Creek program based on AMA's format bibles has been announced, produced, or broadcast. Accordingly, AMA's actual damages on the CUTSA and breach of fiduciary duty claims are modest, consisting primarily of the development costs of the transmitted materials and any unjust enrichment that may have accrued to Halcyon Creek or Mr. Aldrich. The cross-claims serve primarily an injunctive and return-of-materials purpose, as well as providing significant settlement leverage that offsets a portion of Mr. Aldrich's affirmative claims.
Second, the continued litigation costs for both parties are substantial. AMA estimates that it would incur an additional $200,000 to $350,000 in defense and cross-claim prosecution costs through trial, including additional discovery, expert fees, motion practice, and trial preparation and presentation. Mr. Aldrich's litigation costs would be of a similar magnitude. These costs, combined with the inherent uncertainty of trial, provide a strong incentive for both parties to reach a negotiated resolution.
Third, Pemberton Mutual Assurance Co. has denied EPL coverage for the Aldrich dispute. Pemberton's coverage denial is based on the Insured v. Insured Exclusion at Section IV.C of the policy (on the ground that Mr. Aldrich, as a former officer of AMA, is an "insured" under the policy), AMA's affirmative cross-claims (which fall outside the scope of "defense" costs under the policy), and the restrictive covenant claims (which Pemberton contends do not constitute "Employment Practices" as defined in the policy). AMA has not challenged this coverage determination and does not expect Pemberton to participate in the Aldrich resolution. Accordingly, any settlement of the Aldrich matter is entirely self-funded by AMA.
F. AMA's Proposed Resolution — Aldrich
Based on the foregoing analysis, AMA proposes the following terms for the resolution of the Aldrich dispute:
Cash Settlement: $2,000,000 to $2,500,000, payable as a lump sum, less all applicable withholdings (including federal and state income tax withholding and FICA contributions). AMA proposes that the settlement amount be allocated as follows for tax reporting purposes: (i) a portion allocated to wages (severance equivalent and bonus equivalent), subject to W-2 reporting and withholding; (ii) a portion allocated to non-wage damages (emotional distress, general damages), reportable on Form 1099; and (iii) a portion allocated to attorneys' fees, payable directly to Whitfield & Associates and reportable on Form 1099. The specific allocation would be negotiated between the parties.
RSU Acceleration: AMA proposes accelerated vesting of 8,000 to 10,000 RSUs of the 15,300 unvested RSUs remaining at the time of Mr. Aldrich's termination. The remaining 5,300 to 7,300 unvested RSUs would be forfeited. The accelerated RSUs would be settled in shares of AGMG common stock in accordance with the terms of the AGMG Restricted Stock Unit Agreement, subject to AGMG's standard settlement procedures and any applicable securities law restrictions. This partial acceleration represents a meaningful concession by AMA — under the "for cause" termination, all 15,300 unvested RSUs were subject to automatic forfeiture — while preserving some economic consequence of Mr. Aldrich's contractual breach.
Mutual General Release: The settlement would include a full mutual general release, under which Mr. Aldrich would release all claims asserted in his Complaint and all related claims (known and unknown, pursuant to a Cal. Civ. Code § 1542 waiver), and AMA would release all cross-claims asserted in its Amended Cross-Complaint and all related claims. The release would be broadly drafted to cover all claims arising from or related to Mr. Aldrich's employment with AMA, the termination of his employment, and the subject matter of the litigation.
Modified Restrictive Covenants: AMA proposes the following modifications to the restrictive covenants in the Employment Agreement:
• § 9.1 (Non-Competition, 18 months): Voided and deemed unenforceable. The parties would mutually agree that this provision is void and unenforceable under California Business & Professions Code § 16600. This concession is consistent with AMA's existing litigation position and California law.
• § 9.2 (Non-Solicitation of Employees, currently 24 months): Reduced from 24 months to 12 months post-settlement. AMA has a legitimate and substantial interest in preventing the solicitation of its employees by a former senior executive who had access to and influence over a large number of AMA personnel. A 12-month restriction is reasonable, narrowly tailored, and consistent with AMA's actual business needs.
• § 9.3 (Non-Solicitation of Business Relationships, currently 24 months): Reduced from 24 months to 12 months post-settlement. While AMA recognizes the vulnerability of this provision under California law, AMA's willingness to shorten the restriction and to negotiate its specific terms reflects an effort to reach a workable compromise.
• § 9.4 (Confidentiality, indefinite): Remains in full force indefinitely. This is non-negotiable for AMA. Given the documented evidence of Mr. Aldrich's unauthorized transmission of proprietary materials to a competitor, AMA cannot agree to any modification, limitation, or termination of the confidentiality obligation. The continued enforcement of Section 9.4 is essential to the protection of AMA's trade secrets, proprietary information, and competitive position, and is a fundamental condition of any settlement.
Return of Materials: As a condition of the settlement, Mr. Aldrich would be required to return and/or permanently delete all AMA proprietary materials in his possession, custody, or control, including but not limited to any copies of AMA materials on personal devices, personal email accounts (including galdrich.private@Northgate Software.com), cloud storage services, external hard drives, USB drives, and any materials transmitted to Halcyon Creek Productions LLC or any other third party. Mr. Aldrich would be required to provide a written certification of compliance — signed under penalty of perjury — within ten (10) business days of the effective date of the settlement agreement. AMA reserves the right to engage a third-party forensic technology firm to verify compliance, at AMA's expense.
Neutral Reference Agreement: AMA would agree to provide a neutral employment reference for Mr. Aldrich, confirming only his dates of employment (September 5, 2017 through October 14, 2022), his title (Senior Vice President, Original Content & Executive Producer), and his eligibility for rehire (neutral). All reference inquiries would be directed to AMA's Human Resources department.
Non-Disparagement: Mutual non-disparagement obligation, with a three-year term commencing on the effective date of the settlement agreement. Neither party would make any statement, oral or written, to any person or entity, that disparages, defames, or casts in a negative light the other party, its officers, directors, employees, products, services, or business practices. The non-disparagement obligation would include carve-outs for truthful testimony under oath or subpoena, communications with legal counsel, and statements required by law or regulation.
No Admission of Liability: The settlement would not constitute an admission of liability, wrongdoing, or violation of any law by either AMA or Mr. Aldrich.
Confidentiality of Settlement Terms: The terms of the settlement, including the settlement amount, would be confidential and would not be disclosed by either party except as required by law, regulation, or court order, or to the parties' respective legal, tax, and financial advisors.
V. GLOBAL RESOLUTION PROPOSAL
A. Combined Package
AMA's global resolution proposal for both the class action and the Aldrich individual dispute is summarized in the following table:
This combined package represents AMA's good-faith effort to achieve a comprehensive and final resolution of all pending employment litigation in a single mediation process. The combined total of $16.75 million to $17.25 million is a significant financial commitment for AMA and reflects the company's recognition of the litigation risks identified in this brief, its desire for finality, and its commitment to fair outcomes for all parties.
B. Benefits of Simultaneous Resolution
AMA believes that a simultaneous resolution of both matters offers compelling benefits for all parties and for the efficient administration of justice:
1. Comprehensive Finality. A global resolution would allow AMA to resolve all pending employment litigation in one process, eliminating the organizational distraction and uncertainty of parallel proceedings. In particular, a simultaneous resolution would eliminate the overhang of the Aldrich dispute during the class settlement approval process. If the Aldrich matter were to remain pending during the class settlement approval proceedings, there is a risk that the Court or class members could perceive the unresolved executive dispute as evidence of a broader pattern of employment practices issues at AMA, potentially complicating the approval process. A simultaneous resolution eliminates t