SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF LOS ANGELES — CENTRAL DISTRICT
DECLARATION OF JONATHAN MERCER IN SUPPORT OF DEFENDANT AND CROSS-COMPLAINANT AURELIUS MEDIA AMERICAS INC.'S CROSS-COMPLAINT
I, Jonathan Mercer, hereby declare as follows:
1. My name is Jonathan Mercer. I am the President of Aurelius Media Americas Inc. ("AMA"). I have held the position of President of AMA continuously since March 2018. I make this declaration based upon my own personal knowledge. If called as a witness, I am competent to testify to all matters stated herein.
2. AMA is a corporation organized and existing under the laws of the State of Delaware (Delaware Division of Corporations File No. 5284731) and is qualified to do business in the State of California. AMA maintains its principal office at 8500 Sunset Boulevard, Suite 1400, West Hollywood, California 90069. AMA is a wholly owned subsidiary of Aurelius Global Media Group PLC ("AGMG"), a public limited company organized under the laws of England and Wales (Companies House No. 08412667), headquartered at 34 Kingsway, London WC2B 6EX, United Kingdom. AGMG is listed on the London Stock Exchange under the ticker symbol LSE: AGMG. AMA currently employs approximately 3,200 employees in the United States, of whom approximately 2,400 are based in the State of California. For the fiscal year ending December 31, 2022, AMA generated approximately $687.4 million in revenue from its United States operations. AMA operates seven production facilities in California and manages fourteen distinct show units that produce unscripted and reality television content, digital content, and live-events programming for domestic and international distribution.
3. Gavin Aldrich ("Aldrich") was employed by AMA from September 5, 2017 through October 14, 2022. At the time of his termination, Aldrich held the title of Senior Vice President of Original Content & Executive Producer. Aldrich was initially hired by AMA in September 2017 as Vice President of Original Content. Effective January 1, 2020, in connection with the First Amendment to his Employment Agreement dated August 1, 2020, Aldrich was promoted to the title of Senior Vice President of Original Content & Executive Producer. At the time of his termination, Aldrich's base salary was $485,000 per year. Throughout his tenure at AMA, Aldrich reported directly to me. In his capacity as Senior Vice President of Original Content & Executive Producer, Aldrich had oversight of AMA's Unscripted Programming Division, which encompasses multiple show units responsible for the development, production, and delivery of AMA's unscripted and reality television content. Aldrich's principal direct report within the Unscripted Programming Division was Dwayne Prescott, Vice President of Unscripted Programming, who in turn managed the day-to-day operations of the show units under Aldrich's supervision.
4. In early October 2022, in my capacity as President of AMA, I directed Aldrich to undertake a restructuring of the Unscripted Programming Division. Specifically, I directed Aldrich to consolidate two underperforming show units within the division and to reduce divisional headcount by approximately fifteen percent (15%). This directive was issued in the ordinary course of AMA's business operations. The directive was consistent with strategic priorities that had been communicated to me by AGMG's senior leadership, including Sir Edmund Halesworth, Chief Executive Officer of AGMG, and Malcolm Dunmore, Chief Financial Officer of AGMG. The restructuring was a cost-efficiency measure necessitated by a significant decline in advertising revenues that AMA experienced during the third quarter of 2022. The restructuring was not, as Aldrich has alleged in his Complaint, an effort to misclassify employees or to reduce overtime costs through improper means. Rather, it was a legitimate business decision made within my authority as President of AMA, directed at ensuring the continued financial viability and operational efficiency of the Unscripted Programming Division.
5. On October 10, 2022, Aldrich sent me an email in which he categorically refused to implement the restructuring directive I had issued. In that email, Aldrich stated, among other things, that the directive was "creatively bankrupt and commercially idiotic" and that he would "not participate in dismantling [his] division." I found the language employed by Aldrich in his October 10, 2022 email to be insubordinate and unprofessional, and wholly inconsistent with the conduct expected of a senior officer of AMA. At no time prior to sending this email did Aldrich raise his concerns regarding the restructuring through appropriate channels — for example, by requesting a private meeting with me to discuss his reservations, by preparing a written memorandum articulating his concerns and proposing alternatives, or by escalating his concerns to AMA's Human Resources department or Legal & Compliance department. Instead, Aldrich's refusal was categorical and was expressed in dismissive and disrespectful terms that were neither constructive nor consistent with the professional standards expected of a Senior Vice President of the Company.
6. On October 11, 2022, in response to Aldrich's email of October 10, 2022, I issued Aldrich a formal written warning. The written warning advised Aldrich that his refusal to comply with a direct instruction from the President of the Company constituted a violation of AMA's policies governing employee conduct and the chain of command, and that continued failure to comply could result in further disciplinary action, up to and including the termination of his employment with AMA. In the written warning, I expressly directed Aldrich to comply with the restructuring directive that I had previously issued and to commence implementation of the divisional consolidation without further delay.
7. Later on October 11, 2022, I was informed by members of my staff that Aldrich had forwarded the email chain — which included both my restructuring directive and Aldrich's own refusal to comply — to six of his subordinates within the Unscripted Programming Division. The recipients of this forwarded email chain included three show-runners and two division heads. In forwarding the email chain, Aldrich added the following comment to his subordinates: "For your awareness — the London suits are gutting our operation." I viewed Aldrich's decision to disseminate this email chain to his subordinates, accompanied by the inflammatory commentary quoted above, as a deliberate effort to undermine my authority as President of AMA and to create dissension within the organization. Aldrich's conduct in this regard was contrary to AMA's reasonable expectations for its senior officers and was a violation of the chain of command. Rather than working collaboratively with me to address the business challenges facing the Unscripted Programming Division, Aldrich sought to rally his subordinates against a legitimate corporate decision.
8. On October 13, 2022, I conferred with Gregory Tanaka, Vice President of Legal & Compliance for AMA, regarding Aldrich's conduct. During this conversation, Mr. Tanaka informed me that AMA's IT security team had previously identified, through a routine data loss prevention ("DLP") audit, that Aldrich had been forwarding confidential AMA materials to his personal email account and to a third-party production company. I wish to make clear the timeline of the DLP audit, as it is relevant to the allegations Aldrich has raised in his Complaint concerning the circumstances of his termination. The DLP audit in question was initiated in August 2022 as part of a routine, calendar-driven information security review conducted by AMA's IT department. The audit was not triggered by, and was not in any way related to, the dispute between Aldrich and me regarding the restructuring directive, which did not arise until October 2022. Preliminary findings from the DLP audit were reported to Mr. Tanaka on September 6, 2022 — more than one month before the October 10, 2022 insubordination incident. A more detailed forensic review of Aldrich's AMA-issued laptop computer was completed on October 3, 2022, which was also before the insubordination incident. The interval between the preliminary findings reported on September 6, 2022 and Aldrich's termination on October 14, 2022 was attributable to the time required to complete the forensic review, to compile and analyze the results, and to consult with inside and outside counsel regarding the appropriate course of action. On October 13, 2022, Mr. Tanaka provided me with a comprehensive summary of the DLP audit findings.
9. Based on the summary provided to me by Mr. Tanaka on October 13, 2022, I was informed that the DLP audit and the subsequent forensic review of Aldrich's AMA-issued laptop revealed the following:
(a) Between approximately July 2021 and September 2022, Aldrich forwarded approximately 340 emails from his AMA corporate email account (galdrich@aureliusmedia.com) to his personal email account (galdrich.private@Northgate Software.com). These 340 emails contained, among other things: show concept documents; audience analytics reports; revenue projections and profit-and-loss summaries for individual show units; talent deal terms and compensation information for on-air talent and production personnel; production schedules; and internal strategy memoranda prepared by and for AMA's senior management.
(b) Additionally, Aldrich transmitted materials to an email address associated with Halcyon Creek Productions LLC (info@halcyoncreekprod.com), a California-based production company. According to records obtained from the California Secretary of State, Halcyon Creek Productions LLC was formed in California on February 14, 2022, by Nina Castellanos, a former AMA development executive who departed AMA in January 2022.
(c) Specifically, the materials Aldrich transmitted to Halcyon Creek Productions LLC included: three unscripted show format bibles, for concepts titled "Apex Endurance," "The Remix," and "Untamed West"; two pilot sizzle reels, for the concepts titled "Apex Endurance" and "The Remix"; and a detailed revenue model for AMA's franchise program "Summit Challenge."
10. "Summit Challenge" is AMA's most valuable unscripted franchise. "Summit Challenge" has been in continuous production since 2019 and is currently in its fifth season. The franchise generates approximately $42 million in annual revenue for AMA across domestic and international licensing, advertising, and ancillary revenue streams, including merchandise, digital content, and live-event activations. The revenue model that Aldrich transmitted to Halcyon Creek Productions LLC contains detailed, line-item financial projections for the "Summit Challenge" franchise, including, without limitation, per-episode production costs, network license fees, international distribution revenues broken down by territory, advertising cost-per-mille ("CPM") rates, and talent compensation structures for both on-air talent and above-the-line production personnel. The unauthorized disclosure of the "Summit Challenge" revenue model to a third party — and, in particular, to a competitor operated by a former AMA executive — poses a significant and ongoing risk to AMA's competitive position in the unscripted television marketplace.
11. At no time did AMA authorize Aldrich to transmit confidential or proprietary materials to his personal email account or to any third party outside of AMA. AMA's Acceptable Use and Confidentiality Policy (last revised March 2021) expressly prohibits employees from "transmitting, forwarding, or copying Company proprietary information, trade secrets, or confidential data to personal email accounts, personal cloud storage, or non-Company-approved third-party recipients." Aldrich signed an acknowledgment of this policy on April 12, 2021, confirming that he had received, read, and understood the policy and agreed to be bound by its terms. Under AMA's established procedures, all external transmissions of development materials — including transmissions to potential co-production partners, agents, or other third parties — require prior written approval from either the President of AMA (i.e., me) or AMA's Vice President of Business Affairs. No such approval was sought by Aldrich, and no such approval was granted by me or by the Vice President of Business Affairs, with respect to any of Aldrich's transmissions of confidential materials to his personal email account or to Halcyon Creek Productions LLC.
12. Based on the totality of the circumstances described herein — namely, Aldrich's insubordination in refusing a direct and lawful instruction from the President of AMA; his deliberate dissemination of the email chain to subordinates in a manner designed to undermine my authority and foment dissension within the organization; and, most critically, the DLP audit findings revealing serious and sustained confidentiality violations over a period of approximately fourteen months — I made the decision to terminate Aldrich's employment with AMA "for cause" under Section 7.2(b) of his Employment Agreement, dated September 5, 2017, as amended by the First Amendment dated August 1, 2020. The termination decision was made in consultation with Gregory Tanaka, Vice President of Legal & Compliance, and Lorraine Okafor, Senior Vice President of Human Resources. The termination was effective October 14, 2022. The primary basis for the "for cause" termination was the confidentiality violations identified through the DLP audit — specifically, Aldrich's material breach of Section 9.4 (Confidentiality) of his Employment Agreement and his material violation of AMA's Acceptable Use and Confidentiality Policy. The insubordination and Aldrich's dissemination of internal communications to his subordinates provided additional and significant context for the termination decision, but the confidentiality violations constituted the primary and independently sufficient basis for the decision to terminate Aldrich's employment for cause.
13. I am aware that Aldrich has contended, in his Complaint and through counsel, that his transmission of materials to Halcyon Creek Productions LLC was undertaken in connection with a "potential co-production opportunity" on behalf of AMA. I state unequivocally that no such co-production opportunity was ever presented to me, discussed with me, or approved by me. No co-production proposal, term sheet, letter of intent, memorandum of understanding, or written agreement of any kind between AMA and Halcyon Creek Productions LLC was ever prepared, circulated, or approved during my tenure as President of AMA. I was not aware of any discussions between Aldrich and Halcyon Creek Productions LLC or Nina Castellanos regarding any business arrangement, co-production or otherwise, until I was informed of the DLP audit findings by Mr. Tanaka on October 13, 2022. I have further confirmed with AMA's Business Affairs department that it was similarly not informed of any discussions, negotiations, or proposed transactions between Aldrich and Halcyon Creek Productions LLC or Nina Castellanos at any time.
14. The unauthorized disclosure of AMA's proprietary show format bibles, pilot sizzle reels, and the "Summit Challenge" revenue model to a competitor has caused and continues to cause harm to AMA. The show format bibles for "Apex Endurance," "The Remix," and "Untamed West" represent significant investments by AMA in concept development. AMA's development costs for these three concepts were approximately $120,000 for "Apex Endurance," approximately $85,000 for "The Remix," and approximately $95,000 for "Untamed West," for a combined total of approximately $300,000 in development expenditures. As of October 2022, AMA was in preliminary discussions with major streaming platforms regarding a potential series order for "Apex Endurance," and AMA had produced a sizzle reel for "Untamed West" that was actively being used in pitch meetings with cable networks. The disclosure of these materials to a competitor — a production company formed and operated by a former AMA development executive with direct knowledge of AMA's development pipeline and business relationships — jeopardizes AMA's ability to exploit these concepts commercially and to recoup its development investments. Furthermore, the disclosure of the "Summit Challenge" revenue model, which contains detailed financial projections for AMA's most valuable franchise, provides a competitor with sensitive competitive intelligence regarding AMA's pricing structures, production cost efficiencies, network license fee expectations, international distribution revenue benchmarks, advertising rate cards, and talent compensation norms. The competitive harm flowing from this disclosure is ongoing and is not susceptible to precise quantification at this time.
15. I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.
Executed this 18th day of January, 2023, in West Hollywood, California.
________________________________________
Jonathan Mercer
| GAVIN ALDRICH, | Case No. 22STCV41087 |
| Plaintiff, | Assigned for All Purposes to |
Hon. Catherine Villanueva, Dept. 52
v.
DECLARATION OF JONATHAN MERCER
AURELIUS MEDIA AMERICAS INC., a Delaware corporation,
CROSS-COMPLAINANT AURELIUS MEDIA
Defendant and Cross-Complainant.