1017-00005 · Aurelius Global Media Group · Analysis

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PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT — PREPARED AT THE DIRECTION OF COUNSEL

MEMORANDUM

FROM: Nadia Petrov, Associate, Calderwood & Harkness LLP

REVIEWED BY: Devon Archer, Lead Associate, Calderwood & Harkness LLP

DATE: May 18, 2023

TO: Investigation File — Matter No. 1017-00005

RE: Applicable Legal Standards Under the California Fair Employment and Housing Act (Cal. Gov. Code §§ 12940 et seq.) — Independent Workplace Investigation of Allegations Against Marcus Hale, President, Aurelius Pacific Studios Inc.

CLIENT: Aurelius Global Media Group PLC (Board of Directors)

PRIVILEGE DESIGNATION: This memorandum is protected by the attorney-client privilege and the work-product doctrine. It has been prepared by Calderwood & Harkness LLP at the direction of the Board of Directors of Aurelius Global Media Group PLC in connection with the independent workplace investigation opened May 2, 2023. The privilege belongs solely to Aurelius Global Media Group PLC and may be waived only at the direction of the Board. No disclosure of this memorandum or its contents should be made to any third party without the prior written authorization of counsel.

I. Purpose and Scope of This Memorandum

This memorandum sets forth the legal framework applicable to the ongoing investigation of workplace misconduct allegations against Marcus Hale, President of Aurelius Pacific Studios Inc. ("APS"). APS is a Delaware corporation headquartered at 3200 West Alameda Avenue, Suite 400, Burbank, California 91505. APS is a wholly owned subsidiary of Aurelius Global Media Group PLC ("AGMG"), a public limited company organized under the laws of England and Wales and listed on the London Stock Exchange. As the direct subsidiary charged with operating AGMG's domestic film and television production business, APS is the direct employer of all US studio-division personnel, including Hale and each of the three complainants identified below.

The three individuals who have submitted formal complaints in connection with this matter are:

1. Jenna Morales, Vice President of Development, who alleges sexual harassment by Hale, including unwanted sexual advances, sexually suggestive communications, inappropriate comments regarding her physical appearance, and unwelcome physical contact, occurring from approximately September 2022 through March 2023.

2. Claire Ngo, Senior Director of Talent Relations, who alleges sexually inappropriate comments made by Hale regarding her attire and personal life during a company off-site retreat in February 2023, and subsequent exclusion from key departmental meetings.

3. Darren Whitfield, Senior Vice President of Physical Production, who alleges that Hale retaliated against him after Whitfield raised concerns about Hale's treatment of female employees during a leadership team meeting on January 23, 2023. Whitfield's retaliation claim centers on the reassignment of two high-profile production projects within two weeks of his protected activity.

Accordingly, the allegations under investigation fall into three categories: (1) sexual harassment of Morales, (2) sexually inappropriate comments directed at Ngo (with potential additional harassment and/or retaliation claims), and (3) retaliation against Whitfield for engaging in protected opposition activity.

The investigation is being conducted under the joint authorization of the People & Culture Committee of the AGMG Board of Directors, chaired by Dame Cordelia Ashworth, and the Audit & Risk Committee of the AGMG Board, chaired by Raymond Okoro. Calderwood & Harkness LLP was retained as independent outside counsel to conduct the investigation, with the engagement letter executed on May 1, 2023.

California law governs the employment relationship between APS and each of its employees, including Hale and the three complainants, given that APS is headquartered in California and all relevant conduct occurred within the state. The principal statute at issue is the California Fair Employment and Housing Act, Cal. Gov. Code §§ 12940 et seq. ("FEHA"). This memorandum identifies and analyzes the FEHA legal standards that the investigation team must apply in evaluating the evidence.

It should be noted that the APS Employee Handbook (CA Supplement), revised March 15, 2022, contains several policies directly implicated by the allegations, including Section 5.3 (Anti-Harassment & Anti-Discrimination Policy), Section 5.7 (Anti-Retaliation Policy), and Section 8.1 (Complaint & Investigation Procedures). In addition, AGMG's Global Code of Conduct and Board Corporate Governance Guidelines impose separate standards of conduct applicable to senior executives. These internal company policies are analyzed in a separate memorandum; the present memorandum is confined to the statutory legal standards under FEHA.

II. Overview of the California Fair Employment and Housing Act

A. Statutory Framework

The California Fair Employment and Housing Act is codified at California Government Code sections 12900 through 12996. Enacted originally as the California Fair Employment Practice Act in 1959, and subsequently expanded and renamed, FEHA constitutes the most comprehensive state-level employment discrimination and harassment statute in the United States. It provides a broad array of protections for employees against unlawful employment practices, including harassment, discrimination, and retaliation based on numerous protected characteristics.

Section 12940 is the central operative provision of FEHA, setting forth the specific unlawful employment practices prohibited under the statute. It addresses, among other things, discrimination in hiring, firing, and terms and conditions of employment (§ 12940(a)); harassment by supervisors and co-workers (§ 12940(j)); retaliation against individuals who oppose prohibited practices or participate in FEHA proceedings (§ 12940(h)); failure to take reasonable steps to prevent harassment and discrimination (§ 12940(k)); and aiding and abetting of prohibited conduct (§ 12940(i)).

FEHA is enforced administratively by the California Civil Rights Department ("CRD"), formerly known as the Department of Fair Employment and Housing ("DFEH"). The CRD has the authority to receive and investigate complaints, issue right-to-sue notices, and, in appropriate cases, file civil actions on behalf of aggrieved individuals. In addition, individuals may file private civil actions in state superior court after exhausting administrative remedies or obtaining a right-to-sue notice from the CRD. The statute of limitations for filing a complaint with the CRD is three years from the date of the alleged unlawful employment practice, pursuant to Assembly Bill 9, effective January 1, 2020. Cal. Gov. Code § 12960(e).

FEHA applies to employers with five or more employees. Cal. Gov. Code § 12926(d). As a major entertainment company employing approximately 2,300 individuals in its US studio-division operations, APS is unquestionably a covered employer under FEHA. There is no colorable argument that APS falls outside the statute's coverage.

It is important to note at the outset that FEHA provides broader protections than its federal counterpart, Title VII of the Civil Rights Act of 1964, in several material respects. These differences are noted throughout this memorandum where relevant and include, among other things: (1) FEHA's disjunctive "severe or pervasive" standard for hostile work environment claims, as compared to Title VII's conjunctive "severe and pervasive" standard; (2) FEHA's strict liability standard for employer liability for supervisor harassment, without the affirmative defense available under federal law; (3) FEHA's absence of any statutory cap on compensatory damages, as compared to the tiered caps imposed by Title VII; and (4) FEHA's broader definition of protected activity for purposes of retaliation claims. These distinctions make California an especially protective jurisdiction for employees asserting harassment and retaliation claims and correspondingly increase the potential liability exposure for APS and AGMG.

B. Protected Categories Relevant to This Investigation

Of the numerous protected categories enumerated under FEHA, two are directly implicated by the allegations at issue in this investigation:

Sex and Gender. California Government Code sections 12940(a) and 12940(j) prohibit employment discrimination and harassment, respectively, on the basis of sex, gender, gender identity, and gender expression. The sexual harassment allegations brought by Morales and Ngo fall squarely within this protected category. Under California law, harassment based on sex encompasses a broad range of conduct, including unwanted sexual advances, requests for sexual favors, sexually suggestive comments, unwelcome physical touching of a sexual or gender-based nature, and the creation of a hostile work environment through conduct that is sexual in nature or directed at an individual because of their sex or gender.

Opposition to Prohibited Practices / Participation in Complaints. California Government Code section 12940(h) prohibits retaliation against any person who has opposed any practices forbidden under FEHA or who has filed a complaint, testified, or assisted in any proceeding under FEHA. The retaliation allegation brought by Whitfield — asserting that he was subjected to adverse employment consequences after raising concerns about Hale's treatment of female employees — directly implicates this protection. As discussed in greater detail in Section IV below, the protection afforded by section 12940(h) extends to informal internal opposition activities, not merely to formal agency charges or court proceedings.

C. Covered Individuals

FEHA defines "employee" broadly to encompass any individual employed by an employer. Cal. Gov. Code § 12926(c). All three complainants — Morales, Ngo, and Whitfield — are current, active employees of APS and are indisputably covered under FEHA's protections.

Marcus Hale occupies a dual role under FEHA that is significant for purposes of this analysis. First, he is an employee of APS, holding the title of President of APS and serving as the highest-ranking officer of the US studio-division entity. He reports directly to Elliot Vane, Chief Executive Officer of AGMG, the parent company. Second, and critically, Hale is a supervisor within the meaning of FEHA. He oversees the entirety of APS's US studio operations and has nine direct-report Senior Vice Presidents, including Whitfield. In his capacity as President, Hale has the authority to hire, transfer, promote, discipline, and discharge employees, or to effectively recommend such actions — the core criteria for "supervisor" status under Cal. Gov. Code § 12926(t).

Hale's status as a "supervisor" under FEHA is of paramount importance to the employer liability analysis, because California law imposes strict liability on employers for harassment committed by supervisors. This strict liability framework is discussed in detail in Section V of this memorandum. As a threshold matter, however, it bears emphasizing that there is no question regarding Hale's supervisory status: as President of APS, he is the most senior executive within the entity and exercises direct and indirect supervisory authority over all three complainants and, indeed, over the entire US studio-division workforce.

III. Sexual Harassment Under FEHA

A. Statutory Prohibition

California Government Code section 12940(j)(1) provides that it is an unlawful employment practice for an employer, labor organization, employment agency, apprenticeship training program, or any training program leading to employment, or any other person, to harass an employee, an applicant, an unpaid intern or volunteer, or a person providing services pursuant to a contract because of, among other characteristics, sex and gender.

Importantly, the statute imposes liability not only on the employer as an entity but also on "any other person" who engages in harassment, thereby establishing individual liability for the harasser in addition to entity liability. This means that Hale may face personal liability for harassment, independent of any entity-level liability imposed upon APS or AGMG.

California courts have consistently held that harassment need not be motivated by sexual desire to constitute actionable sexual harassment under FEHA. In Lyle v. Warner Brothers Television Productions (2006) 38 Cal.4th 264, 279–280, the California Supreme Court explained that the critical inquiry is whether the challenged conduct was "based on sex" — that is, whether the plaintiff was subjected to the conduct because of their sex or gender, regardless of whether the conduct was driven by sexual attraction. Similarly, in Pantoja v. Anton (2011) 198 Cal.App.4th 87, 114, the Court of Appeal reiterated that sexual harassment encompasses conduct that is motivated by hostility based on sex as well as conduct that is motivated by sexual desire.

California law recognizes two distinct theories of sexual harassment: (1) quid pro quo harassment and (2) hostile work environment harassment. Both theories are potentially applicable to the allegations in this investigation, particularly the Morales allegations, and each is analyzed in turn below.

B. Quid Pro Quo Harassment

1. Definition and Elements

Quid pro quo harassment, which translates literally as "this for that," occurs when submission to unwelcome sexual conduct is made, explicitly or implicitly, a term or condition of an individual's employment, or when submission to or rejection of such conduct by an individual is used as the basis for an employment decision affecting that individual. This theory of harassment is inherently linked to the abuse of supervisory authority, as it requires that the harasser possess the power to confer or withhold employment benefits as a consequence of the victim's response to the sexual conduct.

Under California law, the elements of a quid pro quo sexual harassment claim are:

(a) The plaintiff was subjected to unwelcome sexual advances, requests for sexual favors, or other verbal or physical conduct of a sexual nature;

(b) The conduct was committed by a supervisor or other person with authority over the plaintiff's employment;

(c) Submission to the conduct was explicitly or implicitly made a term or condition of the plaintiff's employment, or rejection of the conduct was used as the basis for an adverse employment action affecting the plaintiff.

The California Court of Appeal in Mogilefsky v. Superior Court (1993) 20 Cal.App.4th 1409, 1414–1416, articulated the foundational framework for quid pro quo claims under FEHA, explaining that the hallmark of such a claim is the conditioning of concrete employment benefits on the employee's acquiescence to sexual demands. The California Supreme Court further refined the scope of actionable harassment in Hughes v. Pair (2009) 46 Cal.4th 1035, 1043, clarifying that while a broad range of conduct may give rise to harassment claims, the plaintiff must demonstrate a nexus between the challenged conduct and a protected characteristic — in this case, sex.

Quid pro quo harassment may be established through either explicit or implicit conditioning. An explicit quid pro quo involves a direct statement by the supervisor linking job benefits or adverse consequences to the employee's submission to sexual demands (e.g., "If you sleep with me, I will promote you" or "If you refuse, I will reassign you"). An implicit quid pro quo, which is more commonly alleged, involves circumstances from which a reasonable person would infer that employment consequences are tied to the employee's response to sexual overtures. Courts examine the totality of the circumstances, including the supervisor's authority, the nature of the sexual conduct, the timing and nature of any adverse employment action, and any statements or behavior suggesting a connection between the sexual conduct and employment decisions.

2. Application to the Morales Allegations

The allegations presented by Jenna Morales contain elements that potentially support a quid pro quo theory of sexual harassment. Morales alleges a pattern of unwanted sexual advances by Hale occurring from approximately September 2022 through March 2023, which included the following specific conduct:

• Invitations to hotel room: During the APS Vancouver production trip in October 2022, Hale allegedly invited Morales to his hotel room on at least one occasion under circumstances suggesting a personal or sexual rather than professional purpose.

• Sexually suggestive text messages: Morales alleges that Hale sent her sexually suggestive text messages on November 14, November 29, and December 8, 2022. These messages have been identified as potentially recoverable from device and carrier records and are a priority for forensic collection and review by the investigation team.

• Comments about physical appearance: During a one-on-one meeting on January 11, 2023, Hale allegedly made comments about Morales's physical appearance that were sexual in nature and unrelated to any legitimate business purpose.

• Physical contact: At a company dinner on February 3, 2023, Hale allegedly placed his hand on Morales's lower back and thigh in a manner she perceived as sexual and unwelcome.

Critically for the quid pro quo analysis, Morales further alleges that after she rejected Hale's advances, she was subjected to a retaliatory reassignment of her responsibilities. If the investigation substantiates that the reassignment constituted an adverse employment action and that it was causally linked to Morales's rejection of Hale's sexual conduct, this would support a quid pro quo theory. The quid pro quo framework does not require that the conditioning be stated explicitly; a reasonable inference drawn from the temporal proximity between the rejection of advances and a subsequent adverse employment action may suffice.

Hale is indisputably a "supervisor" with authority over Morales's employment. As President of APS, Hale sits at the apex of the APS organizational hierarchy. Morales, as Vice President of Development, falls within Hale's direct organizational chain of command. Hale possesses the unilateral authority — or at minimum the ability to effectively recommend — employment decisions affecting Morales, including reassignment, promotion, compensation adjustments, and termination. This power dynamic is central to the quid pro quo analysis and underscores the coercive nature of the alleged sexual advances.

C. Hostile Work Environment Harassment

1. Definition and Elements

Hostile work environment harassment, the second recognized theory of sexual harassment under California law, occurs when unwelcome sexual conduct is sufficiently severe or pervasive to alter the conditions of the victim's employment and create an abusive working environment. Unlike quid pro quo harassment, hostile work environment harassment does not require a tangible adverse employment action; rather, the actionable harm is the creation of a work atmosphere that is permeated with discriminatory intimidation, ridicule, and insult sufficiently severe or pervasive to alter the conditions of the victim's employment and create an abusive working environment.

Under California law, the elements of a hostile work environment sexual harassment claim are:

(a) The plaintiff was subjected to unwelcome sexual conduct, which may be verbal, physical, or visual in nature;

(b) The conduct was based on sex or gender;

(c) The conduct was sufficiently severe or pervasive to alter the conditions of the plaintiff's employment and create a hostile or abusive work environment, assessed from both a subjective and an objective standpoint;

(d) There is a basis for employer liability (addressed in Section V of this memorandum).

The California Court of Appeal articulated the governing framework for hostile work environment claims under FEHA in Fisher v. San Pedro Peninsula Hospital (1989) 214 Cal.App.3d 590, 608–610, a seminal decision that has been cited extensively by California courts in the decades since. In Fisher, the court held that the plaintiff need not demonstrate that the harassing conduct was both severe and pervasive; rather, a single incident of harassment may be actionable if it is sufficiently severe, and a pattern of less severe conduct may be actionable if it is sufficiently pervasive. Id. at 609–610. The California Supreme Court confirmed and applied this framework in Lyle v. Warner Brothers Television Productions (2006) 38 Cal.4th 264, 283–284.

2. The "Severe or Pervasive" Standard

This is perhaps the single most important distinction between California FEHA and federal Title VII for purposes of this investigation. Under federal law, the standard for hostile work environment harassment is whether the conduct was "severe and pervasive" — a conjunctive standard requiring that both conditions be met. Under FEHA, by contrast, the standard is disjunctive: conduct that is either sufficiently severe or sufficiently pervasive may give rise to a hostile work environment claim. This lower threshold significantly expands the scope of actionable harassment under California law.

The "severe or pervasive" determination is made under a totality-of-the-circumstances analysis. California courts consider the following factors, among others:

• The frequency of the discriminatory or harassing conduct;

• The severity of the conduct;

• Whether the conduct was physically threatening or humiliating, as opposed to a mere offensive utterance;

• Whether the conduct unreasonably interfered with the plaintiff's work performance;

• The context in which the conduct occurred, including the nature of the work environment and the relative positions of the parties.

The hostile work environment analysis contains both a subjective and an objective component. The complainant must demonstrate that they actually perceived the work environment as hostile or abusive (the subjective prong), and a reasonable person in the complainant's position — taking into account all relevant circumstances — must also find the environment hostile or abusive (the objective prong). Harris v. Forklift Systems, Inc. (1993) 510 U.S. 17, 21–22 (federal standard adopted by California courts); Fisher, supra, 214 Cal.App.3d at 609–610.

California courts have consistently applied a lower threshold than their federal counterparts in evaluating the severity or pervasiveness of alleged harassment. Individual acts of physical touching — particularly touching of intimate or near-intimate body areas — have been found sufficient to constitute "severe" harassment standing alone, without any requirement that the touching be repeated or accompanied by other harassing conduct. Similarly, explicit sexual commentary by a supervisor directed at a subordinate has been found sufficient to create a hostile work environment even when limited to a small number of incidents, given the inherent power imbalance and coercive dynamics present in the supervisor-subordinate relationship.

3. Application to the Morales Allegations

The pattern of conduct alleged by Jenna Morales, if substantiated, likely satisfies both the "severe" and "pervasive" prongs of the hostile work environment analysis under FEHA, either independently or in combination.

Pervasiveness. The conduct alleged by Morales spans approximately six months (September 2022 through March 2023) and encompasses multiple categories of harassing behavior: verbal advances (hotel room invitations during the October 2022 Vancouver trip), written sexually suggestive communications (text messages dated November 14, November 29, and December 8, 2022), in-person comments about physical appearance (January 11, 2023 meeting), and unwelcome physical contact (February 3, 2023 company dinner). The multiplicity of incidents, their recurrence over a sustained period, and range modalities through which the harassing conduct was allegedly delivered collectively establish a pattern that is likely to satisfy the "pervasive" prong of the analysis. This is not a case involving a single, isolated incident; rather, the allegations describe an escalating course of conduct that permeated the complainant's working relationship with the most senior executive in the organization.

Severity. Even considered individually, several of the alleged incidents are likely to satisfy the "severe" prong. Under California law, physical touching of a sexual or near-intimate nature by a supervisor is treated as among the most severe forms of workplace harassment. The allegation that Hale placed his hand on Morales's lower back and thigh at the February 3, 2023 company dinner — a public setting, which may have been witnessed by other employees — constitutes the type of unwelcome physical contact that California courts have repeatedly held to be sufficiently severe to support a hostile work environment claim standing alone. See, e.g., Doe v. Capital Cities (1996) 50 Cal.App.4th 1038, 1048 (single incident of physical touching of a sexual nature may constitute severe harassment).

The sexually suggestive text messages, which constitute written documentary evidence of the alleged harassment, are of particular significance. Unlike verbal statements, which may be subject to conflicting recollections, text messages are susceptible to forensic recovery and authentication, and their content can be evaluated directly by the investigation team. If the messages contain explicitly sexual content, they provide contemporaneous, documentary corroboration of Morales's allegations and would be highly probative evidence in any subsequent litigation.

The hotel room invitations during the Vancouver production trip carry particular weight in the hostile work environment analysis because they were made by a direct superior during a business trip — a context in which the subordinate employee is effectively captive and unable to distance herself from the harasser. Courts have recognized that harassment occurring during business travel may be more coercive and threatening than similar conduct occurring in an office setting, because the employee has reduced ability to remove herself from the situation and may feel professionally obligated to comply with a superior's requests.

4. Application to the Ngo Allegations

Claire Ngo alleges that during the company off-site retreat held at the Monarch Valley Resort in Ojai, California (February 17–18, 2023), Hale made sexually suggestive comments about her attire and asked her a personal question — specifically, "Are you seeing anyone?" — in a context that she perceived as inappropriately personal and sexual in nature. While the retreat setting involved social interaction among colleagues, the comments were allegedly directed specifically at Ngo by the most senior executive present and concerned her physical appearance and personal romantic life.

Whether these comments, standing alone, satisfy the "severe" prong of the hostile work environment analysis is a closer question than the Morales allegations. A single instance of verbal commentary — even commentary that is sexual or gender-based in nature — may or may not meet the severity threshold depending on the totality of the circumstances, including the nature and explicitness of the comments, the relationship between the parties, the setting, and the effect on the complainant. Under the more protective California standard, a single comment about a subordinate's appearance coupled with a probing personal question about her romantic life by the President of the company could, in context, be found sufficiently severe, particularly if the comments were made in front of other employees or in a manner that singled out Ngo based on her sex or gender.

The analysis does not end with the retreat incident, however. Ngo further alleges that she was excluded from three key talent-relations strategy meetings held in March and April 2023. If these exclusions were motivated by Ngo's sex or gender — for example, if they reflected an effort by Hale to marginalize Ngo after she failed to respond positively to his personal overtures — they could constitute additional evidence of a hostile work environment. Alternatively, if the exclusions were motivated by Hale's awareness that Ngo had complained about his conduct, they may support a retaliation theory, which is discussed separately in Section IV below. The investigation must probe both possibilities.

D. Unwelcomeness

A threshold element of any sexual harassment claim — whether brought under a quid pro quo or hostile work environment theory — is that the alleged conduct was unwelcome. The complainant must demonstrate that the sexual conduct was not solicited or incited by the complainant and that the complainant regarded the conduct as undesirable or offensive. Cal. Gov. Code § 12940(j)(4)(C); see also Lyle, supra, 38 Cal.4th at 283.

Unwelcomeness is assessed from the complainant's subjective perspective, though objective evidence of the complainant's reaction to the conduct is relevant. A complainant's failure to immediately object to or report harassment does not negate unwelcomeness; California courts have recognized that employees, particularly those in subordinate positions, may refrain from objecting to a supervisor's conduct out of fear of retaliation, embarrassment, or a desire to avoid confrontation. The appropriate inquiry is whether the complainant, by her conduct, indicated that the sexual advances or comments were unwelcome, not whether the complainant lodged a formal protest at the moment the conduct occurred.

The complainant's own conduct may be relevant to the unwelcomeness analysis — for example, evidence that the complainant actively participated in or encouraged the sexual conduct may undermine a claim of unwelcomeness. However, voluntary participation in social interactions or even in mildly flirtatious banter does not constitute blanket consent to escalating sexual conduct. Each instance of alleged harassment must be evaluated on its own terms.

It should be noted that Hale's position statement, submitted through his personal legal counsel Graham Thornfield of Thornfield & Associates LLP on June 5, 2023, characterizes the complaints filed by Morales and Ngo as performance-related grievances rather than sexual harassment claims. Specifically, Hale's position statement asserts that Morales's reassignment was based on legitimate business concerns regarding project performance and that his interactions with Ngo at the Monarch Valley retreat were collegial and professional in nature. The investigation must carefully assess whether the conduct alleged by the complainants was in fact sexual in nature and unwelcome, as they assert, or whether Hale's characterization of the interactions as professional and performance-related is supported by the evidence. This is a factual question that lies at the heart of the investigation.

IV. Retaliation Under FEHA

A. Statutory Prohibition

California Government Code section 12940(h) provides that it is an unlawful employment practice for any employer to discharge, expel, or otherwise discriminate against any person because the person has opposed any practices forbidden under FEHA or because the person has filed a complaint, testified, or assisted in any proceeding under FEHA. The retaliation prohibition is broadly construed and serves the essential purpose of protecting employees who seek to vindicate their own rights or the rights of others under the statute from adverse consequences for doing so.

Critically, the retaliation protections afforded by section 12940(h) extend to internal complaints and informal opposition activity, not solely to the filing of formal charges with the CRD or participation in court proceedings. In Yanowitz v. L'Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1042–1043, the California Supreme Court held that an employee who refuses to comply with a supervisor's directive to terminate a subordinate on discriminatory grounds engages in "protected opposition activity" within the meaning of section 12940(h), even though the employee did not file a formal complaint. The court explained that the purpose of the anti-retaliation provision would be undermined if employees were required to formalize their objections before receiving protection from retaliatory conduct. Id. at 1043. This broad construction of protected activity is directly relevant to the Whitfield allegations, as discussed in Section IV.D below.

B. Elements of a Retaliation Claim

Under California law, a plaintiff asserting a retaliation claim under section 12940(h) must establish three elements:

(1) The plaintiff engaged in a protected activity;

(2) The employer subjected the plaintiff to an adverse employment action; and

(3) There was a causal link between the protected activity and the adverse employment action.

Protected Activity. Under FEHA, protected activity includes, but is not limited to: (a) opposing harassment, discrimination, or other practices forbidden under FEHA; (b) filing an internal complaint with the employer regarding conduct believed to violate FEHA; (c) filing a complaint with the CRD or commencing a civil action under FEHA; (d) participating, testifying, or assisting in any investigation, proceeding, or hearing under FEHA; and (e) supporting or assisting another employee in connection with a complaint of harassment or discrimination. The employee need not prove that the underlying harassment or discrimination actually occurred; it is sufficient that the employee held a reasonable, good-faith belief that the conduct they opposed was unlawful. Yanowitz, supra, 36 Cal.4th at 1042.

Adverse Employment Action. The concept of "adverse employment action" is broadly construed under California law. It encompasses not only ultimate employment decisions such as termination, demotion, or suspension, but also any action that materially affects the terms, conditions, or privileges of employment. Yanowitz, supra, 36 Cal.4th at 1050–1054. The California Supreme Court in Yanowitz specifically held that an adverse employment action is not limited to economic harm or a formal change in employment status; rather, it includes any employer conduct that is reasonably likely to deter employees from engaging in protected activity. Id. at 1054. Examples of actionable adverse employment actions under California law include: reassignment of significant job responsibilities, exclusion from important meetings or decision-making processes, unwarranted negative performance evaluations, hostile treatment or ostracism, and transfer to a less desirable position or location.

Causal Link. The plaintiff must demonstrate a causal connection between the protected activity and the adverse employment action. Causation may be established through direct evidence (e.g., statements by the decision-maker indicating retaliatory motive) or circumstantial evidence, including temporal proximity between the protected activity and the adverse action, disparate treatment compared to similarly situated employees who did not engage in protected activity, and evidence that the employer's stated justification for the adverse action is pretextual.

C. Temporal Proximity and Causal Inference

Close temporal proximity between an employee's protected activity and a subsequent adverse employment action is one of the most commonly cited forms of circumstantial evidence supporting a causal inference. California courts have recognized that when an adverse action follows closely on the heels of protected activity, the temporal relationship alone may give rise to a permissible inference of retaliatory motive. See, e.g., Clark v. Claremont University Center (1992) 6 Cal.App.4th 639, 667 (finding that proximity in time between protected activity and adverse action, combined with other circumstantial evidence, was sufficient to support an inference of causation).

While there is no bright-line rule defining the precise temporal window within which an adverse action must follow protected activity to give rise to a causal inference, California courts have found periods of days to weeks to be highly probative. Conversely, an adverse action occurring many months after the protected activity, without intervening evidence of retaliatory animus, may be insufficient to support a causal inference based on temporal proximity alone. In the present case, the 14-day gap between Whitfield's protected activity and the alleged adverse action is exceptionally close and falls well within the range that California courts have found probative.

D. Application to the Whitfield Allegations

The Whitfield allegations present a straightforward retaliation claim under section 12940(h), with each element supported by the evidence as currently understood:

Protected Activity. On January 23, 2023, Darren Whitfield, SVP of Physical Production, raised concerns about Hale's treatment of female employees during a leadership team meeting. This constitutes protected "opposition" activity within the meaning of section 12940(h). By voicing objections to conduct he reasonably believed to be discriminatory or harassing, Whitfield engaged in precisely the type of activity the anti-retaliation provision is designed to protect. It is not necessary that Whitfield framed his concerns in legal terms or specifically invoked FEHA; it is sufficient that he opposed practices that he reasonably believed to be unlawful. Yanowitz, supra, 36 Cal.4th at 1042–1043. The investigation should confirm the specific content of Whitfield's statements at the January 23 meeting through witness interviews and, if available, meeting notes or contemporaneous communications.

Adverse Employment Action. On February 6, 2023 — exactly 14 days after Whitfield raised his concerns — Hale reassigned two of Whitfield's highest-profile production projects: Project Meridian and Project Halcyon, which carry combined budgets of approximately $187 million. These projects were reassigned to Cameron Briggs, SVP of Production. The reassignment of $187 million in production responsibilities from a Senior Vice President constitutes a material change in the terms and conditions of Whitfield's employment. Oversight of high-budget, high-visibility production projects is a core component of Whitfield's role as SVP of Physical Production; the removal of such projects diminishes his authority, professional stature, and potential for future advancement, and would be perceived by any reasonable person as a significant demotion in substance, if not in title. Under the broad definition of adverse employment action articulated in Yanowitz, this reassignment clearly qualifies.

Causal Link. The very close temporal proximity between Whitfield's protected activity (January 23, 2023) and the adverse reassignment (February 6, 2023) — a period of only 14 days — strongly supports a causal inference. This inference is further strengthened by email evidence reportedly showing that Hale directed the reassignment of the Meridian and Halcyon projects the day after Whitfield's complaint, with no documented performance-related justification for the reassignment. If the investigation confirms that no legitimate business reason supported the reassignment and that Hale initiated the decision in direct temporal proximity to Whitfield's complaint, the circumstantial case for retaliatory causation will be compelling.

Taken together, the Whitfield allegations present a strong prima facie case of retaliation under section 12940(h). The investigation should focus on (1) confirming the content and context of Whitfield's January 23, 2023 statements, (2) documenting the timeline and decision-making process for the project reassignment, (3) assessing whether any legitimate, non-retaliatory justification for the reassignment exists, and (4) evaluating the email evidence regarding Hale's direction of the reassignment.

E. Application to the Ngo Allegations (Potential Retaliation)

In addition to the harassment claim discussed in Section III.C.4 above, the Ngo allegations may also support a retaliation theory. Ngo alleges that after the Monarch Valley Resort off-site retreat (February 17–18, 2023), she complained to a colleague about Hale's sexually suggestive comments. She further alleges that following this complaint, Hale excluded her from three key talent-relations strategy meetings held during March and April 2023.

If Ngo's complaint constitutes "opposition" activity within the meaning of section 12940(h), if Hale was aware of or learned about the complaint, and if the meeting exclusions were motivated by that awareness, the exclusions could constitute retaliatory adverse employment actions. Exclusion from meetings that are central to an employee's job responsibilities falls within the broad definition of adverse employment action under Yanowitz, as it materially affects the employee's ability to perform her duties and may signal marginalization within the organization.

The viability of the retaliation theory in connection with the Ngo allegations depends on a critical factual question: whether Hale was aware that Ngo had complained about his conduct. If Ngo's complaint to a colleague was communicated to Hale — either directly by the colleague, indirectly through the organizational grapevine, or through another channel — and if the meeting exclusions followed as a result of that awareness, the causal element would be satisfied. The investigation should specifically probe: (a) the identity of the colleague to whom Ngo complained; (b) whether that colleague or anyone else communicated the substance of Ngo's complaint to Hale; (c) the precise timeline of the meeting exclusions relative to the date on which Hale became or may have become aware of the complaint; and (d) whether there is any legitimate, non-retaliatory explanation for Ngo's exclusion from the meetings.

V. Employer Liability Standards Under FEHA

A. Supervisor Harassment — Strict Liability

The employer liability framework under FEHA differs materially from its federal counterpart and is of central importance to this investigation. Under California FEHA, an employer is strictly liable for harassment by a supervisor, regardless of whether the employer knew or should have known of the harassment. Cal. Gov. Code § 12940(j)(1). This means that if the investigation substantiates that Marcus Hale engaged in sexual harassment of Morales or Ngo, APS will be vicariously liable for that harassment as a matter of law, without any opportunity to assert a defense based on the adequacy of its anti-harassment policies, complaint procedures, or remedial response.

This strict liability standard stands in sharp contrast to the framework established under federal Title VII by the United States Supreme Court in Burlington Industries, Inc. v. Ellerth (1998) 524 U.S. 742 and Faragher v. City of Boca Raton (1998) 524 U.S. 775. Under Ellerth and Faragher, an employer facing a hostile work environment claim based on supervisor harassment may assert an affirmative defense by demonstrating that (1) the employer exercised reasonable care to prevent and correct promptly any sexually harassing behavior, and (2) the plaintiff employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise. No such affirmative defense exists under FEHA for supervisor harassment. The California Legislature and courts have expressly rejected the Ellerth/Faragher defense in the context of FEHA claims. See State Dep't of Health Servs. v. Superior Court (2003) 31 Cal.4th 1026, 1040–1042.

The definition of "supervisor" under FEHA is codified at California Government Code section 12926(t), which provides that a "supervisor" is any individual having the authority, in the interest of the employer, to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or the responsibility to direct them, or to adjust their grievances, or effectively to recommend that action, if, in connection with the foregoing, the exercise of that authority is not of a merely routine or clerical nature, but requires the use of independent judgment.

Marcus Hale, as President of APS, unquestionably satisfies this definition with respect to all three complainants. As the highest-ranking officer of the US studio-division entity, Hale has the authority to hire, promote, reassign, discipline, and terminate employees throughout the APS organization. He exercises direct supervisory authority over nine Senior Vice Presidents who report to him, and he has indirect authority over the hundreds of employees in the APS organizational hierarchy beneath those SVPs. With respect to the three complainants specifically:

• Morales (VP of Development) falls within Hale's organizational chain of command. While she may also report to an intermediate supervisor, Hale, as President, has the authority to make or effectively recommend employment decisions affecting her.

• Ngo (Senior Director of Talent Relations) is similarly within Hale's organizational authority as President of the entity.

• Whitfield (SVP of Physical Production) is one of Hale's nine direct reports, making Hale his immediate supervisor.

There is no colorable argument that Hale is anything other than a "supervisor" within the meaning of FEHA. His supervisory status is clear, and it triggers the strict liability standard for any harassment he is found to have committed.

B. Implications for APS and AGMG

The practical implications of the strict liability standard for APS and, by extension, AGMG as its parent company, are substantial. Because Hale is a supervisor under FEHA, APS faces strict vicarious liability for any harassment he is found to have committed against Morales, Ngo, or any other APS employee. This liability attaches automatically upon a finding that the harassment occurred; it does not depend on whether APS knew or should have known about the harassment, whether APS maintained adequate anti-harassment policies, whether APS conducted a prompt investigation upon learning of the allegations, or whether the complainants utilized available complaint procedures.

In practical terms, the strict liability standard means that the factual determination of whether harassment occurred is the dispositive question for liability purposes. If the investigation concludes that Hale engaged in conduct constituting sexual harassment under FEHA, liability follows as a matter of law. There is no affirmative defense, no safe harbor, and no mitigation based on the adequacy of the employer's preventive measures. The employer's remedial efforts — including this investigation — may be relevant to the damages analysis (particularly the failure-to-prevent claim under section 12940(k), discussed in Section VI below) and to the assessment of punitive damages, but they do not provide a defense to the underlying harassment liability.

With respect to AGMG as the parent company, the investigation should note that parent-company liability for the acts of a subsidiary's employees depends on the degree of control exercised by the parent over the subsidiary's employment practices. While a detailed analysis of AGMG's potential direct liability is beyond the scope of this memorandum, the fact that AGMG's Board authorized this investigation and exercises governance oversight through its People & Culture and Audit & Risk Committees suggests a degree of involvement in APS employment matters that may be relevant to the liability analysis.

C. Employer Liability for Retaliation

Retaliation claims under section 12940(h) are analyzed under a different liability framework than harassment claims. Rather than strict liability, retaliation claims are assessed under standard respondeat superior and agency principles. An employer is liable for the retaliatory acts of its supervisors and agents where those acts are taken within the scope of the supervisor's or agent's authority.

In the present case, both of the alleged retaliatory acts — Hale's reassignment of Whitfield's production projects and Hale's potential exclusion of Ngo from talent-relations strategy meetings — were actions taken within the scope of Hale's authority as President of APS. As President, Hale had the authority to direct the assignment of production projects and to determine the composition of meeting invitees. These were not rogue acts taken outside the bounds of Hale's employment; they were management decisions made in the exercise of his supervisory authority. Accordingly, APS is exposed to respondeat superior liability for any retaliation found to have occurred.

D. Aiding and Abetting Liability

California Government Code section 12940(i) provides that it is an unlawful employment practice for any person to aid, abet, incite, compel, or coerce the doing of any of the acts forbidden under FEHA, or to attempt to do so. This provision establishes individual liability for persons who facilitate or participate in prohibited conduct, independent of any entity-level employer liability.

Under section 12940(i), individual liability may attach to Hale personally for any harassment or retaliation he is found to have committed. This individual liability exists in addition to, and independent of, APS's entity-level liability. It also means that Hale faces personal financial exposure for damages, including potentially punitive damages, arising from his own conduct. The investigation should be aware of this individual liability exposure, as it may affect Hale's willingness to cooperate with the investigation and may be relevant to any settlement discussions or remedial actions.

VI. Employer's Duty to Prevent and Correct — Cal. Gov. Code § 12940(k)

A. Statutory Obligation

California Government Code section 12940(k) imposes on employers an affirmative duty to take all reasonable steps necessary to prevent discrimination and harassment from occurring in the workplace. This duty is independent of the employer's vicarious liability for the harassing conduct of its supervisors; it constitutes a separate cause of action that may be asserted by a complainant in addition to, and independently of, the underlying harassment claim.

The duty to prevent is not merely aspirational; it is an enforceable legal obligation that imposes liability when an employer fails to take the reasonable preventive and corrective measures that the law requires. Section 12940(k) reflects the California Legislature's recognition that preventing harassment from occurring in the first instance is preferable to addressing it after the fact, and that employers bear the primary responsibility for maintaining a harassment-free workplace.

B. Elements of a § 12940(k) Claim

To prevail on a failure-to-prevent claim under section 12940(k), a plaintiff must establish:

(1) The plaintiff was subjected to harassment, discrimination, or retaliation in violation of FEHA;

(2) The defendant employer failed to take all reasonable steps necessary to prevent the harassing, discriminatory, or retaliatory conduct from occurring; and

(3) The employer's failure was a substantial factor in causing the plaintiff's harm.

In most cases, the failure-to-prevent claim rises and falls with the underlying harassment or retaliation claim — if no harassment or retaliation is found, the failure-to-prevent claim necessarily fails as well. See Trujillo v. North County Transit District (1998) 63 Cal.App.4th 280, 289. However, there may be circumstances in which the failure-to-prevent analysis yields independent insights into the employer's culpability, particularly where the employer had prior notice of potential misconduct and failed to take adequate measures to prevent its recurrence.

C. Reasonable Steps — What the Law Requires

California law and FEHA regulations specify a range of measures that constitute "reasonable steps" to prevent harassment and discrimination. These include, but are not limited to:

• Anti-harassment policies: Employers must adopt and distribute written anti-harassment policies that clearly communicate the employer's prohibition of harassment and discrimination, identify prohibited conduct, and explain the consequences for violations. The policy must be provided to all employees, and employers should ensure that it is accessible in the languages spoken by their workforce.

• Anti-harassment training: Under Senate Bill 1343, effective January 1, 2019, California employers with five or more employees must provide sexual harassment prevention training to all employees. Supervisory employees must receive at least two hours of interactive training every two years; non-supervisory employees must receive at least one hour of interactive training every two years. Cal. Gov. Code § 12950.1. Training must include, among other topics, information about the FEHA definitions of sexual harassment, practical examples of prohibited conduct, remedies available to victims, and strategies for preventing harassment.

• Effective complaint procedures: Employers must establish and communicate procedures by which employees can report allegations of harassment and discrimination. These procedures should identify multiple reporting channels (to address situations where the harasser is the complainant's direct supervisor), ensure confidentiality to the extent possible, and protect complainants from retaliation.

• Prompt and thorough investigations: Upon receiving a complaint of harassment, the employer must conduct a fair, timely, and thorough investigation that provides all parties appropriate due process and reaches reasonable conclusions based on the evidence collected.

• Appropriate remedial action: When harassment is confirmed through an investigation, the employer must take prompt and effective remedial action to stop the harassment, remedy its effects, and prevent its recurrence. Remedial measures should be proportionate to the severity of the harassment and may include discipline up to and including termination of the harasser.

D. Investigation Obligations

The duty to investigate is a critical component of the employer's obligation under section 12940(k). An employer that receives a complaint of harassment — whether formal or informal, written or verbal — has an obligation to promptly initiate a fair, timely, and thorough investigation. The governing standard is set forth in the FEHA regulations at California Code of Regulations, title 2, section 11023(b), which provides that once an employer is put on notice of a complaint of harassment, the employer must take "immediate and appropriate corrective action," including a "fair, timely, and thorough investigation that provides all parties appropriate due process" and reaches "reasonable conclusions based on the evidence collected."

The investigation must be conducted by qualified personnel — ideally trained investigators with experience in employment law and workplace investigations. The investigation must be documented, and the investigative findings and conclusions must be communicated to the relevant parties. An employer that fails to investigate a complaint of harassment, or that conducts an inadequate investigation, may itself be liable under section 12940(k) for failure to take reasonable steps to prevent harassment.

The adequacy of an investigation is assessed under a reasonableness standard, taking into account the totality of the circumstances, including the nature and severity of the allegations, the resources available to the employer, the promptness of the investigation, the thoroughness of the evidence-gathering process, the fairness of the procedures followed, and the reasonableness of the conclusions reached.

E. Application — Prior Complaint Handling Deficiencies

The investigation has identified a significant factual issue that bears directly on the section 12940(k) analysis. In July 2021, a prior informal complaint was made against Hale by Serena Whitcomb, who served as his executive assistant from April 2019 through September 2021. Whitcomb alleged that Hale made inappropriate comments during the course of her employment. The nature and content of those comments are being investigated as part of the current engagement.

That complaint was handled internally by Victor Gallegos, then Vice President of Human Resources for APS. Gallegos addressed the complaint by issuing a verbal counseling to Hale on or about August 2, 2021. Critically, however, no formal investigation was conducted in response to the Whitcomb complaint. The verbal counseling was not documented in writing, and no record of the counseling or the underlying complaint was retained in Hale's personnel file.

The failure to formally investigate the Whitcomb complaint and to document the resulting corrective action constitutes a potentially significant deficiency under section 12940(k). The 2021 complaint put APS on notice that Hale had engaged in conduct that at least one employee perceived as inappropriate. Upon receiving that notice, APS had an obligation to conduct a fair, timely, and thorough investigation. By handling the matter informally — without a documented investigation, without written findings, and without placing a record of the counseling in Hale's personnel file — APS may have failed to take "all reasonable steps necessary to prevent harassment from occurring." This failure is particularly significant in light of the fact that the current allegations describe conduct occurring in 2022 and 2023 — after the 2021 complaint — suggesting that the inadequate response to the earlier complaint may have failed to deter further misconduct by Hale.

The section 12940(k) exposure is compounded by the fact that the absence of documentation means APS cannot demonstrate that it took even the limited corrective action that Gallegos reportedly undertook. In any subsequent litigation, APS would bear the burden of proving that it took all reasonable steps to prevent harassment; the absence of documentation makes it difficult, if not impossible, to meet that burden with respect to the 2021 complaint.

This policy deficiency and its implications for APS's liability exposure are analyzed in greater detail in the Policy Gap Analysis Memorandum, which is forthcoming.

VII. Damages and Remedies Available Under FEHA

A. Compensatory Damages

FEHA provides for the recovery of compensatory damages by prevailing plaintiffs, encompassing both economic and non-economic losses. Economic damages include lost wages, lost benefits, and other quantifiable financial losses resulting from the harassment or retaliation. Non-economic damages include emotional distress, mental anguish, loss of enjoyment of life, and other intangible harms.

A critical distinction between FEHA and federal Title VII is that FEHA imposes no cap on compensatory damages. Under Title VII, compensatory and punitive damages are subject to tiered caps ranging from $50,000 to $300,000 depending on the size of the employer. 42 U.S.C. § 1981a(b)(3). No such limitation exists under FEHA. California juries have returned substantial emotional distress awards in FEHA harassment cases, including awards in the millions of dollars in cases involving supervisor harassment, particularly where the harassment was prolonged, the employer failed to take appropriate corrective action, or the employer retaliated against the complainant.

Given the nature of the allegations in this matter — involving the President of the company, multiple complainants, and alleged retaliation — the potential compensatory damages exposure is significant.

B. Punitive Damages

Punitive damages are available under FEHA where the defendant's conduct is shown to have been committed with malice, oppression, or fraud, as defined by California Civil Code section 3294. Malice in

PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT — PREPARED AT THE DIRECTION OF COUNSEL
MEMORANDUM
FROM: Nadia Petrov, Associate, Calderwood & Harkness LLP
REVIEWED BY: Devon Archer, Lead Associate, Calderwood & Harkness LLP
DATE: May 18, 2023
TO: Investigation File — Matter No. 1017-00005
RE: Applicable Legal Standards Under the California Fair Employment and Housing Act (Cal. Gov. Code §§ 12940 et seq.) — Independent Workplace Investigation of Allegations Against Marcus Hale, President, Aurelius Pacific Studios Inc.
CLIENT: Aurelius Global Media Group PLC (Board of Directors)
PRIVILEGE DESIGNATION: This memorandum is protected by the attorney-client privilege and the work-product doctrine. It has been prepared by Calderwood & Harkness LLP at the direction of the Board of Directors of Aurelius Global Media Group PLC in connection with the independent workplace investigation opened May 2, 2023. The privilege belongs solely to Aurelius Global Media Group PLC and may be waived only at the direction of the Board. No disclosure of this memorandum or its contents should be made to any third party without the prior written authorization of counsel.
I. Purpose and Scope of This Memorandum
This memorandum sets forth the legal framework applicable to the ongoing investigation of workplace misconduct allegations against Marcus Hale, President of Aurelius Pacific Studios Inc. ("APS"). APS is a Delaware corporation headquartered at 3200 West Alameda Avenue, Suite 400, Burbank, California 91505. APS is a wholly owned subsidiary of Aurelius Global Media Group PLC ("AGMG"), a public limited company organized under the laws of England and Wales and listed on the London Stock Exchange. As the direct subsidiary charged with operating AGMG's domestic film and television production business, APS is the direct employer of all US studio-division personnel, including Hale and each of the three complainants identified below.
The three individuals who have submitted formal complaints in connection with this matter are:
1. Jenna Morales, Vice President of Development, who alleges sexual harassment by Hale, including unwanted sexual advances, sexually suggestive communications, inappropriate comments regarding her physical appearance, and unwelcome physical contact, occurring from approximately September 2022 through March 2023.
2. Claire Ngo, Senior Director of Talent Relations, who alleges sexually inappropriate comments made by Hale regarding her attire and personal life during a company off-site retreat in February 2023, and subsequent exclusion from key departmental meetings.
3. Darren Whitfield, Senior Vice President of Physical Production, who alleges that Hale retaliated against him after Whitfield raised concerns about Hale's treatment of female employees during a leadership team meeting on January 23, 2023. Whitfield's retaliation claim centers on the reassignment of two high-profile production projects within two weeks of his protected activity.
Accordingly, the allegations under investigation fall into three categories: (1) sexual harassment of Morales, (2) sexually inappropriate comments directed at Ngo (with potential additional harassment and/or retaliation claims), and (3) retaliation against Whitfield for engaging in protected opposition activity.
The investigation is being conducted under the joint authorization of the People & Culture Committee of the AGMG Board of Directors, chaired by Dame Cordelia Ashworth, and the Audit & Risk Committee of the AGMG Board, chaired by Raymond Okoro. Calderwood & Harkness LLP was retained as independent outside counsel to conduct the investigation, with the engagement letter executed on May 1, 2023.
California law governs the employment relationship between APS and each of its employees, including Hale and the three complainants, given that APS is headquartered in California and all relevant conduct occurred within the state. The principal statute at issue is the California Fair Employment and Housing Act, Cal. Gov. Code §§ 12940 et seq. ("FEHA"). This memorandum identifies and analyzes the FEHA legal standards that the investigation team must apply in evaluating the evidence.
It should be noted that the APS Employee Handbook (CA Supplement), revised March 15, 2022, contains several policies directly implicated by the allegations, including Section 5.3 (Anti-Harassment & Anti-Discrimination Policy), Section 5.7 (Anti-Retaliation Policy), and Section 8.1 (Complaint & Investigation Procedures). In addition, AGMG's Global Code of Conduct and Board Corporate Governance Guidelines impose separate standards of conduct applicable to senior executives. These internal company policies are analyzed in a separate memorandum; the present memorandum is confined to the statutory legal standards under FEHA.
II. Overview of the California Fair Employment and Housing Act
A. Statutory Framework
The California Fair Employment and Housing Act is codified at California Government Code sections 12900 through 12996. Enacted originally as the California Fair Employment Practice Act in 1959, and subsequently expanded and renamed, FEHA constitutes the most comprehensive state-level employment discrimination and harassment statute in the United States. It provides a broad array of protections for employees against unlawful employment practices, including harassment, discrimination, and retaliation based on numerous protected characteristics.
Section 12940 is the central operative provision of FEHA, setting forth the specific unlawful employment practices prohibited under the statute. It addresses, among other things, discrimination in hiring, firing, and terms and conditions of employment (§ 12940(a)); harassment by supervisors and co-workers (§ 12940(j)); retaliation against individuals who oppose prohibited practices or participate in FEHA proceedings (§ 12940(h)); failure to take reasonable steps to prevent harassment and discrimination (§ 12940(k)); and aiding and abetting of prohibited conduct (§ 12940(i)).
FEHA is enforced administratively by the California Civil Rights Department ("CRD"), formerly known as the Department of Fair Employment and Housing ("DFEH"). The CRD has the authority to receive and investigate complaints, issue right-to-sue notices, and, in appropriate cases, file civil actions on behalf of aggrieved individuals. In addition, individuals may file private civil actions in state superior court after exhausting administrative remedies or obtaining a right-to-sue notice from the CRD. The statute of limitations for filing a complaint with the CRD is three years from the date of the alleged unlawful employment practice, pursuant to Assembly Bill 9, effective January 1, 2020. Cal. Gov. Code § 12960(e).
FEHA applies to employers with five or more employees. Cal. Gov. Code § 12926(d). As a major entertainment company employing approximately 2,300 individuals in its US studio-division operations, APS is unquestionably a covered employer under FEHA. There is no colorable argument that APS falls outside the statute's coverage.
It is important to note at the outset that FEHA provides broader protections than its federal counterpart, Title VII of the Civil Rights Act of 1964, in several material respects. These differences are noted throughout this memorandum where relevant and include, among other things: (1) FEHA's disjunctive "severe or pervasive" standard for hostile work environment claims, as compared to Title VII's conjunctive "severe and pervasive" standard; (2) FEHA's strict liability standard for employer liability for supervisor harassment, without the affirmative defense available under federal law; (3) FEHA's absence of any statutory cap on compensatory damages, as compared to the tiered caps imposed by Title VII; and (4) FEHA's broader definition of protected activity for purposes of retaliation claims. These distinctions make California an especially protective jurisdiction for employees asserting harassment and retaliation claims and correspondingly increase the potential liability exposure for APS and AGMG.
B. Protected Categories Relevant to This Investigation
Of the numerous protected categories enumerated under FEHA, two are directly implicated by the allegations at issue in this investigation:
Sex and Gender. California Government Code sections 12940(a) and 12940(j) prohibit employment discrimination and harassment, respectively, on the basis of sex, gender, gender identity, and gender expression. The sexual harassment allegations brought by Morales and Ngo fall squarely within this protected category. Under California law, harassment based on sex encompasses a broad range of conduct, including unwanted sexual advances, requests for sexual favors, sexually suggestive comments, unwelcome physical touching of a sexual or gender-based nature, and the creation of a hostile work environment through conduct that is sexual in nature or directed at an individual because of their sex or gender.
Opposition to Prohibited Practices / Participation in Complaints. California Government Code section 12940(h) prohibits retaliation against any person who has opposed any practices forbidden under FEHA or who has filed a complaint, testified, or assisted in any proceeding under FEHA. The retaliation allegation brought by Whitfield — asserting that he was subjected to adverse employment consequences after raising concerns about Hale's treatment of female employees — directly implicates this protection. As discussed in greater detail in Section IV below, the protection afforded by section 12940(h) extends to informal internal opposition activities, not merely to formal agency charges or court proceedings.
C. Covered Individuals
FEHA defines "employee" broadly to encompass any individual employed by an employer. Cal. Gov. Code § 12926(c). All three complainants — Morales, Ngo, and Whitfield — are current, active employees of APS and are indisputably covered under FEHA's protections.
Marcus Hale occupies a dual role under FEHA that is significant for purposes of this analysis. First, he is an employee of APS, holding the title of President of APS and serving as the highest-ranking officer of the US studio-division entity. He reports directly to Elliot Vane, Chief Executive Officer of AGMG, the parent company. Second, and critically, Hale is a supervisor within the meaning of FEHA. He oversees the entirety of APS's US studio operations and has nine direct-report Senior Vice Presidents, including Whitfield. In his capacity as President, Hale has the authority to hire, transfer, promote, discipline, and discharge employees, or to effectively recommend such actions — the core criteria for "supervisor" status under Cal. Gov. Code § 12926(t).
Hale's status as a "supervisor" under FEHA is of paramount importance to the employer liability analysis, because California law imposes strict liability on employers for harassment committed by supervisors. This strict liability framework is discussed in detail in Section V of this memorandum. As a threshold matter, however, it bears emphasizing that there is no question regarding Hale's supervisory status: as President of APS, he is the most senior executive within the entity and exercises direct and indirect supervisory authority over all three complainants and, indeed, over the entire US studio-division workforce.
III. Sexual Harassment Under FEHA
A. Statutory Prohibition
California Government Code section 12940(j)(1) provides that it is an unlawful employment practice for an employer, labor organization, employment agency, apprenticeship training program, or any training program leading to employment, or any other person, to harass an employee, an applicant, an unpaid intern or volunteer, or a person providing services pursuant to a contract because of, among other characteristics, sex and gender.
Importantly, the statute imposes liability not only on the employer as an entity but also on "any other person" who engages in harassment, thereby establishing individual liability for the harasser in addition to entity liability. This means that Hale may face personal liability for harassment, independent of any entity-level liability imposed upon APS or AGMG.
California courts have consistently held that harassment need not be motivated by sexual desire to constitute actionable sexual harassment under FEHA. In Lyle v. Warner Brothers Television Productions (2006) 38 Cal.4th 264, 279–280, the California Supreme Court explained that the critical inquiry is whether the challenged conduct was "based on sex" — that is, whether the plaintiff was subjected to the conduct because of their sex or gender, regardless of whether the conduct was driven by sexual attraction. Similarly, in Pantoja v. Anton (2011) 198 Cal.App.4th 87, 114, the Court of Appeal reiterated that sexual harassment encompasses conduct that is motivated by hostility based on sex as well as conduct that is motivated by sexual desire.
California law recognizes two distinct theories of sexual harassment: (1) quid pro quo harassment and (2) hostile work environment harassment. Both theories are potentially applicable to the allegations in this investigation, particularly the Morales allegations, and each is analyzed in turn below.
B. Quid Pro Quo Harassment
1. Definition and Elements
Quid pro quo harassment, which translates literally as "this for that," occurs when submission to unwelcome sexual conduct is made, explicitly or implicitly, a term or condition of an individual's employment, or when submission to or rejection of such conduct by an individual is used as the basis for an employment decision affecting that individual. This theory of harassment is inherently linked to the abuse of supervisory authority, as it requires that the harasser possess the power to confer or withhold employment benefits as a consequence of the victim's response to the sexual conduct.
Under California law, the elements of a quid pro quo sexual harassment claim are:
(a) The plaintiff was subjected to unwelcome sexual advances, requests for sexual favors, or other verbal or physical conduct of a sexual nature;
(b) The conduct was committed by a supervisor or other person with authority over the plaintiff's employment;
(c) Submission to the conduct was explicitly or implicitly made a term or condition of the plaintiff's employment, or rejection of the conduct was used as the basis for an adverse employment action affecting the plaintiff.
The California Court of Appeal in Mogilefsky v. Superior Court (1993) 20 Cal.App.4th 1409, 1414–1416, articulated the foundational framework for quid pro quo claims under FEHA, explaining that the hallmark of such a claim is the conditioning of concrete employment benefits on the employee's acquiescence to sexual demands. The California Supreme Court further refined the scope of actionable harassment in Hughes v. Pair (2009) 46 Cal.4th 1035, 1043, clarifying that while a broad range of conduct may give rise to harassment claims, the plaintiff must demonstrate a nexus between the challenged conduct and a protected characteristic — in this case, sex.
Quid pro quo harassment may be established through either explicit or implicit conditioning. An explicit quid pro quo involves a direct statement by the supervisor linking job benefits or adverse consequences to the employee's submission to sexual demands (e.g., "If you sleep with me, I will promote you" or "If you refuse, I will reassign you"). An implicit quid pro quo, which is more commonly alleged, involves circumstances from which a reasonable person would infer that employment consequences are tied to the employee's response to sexual overtures. Courts examine the totality of the circumstances, including the supervisor's authority, the nature of the sexual conduct, the timing and nature of any adverse employment action, and any statements or behavior suggesting a connection between the sexual conduct and employment decisions.
2. Application to the Morales Allegations
The allegations presented by Jenna Morales contain elements that potentially support a quid pro quo theory of sexual harassment. Morales alleges a pattern of unwanted sexual advances by Hale occurring from approximately September 2022 through March 2023, which included the following specific conduct:
• Invitations to hotel room: During the APS Vancouver production trip in October 2022, Hale allegedly invited Morales to his hotel room on at least one occasion under circumstances suggesting a personal or sexual rather than professional purpose.
• Sexually suggestive text messages: Morales alleges that Hale sent her sexually suggestive text messages on November 14, November 29, and December 8, 2022. These messages have been identified as potentially recoverable from device and carrier records and are a priority for forensic collection and review by the investigation team.
• Comments about physical appearance: During a one-on-one meeting on January 11, 2023, Hale allegedly made comments about Morales's physical appearance that were sexual in nature and unrelated to any legitimate business purpose.
• Physical contact: At a company dinner on February 3, 2023, Hale allegedly placed his hand on Morales's lower back and thigh in a manner she perceived as sexual and unwelcome.
Critically for the quid pro quo analysis, Morales further alleges that after she rejected Hale's advances, she was subjected to a retaliatory reassignment of her responsibilities. If the investigation substantiates that the reassignment constituted an adverse employment action and that it was causally linked to Morales's rejection of Hale's sexual conduct, this would support a quid pro quo theory. The quid pro quo framework does not require that the conditioning be stated explicitly; a reasonable inference drawn from the temporal proximity between the rejection of advances and a subsequent adverse employment action may suffice.
Hale is indisputably a "supervisor" with authority over Morales's employment. As President of APS, Hale sits at the apex of the APS organizational hierarchy. Morales, as Vice President of Development, falls within Hale's direct organizational chain of command. Hale possesses the unilateral authority — or at minimum the ability to effectively recommend — employment decisions affecting Morales, including reassignment, promotion, compensation adjustments, and termination. This power dynamic is central to the quid pro quo analysis and underscores the coercive nature of the alleged sexual advances.
C. Hostile Work Environment Harassment
1. Definition and Elements
Hostile work environment harassment, the second recognized theory of sexual harassment under California law, occurs when unwelcome sexual conduct is sufficiently severe or pervasive to alter the conditions of the victim's employment and create an abusive working environment. Unlike quid pro quo harassment, hostile work environment harassment does not require a tangible adverse employment action; rather, the actionable harm is the creation of a work atmosphere that is permeated with discriminatory intimidation, ridicule, and insult sufficiently severe or pervasive to alter the conditions of the victim's employment and create an abusive working environment.
Under California law, the elements of a hostile work environment sexual harassment claim are:
(a) The plaintiff was subjected to unwelcome sexual conduct, which may be verbal, physical, or visual in nature;
(b) The conduct was based on sex or gender;
(c) The conduct was sufficiently severe or pervasive to alter the conditions of the plaintiff's employment and create a hostile or abusive work environment, assessed from both a subjective and an objective standpoint;
(d) There is a basis for employer liability (addressed in Section V of this memorandum).
The California Court of Appeal articulated the governing framework for hostile work environment claims under FEHA in Fisher v. San Pedro Peninsula Hospital (1989) 214 Cal.App.3d 590, 608–610, a seminal decision that has been cited extensively by California courts in the decades since. In Fisher, the court held that the plaintiff need not demonstrate that the harassing conduct was both severe and pervasive; rather, a single incident of harassment may be actionable if it is sufficiently severe, and a pattern of less severe conduct may be actionable if it is sufficiently pervasive. Id. at 609–610. The California Supreme Court confirmed and applied this framework in Lyle v. Warner Brothers Television Productions (2006) 38 Cal.4th 264, 283–284.
2. The "Severe or Pervasive" Standard
This is perhaps the single most important distinction between California FEHA and federal Title VII for purposes of this investigation. Under federal law, the standard for hostile work environment harassment is whether the conduct was "severe and pervasive" — a conjunctive standard requiring that both conditions be met. Under FEHA, by contrast, the standard is disjunctive: conduct that is either sufficiently severe or sufficiently pervasive may give rise to a hostile work environment claim. This lower threshold significantly expands the scope of actionable harassment under California law.
The "severe or pervasive" determination is made under a totality-of-the-circumstances analysis. California courts consider the following factors, among others:
• The frequency of the discriminatory or harassing conduct;
• The severity of the conduct;
• Whether the conduct was physically threatening or humiliating, as opposed to a mere offensive utterance;
• Whether the conduct unreasonably interfered with the plaintiff's work performance;
• The context in which the conduct occurred, including the nature of the work environment and the relative positions of the parties.
The hostile work environment analysis contains both a subjective and an objective component. The complainant must demonstrate that they actually perceived the work environment as hostile or abusive (the subjective prong), and a reasonable person in the complainant's position — taking into account all relevant circumstances — must also find the environment hostile or abusive (the objective prong). Harris v. Forklift Systems, Inc. (1993) 510 U.S. 17, 21–22 (federal standard adopted by California courts); Fisher, supra, 214 Cal.App.3d at 609–610.
California courts have consistently applied a lower threshold than their federal counterparts in evaluating the severity or pervasiveness of alleged harassment. Individual acts of physical touching — particularly touching of intimate or near-intimate body areas — have been found sufficient to constitute "severe" harassment standing alone, without any requirement that the touching be repeated or accompanied by other harassing conduct. Similarly, explicit sexual commentary by a supervisor directed at a subordinate has been found sufficient to create a hostile work environment even when limited to a small number of incidents, given the inherent power imbalance and coercive dynamics present in the supervisor-subordinate relationship.
3. Application to the Morales Allegations
The pattern of conduct alleged by Jenna Morales, if substantiated, likely satisfies both the "severe" and "pervasive" prongs of the hostile work environment analysis under FEHA, either independently or in combination.
Pervasiveness. The conduct alleged by Morales spans approximately six months (September 2022 through March 2023) and encompasses multiple categories of harassing behavior: verbal advances (hotel room invitations during the October 2022 Vancouver trip), written sexually suggestive communications (text messages dated November 14, November 29, and December 8, 2022), in-person comments about physical appearance (January 11, 2023 meeting), and unwelcome physical contact (February 3, 2023 company dinner). The multiplicity of incidents, their recurrence over a sustained period, and range modalities through which the harassing conduct was allegedly delivered collectively establish a pattern that is likely to satisfy the "pervasive" prong of the analysis. This is not a case involving a single, isolated incident; rather, the allegations describe an escalating course of conduct that permeated the complainant's working relationship with the most senior executive in the organization.
Severity. Even considered individually, several of the alleged incidents are likely to satisfy the "severe" prong. Under California law, physical touching of a sexual or near-intimate nature by a supervisor is treated as among the most severe forms of workplace harassment. The allegation that Hale placed his hand on Morales's lower back and thigh at the February 3, 2023 company dinner — a public setting, which may have been witnessed by other employees — constitutes the type of unwelcome physical contact that California courts have repeatedly held to be sufficiently severe to support a hostile work environment claim standing alone. See, e.g., Doe v. Capital Cities (1996) 50 Cal.App.4th 1038, 1048 (single incident of physical touching of a sexual nature may constitute severe harassment).
The sexually suggestive text messages, which constitute written documentary evidence of the alleged harassment, are of particular significance. Unlike verbal statements, which may be subject to conflicting recollections, text messages are susceptible to forensic recovery and authentication, and their content can be evaluated directly by the investigation team. If the messages contain explicitly sexual content, they provide contemporaneous, documentary corroboration of Morales's allegations and would be highly probative evidence in any subsequent litigation.
The hotel room invitations during the Vancouver production trip carry particular weight in the hostile work environment analysis because they were made by a direct superior during a business trip — a context in which the subordinate employee is effectively captive and unable to distance herself from the harasser. Courts have recognized that harassment occurring during business travel may be more coercive and threatening than similar conduct occurring in an office setting, because the employee has reduced ability to remove herself from the situation and may feel professionally obligated to comply with a superior's requests.
4. Application to the Ngo Allegations
Claire Ngo alleges that during the company off-site retreat held at the Monarch Valley Resort in Ojai, California (February 17–18, 2023), Hale made sexually suggestive comments about her attire and asked her a personal question — specifically, "Are you seeing anyone?" — in a context that she perceived as inappropriately personal and sexual in nature. While the retreat setting involved social interaction among colleagues, the comments were allegedly directed specifically at Ngo by the most senior executive present and concerned her physical appearance and personal romantic life.
Whether these comments, standing alone, satisfy the "severe" prong of the hostile work environment analysis is a closer question than the Morales allegations. A single instance of verbal commentary — even commentary that is sexual or gender-based in nature — may or may not meet the severity threshold depending on the totality of the circumstances, including the nature and explicitness of the comments, the relationship between the parties, the setting, and the effect on the complainant. Under the more protective California standard, a single comment about a subordinate's appearance coupled with a probing personal question about her romantic life by the President of the company could, in context, be found sufficiently severe, particularly if the comments were made in front of other employees or in a manner that singled out Ngo based on her sex or gender.
The analysis does not end with the retreat incident, however. Ngo further alleges that she was excluded from three key talent-relations strategy meetings held in March and April 2023. If these exclusions were motivated by Ngo's sex or gender — for example, if they reflected an effort by Hale to marginalize Ngo after she failed to respond positively to his personal overtures — they could constitute additional evidence of a hostile work environment. Alternatively, if the exclusions were motivated by Hale's awareness that Ngo had complained about his conduct, they may support a retaliation theory, which is discussed separately in Section IV below. The investigation must probe both possibilities.
D. Unwelcomeness
A threshold element of any sexual harassment claim — whether brought under a quid pro quo or hostile work environment theory — is that the alleged conduct was unwelcome. The complainant must demonstrate that the sexual conduct was not solicited or incited by the complainant and that the complainant regarded the conduct as undesirable or offensive. Cal. Gov. Code § 12940(j)(4)(C); see also Lyle, supra, 38 Cal.4th at 283.
Unwelcomeness is assessed from the complainant's subjective perspective, though objective evidence of the complainant's reaction to the conduct is relevant. A complainant's failure to immediately object to or report harassment does not negate unwelcomeness; California courts have recognized that employees, particularly those in subordinate positions, may refrain from objecting to a supervisor's conduct out of fear of retaliation, embarrassment, or a desire to avoid confrontation. The appropriate inquiry is whether the complainant, by her conduct, indicated that the sexual advances or comments were unwelcome, not whether the complainant lodged a formal protest at the moment the conduct occurred.
The complainant's own conduct may be relevant to the unwelcomeness analysis — for example, evidence that the complainant actively participated in or encouraged the sexual conduct may undermine a claim of unwelcomeness. However, voluntary participation in social interactions or even in mildly flirtatious banter does not constitute blanket consent to escalating sexual conduct. Each instance of alleged harassment must be evaluated on its own terms.
It should be noted that Hale's position statement, submitted through his personal legal counsel Graham Thornfield of Thornfield & Associates LLP on June 5, 2023, characterizes the complaints filed by Morales and Ngo as performance-related grievances rather than sexual harassment claims. Specifically, Hale's position statement asserts that Morales's reassignment was based on legitimate business concerns regarding project performance and that his interactions with Ngo at the Monarch Valley retreat were collegial and professional in nature. The investigation must carefully assess whether the conduct alleged by the complainants was in fact sexual in nature and unwelcome, as they assert, or whether Hale's characterization of the interactions as professional and performance-related is supported by the evidence. This is a factual question that lies at the heart of the investigation.
IV. Retaliation Under FEHA
A. Statutory Prohibition
California Government Code section 12940(h) provides that it is an unlawful employment practice for any employer to discharge, expel, or otherwise discriminate against any person because the person has opposed any practices forbidden under FEHA or because the person has filed a complaint, testified, or assisted in any proceeding under FEHA. The retaliation prohibition is broadly construed and serves the essential purpose of protecting employees who seek to vindicate their own rights or the rights of others under the statute from adverse consequences for doing so.
Critically, the retaliation protections afforded by section 12940(h) extend to internal complaints and informal opposition activity, not solely to the filing of formal charges with the CRD or participation in court proceedings. In Yanowitz v. L'Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1042–1043, the California Supreme Court held that an employee who refuses to comply with a supervisor's directive to terminate a subordinate on discriminatory grounds engages in "protected opposition activity" within the meaning of section 12940(h), even though the employee did not file a formal complaint. The court explained that the purpose of the anti-retaliation provision would be undermined if employees were required to formalize their objections before receiving protection from retaliatory conduct. Id. at 1043. This broad construction of protected activity is directly relevant to the Whitfield allegations, as discussed in Section IV.D below.
B. Elements of a Retaliation Claim
Under California law, a plaintiff asserting a retaliation claim under section 12940(h) must establish three elements:
(1) The plaintiff engaged in a protected activity;
(2) The employer subjected the plaintiff to an adverse employment action; and
(3) There was a causal link between the protected activity and the adverse employment action.
Protected Activity. Under FEHA, protected activity includes, but is not limited to: (a) opposing harassment, discrimination, or other practices forbidden under FEHA; (b) filing an internal complaint with the employer regarding conduct believed to violate FEHA; (c) filing a complaint with the CRD or commencing a civil action under FEHA; (d) participating, testifying, or assisting in any investigation, proceeding, or hearing under FEHA; and (e) supporting or assisting another employee in connection with a complaint of harassment or discrimination. The employee need not prove that the underlying harassment or discrimination actually occurred; it is sufficient that the employee held a reasonable, good-faith belief that the conduct they opposed was unlawful. Yanowitz, supra, 36 Cal.4th at 1042.
Adverse Employment Action. The concept of "adverse employment action" is broadly construed under California law. It encompasses not only ultimate employment decisions such as termination, demotion, or suspension, but also any action that materially affects the terms, conditions, or privileges of employment. Yanowitz, supra, 36 Cal.4th at 1050–1054. The California Supreme Court in Yanowitz specifically held that an adverse employment action is not limited to economic harm or a formal change in employment status; rather, it includes any employer conduct that is reasonably likely to deter employees from engaging in protected activity. Id. at 1054. Examples of actionable adverse employment actions under California law include: reassignment of significant job responsibilities, exclusion from important meetings or decision-making processes, unwarranted negative performance evaluations, hostile treatment or ostracism, and transfer to a less desirable position or location.
Causal Link. The plaintiff must demonstrate a causal connection between the protected activity and the adverse employment action. Causation may be established through direct evidence (e.g., statements by the decision-maker indicating retaliatory motive) or circumstantial evidence, including temporal proximity between the protected activity and the adverse action, disparate treatment compared to similarly situated employees who did not engage in protected activity, and evidence that the employer's stated justification for the adverse action is pretextual.
C. Temporal Proximity and Causal Inference
Close temporal proximity between an employee's protected activity and a subsequent adverse employment action is one of the most commonly cited forms of circumstantial evidence supporting a causal inference. California courts have recognized that when an adverse action follows closely on the heels of protected activity, the temporal relationship alone may give rise to a permissible inference of retaliatory motive. See, e.g., Clark v. Claremont University Center (1992) 6 Cal.App.4th 639, 667 (finding that proximity in time between protected activity and adverse action, combined with other circumstantial evidence, was sufficient to support an inference of causation).
While there is no bright-line rule defining the precise temporal window within which an adverse action must follow protected activity to give rise to a causal inference, California courts have found periods of days to weeks to be highly probative. Conversely, an adverse action occurring many months after the protected activity, without intervening evidence of retaliatory animus, may be insufficient to support a causal inference based on temporal proximity alone. In the present case, the 14-day gap between Whitfield's protected activity and the alleged adverse action is exceptionally close and falls well within the range that California courts have found probative.
D. Application to the Whitfield Allegations
The Whitfield allegations present a straightforward retaliation claim under section 12940(h), with each element supported by the evidence as currently understood:
Protected Activity. On January 23, 2023, Darren Whitfield, SVP of Physical Production, raised concerns about Hale's treatment of female employees during a leadership team meeting. This constitutes protected "opposition" activity within the meaning of section 12940(h). By voicing objections to conduct he reasonably believed to be discriminatory or harassing, Whitfield engaged in precisely the type of activity the anti-retaliation provision is designed to protect. It is not necessary that Whitfield framed his concerns in legal terms or specifically invoked FEHA; it is sufficient that he opposed practices that he reasonably believed to be unlawful. Yanowitz, supra, 36 Cal.4th at 1042–1043. The investigation should confirm the specific content of Whitfield's statements at the January 23 meeting through witness interviews and, if available, meeting notes or contemporaneous communications.
Adverse Employment Action. On February 6, 2023 — exactly 14 days after Whitfield raised his concerns — Hale reassigned two of Whitfield's highest-profile production projects: Project Meridian and Project Halcyon, which carry combined budgets of approximately $187 million. These projects were reassigned to Cameron Briggs, SVP of Production. The reassignment of $187 million in production responsibilities from a Senior Vice President constitutes a material change in the terms and conditions of Whitfield's employment. Oversight of high-budget, high-visibility production projects is a core component of Whitfield's role as SVP of Physical Production; the removal of such projects diminishes his authority, professional stature, and potential for future advancement, and would be perceived by any reasonable person as a significant demotion in substance, if not in title. Under the broad definition of adverse employment action articulated in Yanowitz, this reassignment clearly qualifies.
Causal Link. The very close temporal proximity between Whitfield's protected activity (January 23, 2023) and the adverse reassignment (February 6, 2023) — a period of only 14 days — strongly supports a causal inference. This inference is further strengthened by email evidence reportedly showing that Hale directed the reassignment of the Meridian and Halcyon projects the day after Whitfield's complaint, with no documented performance-related justification for the reassignment. If the investigation confirms that no legitimate business reason supported the reassignment and that Hale initiated the decision in direct temporal proximity to Whitfield's complaint, the circumstantial case for retaliatory causation will be compelling.
Taken together, the Whitfield allegations present a strong prima facie case of retaliation under section 12940(h). The investigation should focus on (1) confirming the content and context of Whitfield's January 23, 2023 statements, (2) documenting the timeline and decision-making process for the project reassignment, (3) assessing whether any legitimate, non-retaliatory justification for the reassignment exists, and (4) evaluating the email evidence regarding Hale's direction of the reassignment.
E. Application to the Ngo Allegations (Potential Retaliation)
In addition to the harassment claim discussed in Section III.C.4 above, the Ngo allegations may also support a retaliation theory. Ngo alleges that after the Monarch Valley Resort off-site retreat (February 17–18, 2023), she complained to a colleague about Hale's sexually suggestive comments. She further alleges that following this complaint, Hale excluded her from three key talent-relations strategy meetings held during March and April 2023.
If Ngo's complaint constitutes "opposition" activity within the meaning of section 12940(h), if Hale was aware of or learned about the complaint, and if the meeting exclusions were motivated by that awareness, the exclusions could constitute retaliatory adverse employment actions. Exclusion from meetings that are central to an employee's job responsibilities falls within the broad definition of adverse employment action under Yanowitz, as it materially affects the employee's ability to perform her duties and may signal marginalization within the organization.
The viability of the retaliation theory in connection with the Ngo allegations depends on a critical factual question: whether Hale was aware that Ngo had complained about his conduct. If Ngo's complaint to a colleague was communicated to Hale — either directly by the colleague, indirectly through the organizational grapevine, or through another channel — and if the meeting exclusions followed as a result of that awareness, the causal element would be satisfied. The investigation should specifically probe: (a) the identity of the colleague to whom Ngo complained; (b) whether that colleague or anyone else communicated the substance of Ngo's complaint to Hale; (c) the precise timeline of the meeting exclusions relative to the date on which Hale became or may have become aware of the complaint; and (d) whether there is any legitimate, non-retaliatory explanation for Ngo's exclusion from the meetings.
V. Employer Liability Standards Under FEHA
A. Supervisor Harassment — Strict Liability
The employer liability framework under FEHA differs materially from its federal counterpart and is of central importance to this investigation. Under California FEHA, an employer is strictly liable for harassment by a supervisor, regardless of whether the employer knew or should have known of the harassment. Cal. Gov. Code § 12940(j)(1). This means that if the investigation substantiates that Marcus Hale engaged in sexual harassment of Morales or Ngo, APS will be vicariously liable for that harassment as a matter of law, without any opportunity to assert a defense based on the adequacy of its anti-harassment policies, complaint procedures, or remedial response.
This strict liability standard stands in sharp contrast to the framework established under federal Title VII by the United States Supreme Court in Burlington Industries, Inc. v. Ellerth (1998) 524 U.S. 742 and Faragher v. City of Boca Raton (1998) 524 U.S. 775. Under Ellerth and Faragher, an employer facing a hostile work environment claim based on supervisor harassment may assert an affirmative defense by demonstrating that (1) the employer exercised reasonable care to prevent and correct promptly any sexually harassing behavior, and (2) the plaintiff employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise. No such affirmative defense exists under FEHA for supervisor harassment. The California Legislature and courts have expressly rejected the Ellerth/Faragher defense in the context of FEHA claims. See State Dep't of Health Servs. v. Superior Court (2003) 31 Cal.4th 1026, 1040–1042.
The definition of "supervisor" under FEHA is codified at California Government Code section 12926(t), which provides that a "supervisor" is any individual having the authority, in the interest of the employer, to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or the responsibility to direct them, or to adjust their grievances, or effectively to recommend that action, if, in connection with the foregoing, the exercise of that authority is not of a merely routine or clerical nature, but requires the use of independent judgment.
Marcus Hale, as President of APS, unquestionably satisfies this definition with respect to all three complainants. As the highest-ranking officer of the US studio-division entity, Hale has the authority to hire, promote, reassign, discipline, and terminate employees throughout the APS organization. He exercises direct supervisory authority over nine Senior Vice Presidents who report to him, and he has indirect authority over the hundreds of employees in the APS organizational hierarchy beneath those SVPs. With respect to the three complainants specifically:
• Morales (VP of Development) falls within Hale's organizational chain of command. While she may also report to an intermediate supervisor, Hale, as President, has the authority to make or effectively recommend employment decisions affecting her.
• Ngo (Senior Director of Talent Relations) is similarly within Hale's organizational authority as President of the entity.
• Whitfield (SVP of Physical Production) is one of Hale's nine direct reports, making Hale his immediate supervisor.
There is no colorable argument that Hale is anything other than a "supervisor" within the meaning of FEHA. His supervisory status is clear, and it triggers the strict liability standard for any harassment he is found to have committed.
B. Implications for APS and AGMG
The practical implications of the strict liability standard for APS and, by extension, AGMG as its parent company, are substantial. Because Hale is a supervisor under FEHA, APS faces strict vicarious liability for any harassment he is found to have committed against Morales, Ngo, or any other APS employee. This liability attaches automatically upon a finding that the harassment occurred; it does not depend on whether APS knew or should have known about the harassment, whether APS maintained adequate anti-harassment policies, whether APS conducted a prompt investigation upon learning of the allegations, or whether the complainants utilized available complaint procedures.
In practical terms, the strict liability standard means that the factual determination of whether harassment occurred is the dispositive question for liability purposes. If the investigation concludes that Hale engaged in conduct constituting sexual harassment under FEHA, liability follows as a matter of law. There is no affirmative defense, no safe harbor, and no mitigation based on the adequacy of the employer's preventive measures. The employer's remedial efforts — including this investigation — may be relevant to the damages analysis (particularly the failure-to-prevent claim under section 12940(k), discussed in Section VI below) and to the assessment of punitive damages, but they do not provide a defense to the underlying harassment liability.
With respect to AGMG as the parent company, the investigation should note that parent-company liability for the acts of a subsidiary's employees depends on the degree of control exercised by the parent over the subsidiary's employment practices. While a detailed analysis of AGMG's potential direct liability is beyond the scope of this memorandum, the fact that AGMG's Board authorized this investigation and exercises governance oversight through its People & Culture and Audit & Risk Committees suggests a degree of involvement in APS employment matters that may be relevant to the liability analysis.
C. Employer Liability for Retaliation
Retaliation claims under section 12940(h) are analyzed under a different liability framework than harassment claims. Rather than strict liability, retaliation claims are assessed under standard respondeat superior and agency principles. An employer is liable for the retaliatory acts of its supervisors and agents where those acts are taken within the scope of the supervisor's or agent's authority.
In the present case, both of the alleged retaliatory acts — Hale's reassignment of Whitfield's production projects and Hale's potential exclusion of Ngo from talent-relations strategy meetings — were actions taken within the scope of Hale's authority as President of APS. As President, Hale had the authority to direct the assignment of production projects and to determine the composition of meeting invitees. These were not rogue acts taken outside the bounds of Hale's employment; they were management decisions made in the exercise of his supervisory authority. Accordingly, APS is exposed to respondeat superior liability for any retaliation found to have occurred.
D. Aiding and Abetting Liability
California Government Code section 12940(i) provides that it is an unlawful employment practice for any person to aid, abet, incite, compel, or coerce the doing of any of the acts forbidden under FEHA, or to attempt to do so. This provision establishes individual liability for persons who facilitate or participate in prohibited conduct, independent of any entity-level employer liability.
Under section 12940(i), individual liability may attach to Hale personally for any harassment or retaliation he is found to have committed. This individual liability exists in addition to, and independent of, APS's entity-level liability. It also means that Hale faces personal financial exposure for damages, including potentially punitive damages, arising from his own conduct. The investigation should be aware of this individual liability exposure, as it may affect Hale's willingness to cooperate with the investigation and may be relevant to any settlement discussions or remedial actions.
VI. Employer's Duty to Prevent and Correct — Cal. Gov. Code § 12940(k)
A. Statutory Obligation
California Government Code section 12940(k) imposes on employers an affirmative duty to take all reasonable steps necessary to prevent discrimination and harassment from occurring in the workplace. This duty is independent of the employer's vicarious liability for the harassing conduct of its supervisors; it constitutes a separate cause of action that may be asserted by a complainant in addition to, and independently of, the underlying harassment claim.
The duty to prevent is not merely aspirational; it is an enforceable legal obligation that imposes liability when an employer fails to take the reasonable preventive and corrective measures that the law requires. Section 12940(k) reflects the California Legislature's recognition that preventing harassment from occurring in the first instance is preferable to addressing it after the fact, and that employers bear the primary responsibility for maintaining a harassment-free workplace.
B. Elements of a § 12940(k) Claim
To prevail on a failure-to-prevent claim under section 12940(k), a plaintiff must establish:
(1) The plaintiff was subjected to harassment, discrimination, or retaliation in violation of FEHA;
(2) The defendant employer failed to take all reasonable steps necessary to prevent the harassing, discriminatory, or retaliatory conduct from occurring; and
(3) The employer's failure was a substantial factor in causing the plaintiff's harm.
In most cases, the failure-to-prevent claim rises and falls with the underlying harassment or retaliation claim — if no harassment or retaliation is found, the failure-to-prevent claim necessarily fails as well. See Trujillo v. North County Transit District (1998) 63 Cal.App.4th 280, 289. However, there may be circumstances in which the failure-to-prevent analysis yields independent insights into the employer's culpability, particularly where the employer had prior notice of potential misconduct and failed to take adequate measures to prevent its recurrence.
C. Reasonable Steps — What the Law Requires
California law and FEHA regulations specify a range of measures that constitute "reasonable steps" to prevent harassment and discrimination. These include, but are not limited to:
• Anti-harassment policies: Employers must adopt and distribute written anti-harassment policies that clearly communicate the employer's prohibition of harassment and discrimination, identify prohibited conduct, and explain the consequences for violations. The policy must be provided to all employees, and employers should ensure that it is accessible in the languages spoken by their workforce.
• Anti-harassment training: Under Senate Bill 1343, effective January 1, 2019, California employers with five or more employees must provide sexual harassment prevention training to all employees. Supervisory employees must receive at least two hours of interactive training every two years; non-supervisory employees must receive at least one hour of interactive training every two years. Cal. Gov. Code § 12950.1. Training must include, among other topics, information about the FEHA definitions of sexual harassment, practical examples of prohibited conduct, remedies available to victims, and strategies for preventing harassment.
• Effective complaint procedures: Employers must establish and communicate procedures by which employees can report allegations of harassment and discrimination. These procedures should identify multiple reporting channels (to address situations where the harasser is the complainant's direct supervisor), ensure confidentiality to the extent possible, and protect complainants from retaliation.
• Prompt and thorough investigations: Upon receiving a complaint of harassment, the employer must conduct a fair, timely, and thorough investigation that provides all parties appropriate due process and reaches reasonable conclusions based on the evidence collected.
• Appropriate remedial action: When harassment is confirmed through an investigation, the employer must take prompt and effective remedial action to stop the harassment, remedy its effects, and prevent its recurrence. Remedial measures should be proportionate to the severity of the harassment and may include discipline up to and including termination of the harasser.
D. Investigation Obligations
The duty to investigate is a critical component of the employer's obligation under section 12940(k). An employer that receives a complaint of harassment — whether formal or informal, written or verbal — has an obligation to promptly initiate a fair, timely, and thorough investigation. The governing standard is set forth in the FEHA regulations at California Code of Regulations, title 2, section 11023(b), which provides that once an employer is put on notice of a complaint of harassment, the employer must take "immediate and appropriate corrective action," including a "fair, timely, and thorough investigation that provides all parties appropriate due process" and reaches "reasonable conclusions based on the evidence collected."
The investigation must be conducted by qualified personnel — ideally trained investigators with experience in employment law and workplace investigations. The investigation must be documented, and the investigative findings and conclusions must be communicated to the relevant parties. An employer that fails to investigate a complaint of harassment, or that conducts an inadequate investigation, may itself be liable under section 12940(k) for failure to take reasonable steps to prevent harassment.
The adequacy of an investigation is assessed under a reasonableness standard, taking into account the totality of the circumstances, including the nature and severity of the allegations, the resources available to the employer, the promptness of the investigation, the thoroughness of the evidence-gathering process, the fairness of the procedures followed, and the reasonableness of the conclusions reached.
E. Application — Prior Complaint Handling Deficiencies
The investigation has identified a significant factual issue that bears directly on the section 12940(k) analysis. In July 2021, a prior informal complaint was made against Hale by Serena Whitcomb, who served as his executive assistant from April 2019 through September 2021. Whitcomb alleged that Hale made inappropriate comments during the course of her employment. The nature and content of those comments are being investigated as part of the current engagement.
That complaint was handled internally by Victor Gallegos, then Vice President of Human Resources for APS. Gallegos addressed the complaint by issuing a verbal counseling to Hale on or about August 2, 2021. Critically, however, no formal investigation was conducted in response to the Whitcomb complaint. The verbal counseling was not documented in writing, and no record of the counseling or the underlying complaint was retained in Hale's personnel file.
The failure to formally investigate the Whitcomb complaint and to document the resulting corrective action constitutes a potentially significant deficiency under section 12940(k). The 2021 complaint put APS on notice that Hale had engaged in conduct that at least one employee perceived as inappropriate. Upon receiving that notice, APS had an obligation to conduct a fair, timely, and thorough investigation. By handling the matter informally — without a documented investigation, without written findings, and without placing a record of the counseling in Hale's personnel file — APS may have failed to take "all reasonable steps necessary to prevent harassment from occurring." This failure is particularly significant in light of the fact that the current allegations describe conduct occurring in 2022 and 2023 — after the 2021 complaint — suggesting that the inadequate response to the earlier complaint may have failed to deter further misconduct by Hale.
The section 12940(k) exposure is compounded by the fact that the absence of documentation means APS cannot demonstrate that it took even the limited corrective action that Gallegos reportedly undertook. In any subsequent litigation, APS would bear the burden of proving that it took all reasonable steps to prevent harassment; the absence of documentation makes it difficult, if not impossible, to meet that burden with respect to the 2021 complaint.
This policy deficiency and its implications for APS's liability exposure are analyzed in greater detail in the Policy Gap Analysis Memorandum, which is forthcoming.
VII. Damages and Remedies Available Under FEHA
A. Compensatory Damages
FEHA provides for the recovery of compensatory damages by prevailing plaintiffs, encompassing both economic and non-economic losses. Economic damages include lost wages, lost benefits, and other quantifiable financial losses resulting from the harassment or retaliation. Non-economic damages include emotional distress, mental anguish, loss of enjoyment of life, and other intangible harms.
A critical distinction between FEHA and federal Title VII is that FEHA imposes no cap on compensatory damages. Under Title VII, compensatory and punitive damages are subject to tiered caps ranging from $50,000 to $300,000 depending on the size of the employer. 42 U.S.C. § 1981a(b)(3). No such limitation exists under FEHA. California juries have returned substantial emotional distress awards in FEHA harassment cases, including awards in the millions of dollars in cases involving supervisor harassment, particularly where the harassment was prolonged, the employer failed to take appropriate corrective action, or the employer retaliated against the complainant.
Given the nature of the allegations in this matter — involving the President of the company, multiple complainants, and alleged retaliation — the potential compensatory damages exposure is significant.
B. Punitive Damages
Punitive damages are available under FEHA where the defendant's conduct is shown to have been committed with malice, oppression, or fraud, as defined by California Civil Code section 3294. Malice in

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