Tuesday, January 27, 2026
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Successor Liability Might Apply Despite Gap In Ownership of Bar/Restaurant—C.A.
Justices Say Doctrine Is Not Barred by Fact That Corporation Now Operating Business Did Not Exist When Sole Proprietorship Ended, Doors Closed
By a MetNews Staff Writer
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Pictured is “AJ’s,” a bar and restaurant when Deidra Moncada worked there as a bikini dancer, now a bar. The Court of Appeal has ordered renstatement of her wage-and-hour lawsuit that was dismissed by a Superior Court judge who rejected the theory that the current owner of the San Jose business might be liable under the doctrine of successor liability. |
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The Sixth District Court of Appeal has held that the death of the sole proprietor of a company that owned a bar and grill, and the consequent demise of that business, did not preclude the prospect of “successor liability” being imposed on the decedent’s son and his freshly formed business entity that, in a short time, resumed adult-entertainment operations at the site.
Successor liability generally applies where one business entity assumes the assets and liabilities of another company. Friday’s unpublished opinion, by Acting Presiding Justice Adrienne Grover, holds that the doctrine can extend to a situation where the business that was allegedly liable to the defendant became defunct, but was resurrected by a successor.
Plaintiff Deidra Moncada had worked for AJ’s Restaurant & Bar in San Jose from 2013-17 as a bikini-clad on-stage dancer and lap dancer, with a duty of mingling with patrons. Her initial complaint was filed, on behalf of herself and others similarly situated, on April 19, 2019, alleging that she and the other dancers were improperly classed as independent contractors, were paid no wages, and were remunerated solely through tips, a portion of which they were required to hand-over to management.
She sought, among other things, unpaid wages, liquidated damages, statutory penalties, and attorney fees.
At the time she sued AJ’s, it was wholly owned by Andrea Russo. He died on May 9, 2021.
Grover referred to AJ’s, in its days as a sole proprietorship, as “AJ SP.”
LLC Formed
Russo’s son, Paul Gill, on Oct. 19, 2021, filed with the Office of Sectretary of State articles of incorporation for AJ’s Restaurant & Bar LLC (“AJ LLC”). In November 2022, AJ LLC posted a sign outside the premises making note of a 30th anniversary party coming up on Dec. 1.
The second amended complaint, filed on Sept. 7, 2023, seeks to impose liability on Gill and on his limited liability corporation. Santa Clara Superior Court Judge Charles Adams, on April 23, 2024, sustained a demurrer without leave to amend, explaining that “AJ’s LLC may be engaged in similar business to its predecessor, but it is a limited
liability company that
was formally created after the alleged wrongdoing in the complaint”
and that successor liability does not apply.
Moncada appealed, with AJ LLC as the ole respondent.
Grover’s Opinion
In her opinion reversing the judgment of dismissal, Grover wrote:
“AJ LLC was legally formed a few months after Russo’s death….According to the complaint. AJ SP and AJ LLC conduct the same business activity (‘entertainment featuring bikini dancers’), they operate out of the same location, they employ the same staff and are both managed by Gill. AJ LLC advertised its /30th Anniversary party in December 2022. despite its legal formation only the year before. We conclude plaintiff pled sufficient facts to state successor liability claims against AJ LLC.”
The jurist remarked: “As in labor relations cases, the right of an owner to rearrange a business must be balanced with preserving some protection to employees from a change in the employment relationship, particularly given the Legislature’s intent that wage and hour laws in California protect employees.”
She went on to say: “No single factual aspect establishes or negates the equitable doctrine of successor liability….Because plaintiff’s well-pleaded factual allegations demonstrate substantial continuity between AJ SP and AJ LLC…, we conclude plaintiff has sufficiently alleged a theory of successor liability for purposes of surviving demurrer.”
The case is Moncada v. AJ’s Restaurant & Bar, H052313.
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